U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
STOCKGROUP.COM HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1379282
(State of other jurisdiction of (IRS Employer identification number)
incorporation of organization)
Suite 500-750 W. Pender Street
Vancouver, B.C., Canada V6C 2T7 (604) 331-0995
(Address, including postal code, and telephone number, including
area code, of principal executive offices)
1999 Incentive Stock Option Plan As Amended
(Full Title of the Plan)
Marcus New Copies of all communications to:
c/o Corporation Service Company Joseph Sierchio
1560 Broadway Sierchio & Albert, P.C.
Denver, CO 80202 150 East 58th Street, 25th Floor
(303) 860-7052 New York, New York 10155
(Name, Address and telephone number (212) 446-9500
of Agent for Service
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
Title of securities Amount to be Proposed maximum offering Proposed maximum aggregate Amount of
to be registered registered price per share(1)(2) offering price Registration Fee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares 2,000,000 N/A $3,820,100 $1,062
(no par value)
- ------------------------------------------------------------------------------------------------------------------------
Total 2,000,000 N/A $3,820,100 $1,062
========================================================================================================================
</TABLE>
(1) The closing price for the Registrant's common stock in the over-the-counter
market on November 15, 1999 was $2.32 per share.
To date, Registrant has granted the following number of options with the
following respective exercise prices per share:
105,000 $0.01 8,000 $3.437
640,800 $0.94 2,500 $3.50
692,000 $2.50 10,000 $3.75
8,000 $2.75 24,000 $3.875
8,000 $2.937 16,000 $4.00
23,000 $3.00 8,000 $4.437
18,000 $3.062 10,000 $5.625
5,000 $3.25
Pursuant to Rule 457(c) and 457(h)(i), the registration fee was calculated
on the basis of these figures.
(2) Pursuant to Rule 416(c) under the Securities Act of 1933, this registration
statement also covers an indeterminate amount of interests to be offered
and sold pursuant to the employee benefit plan described herein.
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EXPLANATORY NOTE
This Registration Statement on a Form S-8 includes a Reoffer Prospectus
prepared in accordance with the requirements of Form S-3 which may be used for
the reoffer and resale of securities registered hereby, by certain officers and
directors of the Company who may be deemed "affiliates" of the Company as that
term is defined in Rule 405 under the Securities Act of 1933, as amended.
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PROSPECTUS
2,000,000 SHARES
STOCKGROUP.COM HOLDINGS, INC.
1999 STOCK INCENTIVE PLAN
COMMON STOCK, NO PAR VALUE
This Prospectus is part of a registration statement which we filed to
register 2,000,000 shares of our common stock. These shares may be issued upon
the exercise of stock options which we have granted and may grant to our
employees, consultants, officers and directors under our 1999 Incentive Stock
Option Plan, as amended (the "Plan"). Our common stock is quoted for trading on
the NASD's over the counter electronic bulletin board (the "OTCBB") under the
symbol SWEB.
This Prospectus relates to offers and sales of shares of our common stock
by certain directors, consultants and advisors of the Company (collectively, the
"Selling Shareholders") who may be deemed to be "affiliates" of the Company, as
defined in Rule 405 under the Securities Act of 1933, as amended. Shares of
common stock may be acquired or have been acquired by those persons upon
exercise of stock options granted pursuant to the Plan. The shares that may be
acquired by the Selling Shareholders pursuant to the Plan are called "Award
Shares." Although the expenses of preparing and filing the registration
statement, of which this Prospectus is a part, are being paid by us, we will
receive no part of the proceeds of any such sales. However, we will receive the
proceeds from the exercise, if any, of the stock options granted pursuant to the
Plan.
Our principal office is located at Suite 500 - 750 West Pender Street,
Vancouver, B.C., Canada V6C 2T7 (Telephone No. (604) 331-0995). We are a
corporation formed under and governed by the laws of the State of Colorado.
SEE "RISK FACTORS" FOR CERTAIN FACTORS
RELATING TO THE COMPANY BEGINNING ON PAGE 5.
Neither The Securities And Exchange Commission Nor Any State Securities
Commission Has Approved Or Disapproved Of The Award Shares Or Determined
That This Prospectus Is Accurate. Any Representation To The Contrary Is A
Criminal Offense.
As of the date of this Prospectus, 1,578,300 stock options have been granted
under the Plan.
The Award Shares may be sold from time to time to purchasers directly by
any of the Selling Shareholders. Alternatively, the Selling Shareholders may
sell Award Shares in one or more transactions (which may involve one or more
block transactions) in sales occurring on the OTC BB, in separately negotiated
transactions or in a combination of transactions. Each sale may be made either
at market prices prevailing at the time of such sale or at negotiated prices;
some or all of the Award Shares may be sold through brokers acting on behalf of
the Selling Shareholders or to dealers for resale by such dealers; and, in
connection with these sales, the brokers or dealers may receive compensation in
the form of discounts or commissions from the Selling Shareholders and/or the
purchasers of such shares from whom they may act as broker or agent (which
discounts or commissions are not expected to exceed those customary in the type
of transaction involved). However, any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 under the Securities Act may be sold
under Rule 144 rather than pursuant to this Prospectus. Please also refer to
"Plan of Distribution."
-------------------------------------
The date of this Prospectus is November 16, 1999.
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TABLE OF CONTENTS
Incorporation of Certain Information by Reference............................2
The Company..................................................................4
Risk Factors.................................................................5
Use of Proceeds.............................................................25
Selling Shareholders........................................................25
Plan of Distribution........................................................26
Description of Securities...................................................27
Interests of Named Experts and Counsel......................................27
SEC Position Regarding Indemnity............................................27
Available Information.......................................................27
We have not authorized any person to give any information or to make any
representations to you that are not contained in this Prospectus. You must not
rely upon any information not contained in this Prospectus.
This Prospectus does not constitute an offer of any securities other than
the Award Shares that may be offered hereby or an offer of Award Shares to any
person in any jurisdiction where such offer would be unlawful. The delivery of
this Prospectus or any sale made through its use at any time does not imply that
the information herein is correct as of any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by us with the Securities and Exchange
Commission are incorporated herein by reference and made a part hereof:
1. Our latest Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998 filed pursuant to Section 13(a) of the Exchange Act
which contains financial statements for our latest fiscal year for
which a form 10-KSB was required to have been filed.
2. Our Current Report filed on Form 8-K with the SEC on March 19, 1999
pursuant to Section 13 or 15(d) of the Exchange Act and the amendments
thereto filed with the SEC on March 24, 1999 and May 11, 1999.
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3. Our Quarterly Reports filed on Form 10-QSB with the SEC on May 13,
1999 pursuant to Section 13 or 15(d) of the Exchange Act of 1934 for
the period ending March 31, 1999.
4. Our Current Report filed on Form 8-K with the SEC on June 25, 1999
pursuant to Section 13 or 15(d) of the Exchange Act of 1934.
5. Our Current Report filed on Form 8-K with the SEC on July 9, 1999
pursuant to Section 13 or 15(d) of the Exchange Act of 1934.
6. Our Quarterly Report filed on Form 10-QSB with the SEC on July 12,
1999 pursuant to Section 13 or 15(d) of the Exchange Act of 1934 for
the period ended June 30, 1999.
7. The description of our securities contained in our registration
statement on Form 10-SB, as amended, filed on June 29, 1998.
8. In addition to the foregoing, all documents subsequently filed by
Stockgroup.com pursuant to Sections 13(a), 13(c), 14, and 15(d) of the
Securities Act, prior to the filing of a post-effective amendment
which indicated that all remaining securities offered have been sold
or which registers all securities then remaining unsold, shall be
deemed to be incorporated by reference in this Registration Statement
and to be part thereof from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Prospectus is deemed to be modified or
superseded for the purposes of this Registration Statement to the extent that a
statement contained in this Prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in this
Prospectus modifies or supersedes such statement. Any statement so modified or
superseded is not be deemed, except as so modified or superseded, to constitute
a part of this Registration Statement.
This Prospectus incorporates documents by reference that are not presented
in it or delivered with it. We will provide, without charge, to each person
(including any beneficial owner) to whom this Prospectus is delivered, upon
written or oral request of that person, a copy of any and all of the information
that has been incorporated by reference in this Prospectus (not including
exhibits to such information unless such exhibits are specifically incorporated
by reference into such information). Those requests should be directed to John
Dawe, Vice President Finance, Secretary & Treasurer, at our principal executive
offices at Suite 500-750 West Pender Street, Vancouver, B.C., Canada V6C 2T7
(604) 331-0995.
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THE COMPANY
Stockgroup.com Holdings, Inc. was incorporated under the laws of Colorado
on December 6, 1994 under the name of I-Tech Holdings Group, Inc. On March 11,
1999, we acquired Stock Research Group, Inc. ("our subsidiary") and underwent a
change in control. Through our subsidiary, we commenced our present business at
that time. Prior to that time we were engaged in the design and implementation
of websites. All descriptions concerning our business included in this
Prospectus incorporate our subsidiary. On May 6, 1999, we officially changed our
name from I-Tech Holdings Group, Inc. to Stockgroup.com Holdings, Inc.
Our executive offices are located at Suite 500 - 750 West Pender Street,
Vancouver, British Columbia V6C 2T7. We also maintain offices in New York, San
Francisco, Toronto and Calgary. We are a reporting issuer under the Exchange
Act.
Our Business
We are an investment information online "Community" with viewers in the
United States, Canada and abroad. The "Community" model is based on the creation
and fostering of an Internet site which provides members with a range of
services and content which are targeted toward a certain area of interest.
Community sites are generally designed to foster a user's creative and
interactive experience. Content is generally based around themes of interest
such as News, Business, Entertainment, Life, Art, Career Information, Romance,
Sports, Technology, Travel, etc. By satisfying the personal and practical needs
of its users, an online Community seeks to become the users online home.
Generally, a Community's revenue sources include the sale of advertising, with
additional revenues generated through e-commerce arrangements and the sale of
membership subscriptions for enhanced services.
We focus on business and financial news and information for investors
interested in micro and small capitalization companies. These are companies that
have market capitalization (defined as shares outstanding times the market price
per share) of less than $750 million in the case of "small capitalization"
companies or $50 million in the case of "micro capitalization" companies.
Our main website, www.smallcapcenter.com, acts as a portal for investors
researching, analyzing, and discussing micro and small cap stocks and markets.
This website provides newsworthy micro and small cap information to hundreds of
thousands of investor viewers as well as disseminating information about our
corporate clients. This information includes detailed profiles of companies,
industry news, stock quotes, charts, daily market reports, news releases and
other investment tools. Our Community is multi-tiered and includes both general
interest and industry-specific areas including: Computer Hardware/Software;
Telecomm; Mining/Exploration; Technology; Automotive; Oil/Gas;
Financial/Insurance; Medical Tech; Manufacturing; Biotech; Environmental;
Food/Beverage Tech; Real Estate; and Entertainment. We believe that we have
become a primary provider of timely, accurate investment information to micro
and small cap investors.
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Our subsidiary has been in operation since 1995 and historically has had
three sources of revenue: (i) financial products for public companies' Internet
sites; (iii) marketing services; and (iii) advertising.
Our business is characterized by rapid technological change, new product
development and evolving industry standards. Our business involves various risks
and uncertainties, including our limited operating history, a new and unproven
business model and the limited history of commerce on the Internet. Our success
may depend in part upon the emergence of the Internet as a communications
medium, prospective product development efforts and the acceptance of our
products and services by the marketplace. As part of our strategic development
plans, we invest significant resources in research and development of new
products and services.
As of October, 1999 we had 53 employees, of which 51 were full time.
RISK FACTORS
The following factors should be considered carefully in evaluating the
Company and its business before purchasing the common shares offered by this
Prospectus.
Our limited operating history makes the evaluation of our current business and
the forecasting of our future results difficult.
We have a limited operating history upon which an evaluation of us, our
current business and our prospects can be based, each of which must be
considered in light of the risks, expenses and problems frequently encountered
by all companies in the early stages of development, and particularly by such
companies entering new and rapidly developing markets like the Internet.
Risks related to the Internet may affect our success.
There are many risks associated with operations on the Internet that may
adversely affect our success. Such risks include, without limitation, the
following:
o the lack of broad acceptance of the Community model (as described on page
4) on the Internet
o the possibility that the Internet will fail to achieve broad acceptance as
an advertising and commercial medium
o our inability to attract or retain viewers or to generate significant
advertising revenues or subscription service revenues from our corporate
clients
o a new and relatively unproven business model
o our ability to anticipate and adapt to a developing market
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o the failure of our network infrastructure (including its servers, hardware
and software) to efficiently handle its Internet traffic
o changes in laws that adversely affect our business
o our ability to manage effectively our rapidly expanding operations,
including the amount and timing of capital expenditures and other costs
relating to the expansion of our operations
o the introduction and development of different or more extensive Communities
by our direct and indirect competitors of, including those with greater
financial, technical and marketing resources
o our inability to maintain and increase levels of traffic on our Web site
o our inability to attract, retain and motivate qualified personnel and
general economic conditions.
Our recent revenue growth may not continue in the future.
There can be no assurance that the revenue growth we have experienced in
recent periods will continue or increase. Our limited operating history makes
the prediction of future results difficult or impossible and, therefore, our
recent revenue growth should not be taken as an indication of any growth that
can be expected in the future. Furthermore, our limited operating history leads
us to believe that period-to-period comparisons of our operating results are not
meaningful and that the results for any period should not be relied upon as an
indication of future performance. To the extent that revenues do not grow at
anticipated rates, our business, results of operations and financial condition
would be materially and adversely affected.
We anticipate losses for the foreseeable future.
We have not achieved profitability in the current period and we anticipate
that we will continue to incur net losses for the foreseeable future. The extent
of these losses will depend, in part, on the amount of our growth in revenues
from advertising sales, client product and marketing services and sales revenues
and subscription fees from new services. As of December 31, 1998, we had an
accumulated deficit of CDN$35,000. We expect that our operating expenses will
increase significantly during the next several years, especially in the areas of
sales and marketing, product development and general and administrative
expenses. Thus, we will need to generate increased revenues to achieve
profitability. To the extent that increases in our operating expenses precede or
are not subsequently followed by corresponding increases in revenues, or that we
are unable to adjust operating expense levels accordingly, our business, results
of operations and financial condition would be materially and adversely
affected. There can be no assurance that we will ever achieve or sustain
profitability or that our operating losses will not increase in the future.
Our future success is dependent on continued growth in use of and commercial
viability of the Internet.
Our future success is substantially dependent upon continued growth in the
use of the
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Internet. To support advertising sales, and product and marketing services sales
revenues on www.smallcapcenter.com, the Internet's recent and rapid growth must
continue, and use of the Internet must become widespread. None of these can be
assured. The Internet may prove not to be a viable information communications
medium and information marketplace. Additionally, due to the ability of
consumers to easily compare prices of similar products or services on competing
Web sites, gross margins for the services marketed by us may narrow in the
future and, accordingly, our revenues may be materially negatively impacted. If
use of the Internet does not continue to grow, our business, results of
operations and financial condition would be materially and adversely affected.
Additionally, there are several issues that could lead to resistance
against the acceptance of the Internet as a viable commercial marketplace. To
the extent that the Internet continues to experience significant growth in the
number of users and the level of use, there can be no assurance that its
technical infrastructure will continue to be able to support the demands placed
upon it. The necessary technical infrastructure for significant increases in
electronic news dissemination and e-commerce related to it, such as a reliable
network backbone, may not be timely and adequately developed. In addition,
performance improvements, such as high-speed modems, may not be introduced in a
timely fashion. Furthermore, security and authentication concerns with respect
to transmission over the Internet of confidential information, such as credit
card numbers, may remain. Also, the Internet could lose its viability due to
delays in the development or adoption of new standards and protocols required to
handle increased levels of activity, or due to increased governmental
regulation. Changes in or insufficient availability of telecommunications
services could result in slower response times and adversely affect usage of the
Internet. To the extent the Internet's technical infrastructure does not
effectively support the growth that may occur, our business, results of
operations and financial condition would be materially and adversely affected.
Our business model and acceptance of our products is unproven in the
developing market in which we operate.
Our business model is new and relatively unproven. The model depends upon
our ability to generate multiple revenue streams by diversifying our product
offerings. To be successful, we must, among other things, develop and market
products and services that achieve broad market acceptance by its users,
advertisers and client subscriber companies. There can be no assurance that any
Internet Community, including www.smallcapcenter.com, will achieve broad market
acceptance. Accordingly, no assurance can be given that our business model will
be successful or that it can sustain revenue growth or be profitable.
The market for our products and services is new, rapidly developing and
characterized by an increasing number of market entrants. As is typical of any
new and rapidly evolving market, demand and market acceptance for recently
introduced products and services are subject to a high level of uncertainty and
risk. Moreover, because this market is new and rapidly evolving, it is difficult
to predict its future growth rate, if any, and its ultimate size. If the market
fails to develop, develops more slowly than expected or becomes saturated with
competitors, or if our products and services do not achieve or sustain market
acceptance, our
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business, results of operations and financial condition would be materially and
adversely affected.
If our efforts to achieve a strong brand identity are not successful, our
business and operating results will be materially adversely affected.
We believe that establishing and maintaining brand identity is a critical
aspect of efforts to attract and expand our viewer base, Internet traffic and
advertising and commerce relationships. Furthermore, we believe that the
importance of brand recognition will increase as low barriers to entry encourage
the proliferation of Internet sites. In order to attract and retain viewers,
advertisers and subscriber clients, and in response to competitive pressures, we
intend to increase our financial commitment to the creation and maintenance of
brand loyalty among these groups. We plan to accomplish this, although not
exclusively, through advertising campaigns in several forms of media, including
television, print, online media, and other marketing and promotional efforts. If
we do not generate a corresponding increase in revenue as a result of our
branding efforts or otherwise fail to promote our brand successfully, or if we
incur excessive expenses in an attempt to promote and maintain our brand, our
business, results of operations and financial condition would be materially and
adversely affected.
Promotion and enhancement of the smallcapcenter.com brand will also depend,
in part, on our success in providing a high-quality "Community Experience." Such
success cannot be assured. If viewers, users, advertisers and commerce vendors
do not perceive Smallcapcenter.com's Community experience to be of high quality,
or if we introduce new services or enter into new business ventures that are not
favorably received by such parties, the value of our brand could be diluted.
Such brand dilution could decrease the attractiveness of Smallcapcenter.com to
such parties, and could materially and adversely affect the Company's business,
results of operations and financial condition.
We rely significantly on advertising revenues, the level of which is difficult
to predict and will depend on the amount of "traffic" on our website and
advertisers' acceptance of the internet - based advertising medium.
We derive a significant portion of our revenues from the sale of
advertisements on our site, and expect to continue to do so for the foreseeable
future. Our business model therefore is highly dependent on the amount of
"traffic" on Smallcapcenter.com, which has a direct effect on our advertising
revenues. We are in the early stages of implementing our international branch
network and our advertising sales programs, which, if not successful, could
materially and adversely affect our business, results of operations and
financial condition.
Our ability to generate significant advertising revenues will depend, in
part, on our ability to create new advertising programs without diluting the
perceived value of our existing programs. Our ability to generate advertising
revenues will depend also, in part, on advertisers' acceptance of the Internet
as an attractive and sustainable medium, the
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development of a large base of users of our products and services, the effective
development of Web site content that provides user demographic characteristics
that will be attractive to advertisers, and government regulation. The adoption
of Internet-based advertising, particularly by those advertisers that have
historically relied upon traditional advertising media, requires the acceptance
of a new way of conducting business and exchanging information. There can be no
assurance that the market for Internet advertising will continue to emerge or
become sustainable. If the market develops more slowly than expected, our
business, results of operations and financial condition could be materially and
adversely affected.
The Internet as an advertising medium has not been available for a
sufficient period of time to gauge its effectiveness as compared with
traditional advertising media. No standards have been widely accepted for the
measurement of the effectiveness of Internet-based advertising, and there can be
no assurance that any such standards will become widely accepted in the future.
Additionally, no standards have been widely accepted to measure the number of
unique users or page views related to a particular site. Internet advertising
rates are based in part on third-party estimates of users of an Internet site.
Such estimates are often based on sampling techniques or other imprecise
measures, and may materially differ from our estimates. There can be no
assurance that advertisers will accept our or other parties' measurements of
impressions. The rejection by advertisers of such measurements could have a
material adverse effect on our business, results of operations and financial
condition.
The sale of Internet advertising is subject to intense competition that has
resulted in a wide variety of pricing models, rate quotes and advertising
services. This has made it difficult to project future levels of advertising
revenues and rates. It is also difficult to predict which pricing models, if
any, will achieve broad acceptance among advertisers. As described above, to
date, we have based our advertising rates on providing advertisers with a
guaranteed number of impressions, and any failure of our advertising model to
achieve broad market acceptance, would have a material adverse effect on our
business, results of operations and financial condition.
A majority of our advertising contracts are of a short-term nature and the level
of advertising purchases in the future is uncertain.
To date, substantially all of our advertising contracts have been for terms
averaging one to three months in length, with relatively few longer-term
advertising contracts. Many of our advertising customers have limited experience
with Internet advertising, have not devoted a significant portion of their
advertising expenditures to Internet advertising and may not believe Internet
advertising to be effective relative to traditional advertising media. There can
be no assurance that our current advertisers will continue to purchase
advertisements on www.smallcapcenter.com.
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If the advertisers' guaranteed minimum view run times on our Website are not
met, we will be required to provide additional run times following the contract
terms which may limit our advertising inventory.
Our contracts with advertisers typically guarantee the advertiser or
sponsor either a minimum view run time during which the ad will be seen by users
of smallcapcenter.com; or, a minimum number of "impressions," or
"click-throughs," or times that a sponsorship or advertisement is seen by users
of smallcapcenter.com. To the extent that minimum view run times, or impression
or click-through levels are not achieved for any reason, we may be required to
"make good" or provide additional impressions after the contract term, which may
adversely affect the availability of advertising inventory and which could have
a material adverse effect on our business, results of operations and financial
condition.
Specifically, the process of managing advertising within a large,
high-traffic Web site such as ours is an increasingly important and complex
task. If we do not manage this task in an efficient and appropriate manner, our
financial performance may be impaired. To the extent that we encounter system
failures or material difficulties in the operation of our systems, we could be
unable to deliver banner advertisements and sponsorships through our site. Any
extended failure of, or material difficulties encountered in connection with,
our advertising management system may expose the company to further "make good"
obligations with our advertisers, which, by displacing salable advertising
inventory, among other consequences, would reduce revenues and could have a
material adverse effect on our business, results of operations and financial
condition.
The increased use by consumers of software programs which remove advertising
from their desktops could have an adverse affect on our advertising revenues.
"Filter" software programs that limit or remove advertising from an
Internet user's desktop are available to consumers. Widespread adoption or
increased use of such software by users or the adoption of such software by
certain Internet access providers could have a material adverse effect upon the
viability of advertising on the Internet and, as we rely significantly on
advertising revenues, on our business, results of operations and financial
condition.
Potential fluctuations in our operating results and quarterly fluctuations may
adversely affect our trading price.
Our operating results may fluctuate significantly in the future as a result
of a variety of factors, many of which are outside our control. See "Our Limited
Operating..." p.5 and "Our Recent Revenue Growth..." p.6. As a strategic
response to changes in the competitive environment, we may from time to time
make certain pricing, service or marketing decisions or acquisitions that could
have a material short-term or long-term adverse effect on our business, results
of operations and financial condition. See "If our efforts to achieve a strong
brand identity..." p.8.
We derive a significant portion of our revenues from the sale of
advertising under short-term contracts, averaging one to three months in length.
As a result, our quarterly revenues and operating results are, to a significant
extent, dependent on advertising revenues from contracts entered into within the
quarter, and on our ability to adjust spending in a timely
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manner to compensate for any unexpected revenue shortfall. See "We rely
significantly on advertising revenues..." p.8; "A majority of our advertising
contracts..." p.9; "If the advertisers' guaranteed minimum view run times..."
p.10.
The foregoing factors, in some future quarters, may lead our operating
results to fall below the expectations of securities analysts and investors. In
such event, the trading price of our common stock would likely be materially and
adversely affected.
We are controlled by our officers, directors and entities affiliated with them.
In the aggregate, ownership of our shares by Management represent
approximately 46% of our issued and outstanding shares of common stock. These
stockholders, if acting together, will be able to significantly influence all
matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business combinations
transactions.
Our future performance is dependent on key personnel.
Our performance is substantially dependent on the performance of our senior
management and key technical personnel. In particular, our success depends on
the continued efforts of our senior management team, especially our Chief
Executive Officer, Marcus New and our President, Leslie Landes. The loss of the
services of any of our executive officers or other key employees could have a
material adverse effect on our business, results of operations and financial
condition. Although several senior management personnel have substantial share
and/or stock options interests, we do not have agreements in place, which bind
its senior management to us.
Our future success also depends on our continuing ability to retain and
attract highly qualified technical, editorial and managerial personnel. We
anticipate that the number of our employees will increase significantly in the
next 12 months. Wages for managerial and technical employees are increasing and
are expected to continue to increase in the foreseeable future due to the
competitive nature of this job market. There can be no assurance that we will be
able to retain our key managerial and technical personnel or that it will be
able to attract and retain additional highly qualified technical and managerial
personnel in the future. We have experienced difficulty from time to time in
attracting the personnel necessary to support the growth of our business, and
there can be no assurance that we will not experience similar difficulty in the
future. The inability to attract and retain the technical and managerial
personnel necessary to support the growth of our business, due to, among other
things, a large increase in the wages demanded by such personnel, could have a
material adverse effect upon our business, results of operations and financial
condition.
A majority of our senior management is inexperienced in managing a public
company.
Our recent growth has placed, and is expected to continue to place, a
significant strain on our managerial, operational and financial resources. To
manage our potential growth, we
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must continue to implement and improve our operational and financial systems,
and must expand, train and manage its employee base. Our President and Vice
President Finance joined us during August and November 1998, respectively. In
addition, we have yet to fill several key senior management posts. Furthermore,
the members of our current senior management (other than the President) have not
had any previous experience managing a public company or a large operating
company. There can be no assurance that we will be able to effectively manage
the expansion of our operations, that our systems, procedures or controls will
be adequate to support our operations or that our management will be able to
achieve the rapid execution necessary to fully exploit the market opportunity
for our products and services. Any inability to manage growth effectively could
have a material adverse effect on our business, results of operations and
financial condition.
We must enhance and develop www.smallcapcenter.com to remain competitive.
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of www.smallcapcenter.com and develop
other products and services. Enhancements of or improvements to the Web site may
contain undetected programming errors that require significant design
modifications, resulting in a loss of customer confidence and user support and a
decrease in the value of our brand name recognition.
We plan to develop and introduce new features and functions, such as
increased capabilities for user personalization and interactivity. This will
require the development or licensing of increasingly complex technologies. There
can be no assurance that we will be successful in developing or introducing such
features and functions or that such features and functions will achieve market
acceptance or enhance our brand name recognition. Any failure to effectively
develop and introduce new features and functions, or the failure of such new
features and functions to achieve market acceptance, could have a material
adverse effect on our business, results of operations and financial condition.
We also plan to develop and introduce new products and services. There can
be no assurance that we will be successful in developing or introducing such
products and services or that such products and services will achieve market
acceptance or enhance our brand name recognition. Any failure on our part to
effectively develop and introduce these products and services, or the failure of
such products and services to achieve market acceptance, could have a material
adverse effect on our business, results of operations and financial condition.
The internet industry is characterized by rapid technological change which may
affect our ability to respond to the evolving demands of our market place.
The market for Internet products and services is characterized by rapid
technological developments, evolving industry standards and customer demands,
and frequent new product introductions and enhancements. These market
characteristics are exacerbated by the emerging nature of the market and the
fact that many companies are expected to introduce new Internet products and
services in the near future. Our future success will depend in significant part
on its ability to continually improve the performance, features and reliability
of the site in
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response to both evolving demands of the marketplace and competitive product and
service offerings, and there can be no assurance that we will be successful in
doing so. In addition, the widespread adoption of developing multimedia enabling
technologies could require fundamental and costly changes in our technology and
could fundamentally affect the nature, viability and measurability of
Internet-based advertising, which could adversely affect our business, results
of operations and financial condition.
We may be unable to accommodate increased consumer traffic on our website, which
would limit our ability to increase advertising sales and achieve market
acceptance.
A key element of our strategy is to generate a high volume of user traffic.
Our ability to attract advertisers and to achieve market acceptance of its
products and services, and its reputation, depend significantly upon its
performance and its network infrastructure (including its servers, hardware and
software). Any system failure that causes interruption or slower response time
of our products and services could result in less traffic to the Website and, if
sustained or repeated, could reduce the attractiveness of our products and
services to advertisers and licensees. An increase in the volume of user traffic
could strain the capacity of our technical infrastructure, which could lead to
slower response time or system failures, and could adversely affect the delivery
of the number of impressions that are owed to advertisers and thus our
advertising revenues. In addition, as the number of users of
www.smallcapcenter.com increase, there can be no assurance that Stockgroup.com
and our technical infrastructure will be able to grow accordingly, and we face
risks related to our ability to scale up to the expected viewer levels while
maintaining superior performance. Any failure of our server and networking
systems to handle current or higher volumes of traffic would have a material
adverse effect on our business, results of operations and financial condition.
We may suffer system failures on our Website which could result in negative
publicity, reduce volume of our advertising sales and adversely affect our
market acceptance.
We are also dependent upon third parties to provide potential users with
Web browsers and Internet and online services necessary for access to the site.
In the past, users have occasionally experienced difficulties with Internet and
online services due to system failures, including failures unrelated to our
systems. Any disruption in Internet access provided by third parties could have
a material adverse effect on our business, results of operations and financial
condition. Furthermore, we are dependent on hardware and software suppliers for
prompt delivery, installation and service of equipment used to deliver our
products and services.
Our operations are dependent in part upon our ability to protect our
operating systems against damage from human error, fire, floods, power loss,
telecommunications failures, break-ins and similar events. We do not presently
have redundant, multiple-site capacity in the event of any such occurrence. Our
servers are also vulnerable to computer viruses, break-ins and similar
disruptions from unauthorized tampering with our computer systems. The
occurrence of any of these events could result in the interruption, delay or
cessation of service,
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which could have a material adverse effect on our business, results of
operations and financial condition. In addition, our reputation and the
smallcapcenter.com brand could be materially and adversely affected.
There are security risks to our network.
Experienced programmers ("hackers") have attempted on occasion to penetrate
our network security. We expect that these attempts, some of which have
succeeded, will continue to occur from time to time. Because a hacker who is
able to penetrate our network security could misappropriate proprietary
information or cause interruptions in our products and services or do other
damage, we may be required to expend significant capital and resources to
protect against or to alleviate problems caused by such parties. Additionally,
we may not have a timely remedy against a hacker who is able to penetrate our
network security. Such purposeful security breaches could have a material
adverse effect on our business, results of operations and financial condition.
In addition to purposeful security breaches, the inadvertent transmission of
computer viruses could expose us to a material risk of loss or litigation and
possible liability.
In offering certain payment services for some products and services, we
could become increasingly reliant on encryption and authentication technology
licensed from third parties to provide the security and authentication necessary
to effect secure transmission of confidential information, such as customer
credit card numbers. Advances in computer capabilities, discoveries in the field
of cryptography and other discoveries, events, or developments could lead to a
compromise or breach of the algorithms that our licensed encryption and
authentication technology used to protect such confidential information. If such
a compromise or breach of our licensed encryption authentication technology
occurs, it could have a material adverse effect on our business, results of
operations and financial condition. We may be required to expend significant
capital and resources and engage the services of third parties to protect
against the threat of such security, encryption and authentication technology
breaches or to alleviate problems caused by such breaches. Concerns over the
security of Internet transactions and the privacy of users may also inhibit the
growth of the Internet generally, particularly as a means of conducting
commercial transactions.
We may not be able to compete successfully against current and future
competitors.
The market for viewers, corporate subscribers and Internet advertising is
new and rapidly evolving, and competition for viewers and advertisers, as well
as competition in the information dissemination market, is intense and is
expected to increase significantly. Barriers to entry are relatively
insubstantial and we may face competitive pressures from many additional
companies both in the United States, Canada and abroad.
We believe that the principal competitive factors for companies seeking to
create Communities on the Internet are critical mass (i.e., depth of content and
range of features of interest to viewers), functionality of the Web site, brand
recognition, viewer affinity and loyalty, broad demographic focus and open
access for visitors. In the future, Internet
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communities may be developed or acquired by companies currently operating other
Communities or by Web directories, search engines, shareware archives and
content sites, and by commercial online service providers, Internet Service
Providers and other entities, certain of which may have more resources than us.
We compete for users and advertisers with other content providers and with
thousands of Web sites operated by individuals, the government and educational
institutions. In addition, we could face competition in the future from
traditional media companies, such as newspaper, magazine, television and radio
companies, a number of which, including The Walt Disney Company ("Disney"), CBS
Corporation ("CBS") and The National Broadcasting Company ("NBC"), have recently
made significant acquisitions of or investments in Internet companies.
We believe that the principal competitive factors in attracting advertisers
include the amount of traffic on our Web site, brand recognition, customer
service, the demographics of the Community's members and users, our ability to
offer targeted audiences and the overall cost effectiveness of the advertising
medium offered by us. We believe that the number of Internet companies relying
on Internet-based advertising revenue, as well as the number of advertisers on
the Internet and the number of users, will increase substantially in the future.
Accordingly, we will likely face increased competition, resulting in increased
pricing pressures on its advertising rates, which could have a material adverse
effect on the company.
Many of our existing and potential competitors, including companies
operating Web directories and search engines, and traditional media companies,
have longer operating histories in the Internet Market, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than ours. Such competitors may be able to
undertake more extensive marketing campaigns for their brands and services,
adopt more aggressive advertising pricing policies and make more attractive
offers to potential employees, distribution partners, e-commerce companies,
advertisers and third-party content providers. Furthermore, our existing and
potential competitors may develop Communities that are equal or superior in
quality to, or that achieve greater market acceptance than,
www.smallcapcenter.com. There can be no assurance that we will be able to
compete successfully against its current or future competitors or that
competition will not have a material adverse effect on our business, results of
operations and financial condition.
Additionally, the Internet information market is new and rapidly evolving,
and competition among information providers is expected to increase
significantly. There can be no assurance that Web sites maintained by our
existing and potential competitors will not be perceived by advertisers as being
more desirable for placement of advertisements than smallcapcenter.com. In
addition, many of our current advertising customers and some of its corporate
clients have established relationships with certain of the company's existing or
potential competitors. There can be no assurance that we will be able to retain
or grow our viewer base, traffic levels and advertising customer base at
historical levels, or that competitors will not experience better retention or
greater growth in these areas than us. Accordingly, there can be no assurance
that any of our advertising customers or corporate client companies will not
sever or will elect not to renew their agreements with us, the result of which
could have a material adverse effect on our business, results of operations and
financial condition.
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We have a strong dependence on relationships with suppliers and carriers. If
these relationships are not maintained, our business and financial condition
will be adversely affected.
We are and will continue to be significantly dependent on a number of
third-party relationships to increase traffic on www.smallcapcenter.com and
thereby generate advertising revenues, maintain the current level of service and
variety of content for our viewers, and meet future milestones. We are also
dependent on other Web site operators that provide links to smallcapcenter.com.
Most of our arrangements with third-party Internet sites and other
third-party service providers do not require future minimum commitments to use
our services or to provide access or links to our services or products, are not
exclusive and are short-term or may be terminated at the convenience of the
other party. Moreover, we do not have agreements with the majority of other Web
site operators that provide links to smallcapcenter.com, and such Web site
operators may terminate such links at any time without notice to us. There can
be no assurance that third parties regard their relationship with us as
important to their own respective businesses and operations, that they will not
reassess their commitment to us at any time in the future or that they will not
develop their own competitive services or products.
There can be no assurance that we will be able to maintain relationships
with third parties that supply us with software or products that are crucial to
our success, or that such software or products will be able to sustain any
third-party claims or rights against their use. Furthermore, there can be no
assurance that the software, services or products of those companies that
provide access or links to our services or products will achieve market
acceptance or commercial success. Failure of one of these third parties could
have a material adverse effect on our business, results of operations and
financial condition. In particular, the elimination of a pre-installed bookmark
on a Web browser that directs traffic to our Web site could significantly reduce
traffic on our Web site, which would have a material adverse effect on our
business, results of operations and financial condition.
Additional financing may be required by us as we expect negative operating cash
flow for the next fiscal year. Such financing may result in the issuance of
additional securities and/or may not be available on terms favorable to us.
We expect that we will continue to experience negative operating cash flow
for the foreseeable future as a result of significant spending on advertising
and infrastructure. Accordingly, we may need to raise additional funds in a
timely manner in order to fund our anticipated expansion and new enhanced
services or products, respond to competitive pressures or acquire complementary
products, businesses or technologies. If additional funds are raised through the
issuance of equity or convertible debt securities, the percentage ownership of
the stockholders of the company will be reduced, stockholders may experience
additional dilution and such securities may have rights, preferences or
privileges senior to those of the holders of
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the common stock. We do not have any contractual restrictions on our ability to
incur debt and, accordingly, we could incur significant amounts of indebtedness
to finance our operations. Any such indebtedness could contain covenants, which
would restrict its operations. There can be no assurance that additional
financing if and when needed will be available on terms favorable to us, or at
all. If adequate funds are not available or are not available on acceptable
terms, it would have a material adverse effect on our ability to fund our
expansion, take advantage of acquisition opportunities, develop or enhance
services or products or respond to competitive pressures.
Future acquisitions of other business entities by us entail numerous risks and
uncertainties which could have an adverse affect on its operations and financial
condition.
As part of our business strategy, we expect to review acquisition prospects
that would complement our existing business, augment the distribution of its
Community or enhance its technological capabilities. Future acquisitions by us
could result in potentially dilutive issuance's of equity securities, large and
immediate write-offs, the incurrence of debt and contingent liabilities or
amortization expenses related to goodwill and other intangible assets, any of
which could materially and adversely affect our business, results of operations
and financial condition.
Furthermore, acquisitions entail numerous risks and uncertainties,
including difficulties in the assimilation of operations, personnel,
technologies, products and information systems of the acquired companies, the
diversion of management's attention from other business concerns, the risks of
entering geographic and business markets in which we have no or limited prior
experience and the potential loss of key employees of acquired organizations.
We have not made any acquisitions in the past. No assurance can be given as
to our ability to successfully integrate any businesses, products, technologies
or personnel that might be acquired in the future, and our failure to do so
could have a material adverse effect on our business, results of operations and
financial condition.
We may be unable to protect the intellectual property rights upon which our
business relies, which could harm our competitiveness and cause customer
confusion.
We regard substantial elements of our Web site and underlying technology as
proprietary and attempt to protect them by relying on intellectual property
laws, including trademark, service mark, copyright and trade secret laws and
restrictions on disclosure and transferring title and other methods. We also
generally enter into confidentiality agreements with our employees and
consultants and in connection with our license agreements with third parties. We
seek to control access to and distribution of our technology, documentation and
other proprietary information. Despite these precautions, it may be possible for
a third party to copy or otherwise obtain and use our proprietary information
without authorization or to develop similar technology independently. We are
pursuing the registration of our trademarks in the United States and
internationally. Effective trademark, service mark, copyright and trade secret
protection may not be available in every country in which our services are
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distributed or made available through the Internet, and policing unauthorized
use of our proprietary information is difficult.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any of our proprietary rights. There can be no assurance
that the steps taken by us will prevent misappropriation or infringement of its
proprietary information, which could have a material adverse effect on our
business, results of operations and financial condition.
Litigation may be necessary in the future to enforce our intellectual
property rights, to protect its trade secrets or to determine the validity and
scope of the proprietary rights of others. Such litigation might result in
substantial costs and diversion of resources and management attention.
Furthermore, there can be no assurance that our business activities will not
infringe upon the proprietary rights of others, or that other parties will not
assert infringement claims against us, including claims that by directly or
indirectly providing hyperlink text links to Web sites operated by third
parties, we have infringed upon the proprietary rights of other third parties.
Moreover, from time to time, we may be subject to claims of alleged infringement
by us of the trademarks, service marks and other intellectual property rights of
third parties. Such claims and any resultant litigation, should it occur, might
subject us to significant liability for damages, might result in invalidation of
our proprietary rights and, even if not meritorious, could result in substantial
costs and diversion of resources and management attention and could have a
material adverse effect on our business, results of operations and financial
condition.
We currently license from third parties certain technologies incorporated
into www.smallcapcenter.com. As we continue to introduce new services that
incorporate new technologies, it may be required to license additional
technology from others. There can be no assurance that these third-party
technology licenses will continue to be available to us on commercially
reasonable terms, if at all. Additionally, there can be no assurance that the
third parties from which we currently license our technology will be able to
defend their proprietary rights successfully against claims of infringement. As
a result, any inability on our part to obtain any of these technology licenses
could result in delays or reductions in the introduction of new services or
could adversely affect the performance of our existing services until equivalent
technology can be identified, licensed and integrated.
It is unclear how any existing and future laws enacted will be applied to the
Internet industry and what effect such laws will have on us.
A number of legislative and regulatory proposals under consideration by
federal, state, provincial, local and foreign governmental organizations may
lead to laws or regulations concerning various aspects of the Internet,
including, but not limited to, online content, user privacy, taxation, access
charges, liability for third-party activities and jurisdiction. Additionally, it
is uncertain how existing laws will be applied by the judiciary to the Internet.
The adoption of new laws or the application of existing laws may decrease the
growth in the
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use of the Internet, which could in turn decrease the demand for our services,
increase our cost of doing business or otherwise have a material adverse effect
on our business, results of operations and financial condition.
There can be no assurance that the United States, Canada or foreign nations
will enact legislation or seek to enforce existing laws prohibiting or
restricting certain content from the Internet. Prohibition and restriction of
Internet content could dampen the growth of Internet use, decrease the
acceptance of the Internet as a communications and commercial medium, expose us
to liability, and/or require substantial modification of www.smallcapcenter.com,
and thereby have a material adverse effect on our business, results of
operations and financial condition.
Internet user privacy has become an issue both in the United States, Canada
and abroad. We cannot predict the exact form of the regulations that the FTC may
adopt. There can be no assurance that the United States, Canada or foreign
nations will not adopt additional legislation purporting to protect such
privacy. Any such action could affect the way in which we are allowed to conduct
our business, especially those aspects that involve the collection or use of
personal information, and could have a material adverse effect on our business,
results of operations and financial condition.
The tax treatment of the Internet and e-commerce is currently unsettled. A
number of proposals have been made at the federal, state, provincial and local
level and by certain foreign governments that could impose taxes on the sale of
goods and services and certain other Internet activities. Recently, the Internet
Tax Freedom Act was signed into law, placing a three-year moratorium on new
state and local taxes on certain aspects of Internet commerce. However, there
can be no assurance that future laws imposing taxes or other regulations on
commerce over the Internet would not substantially impair the growth of
e-commerce and as a result have a material adverse effect on our business,
results of operations and financial condition.
Certain local telephone carriers have asserted that the growing popularity
and use of the Internet has burdened the existing telecommunications
infrastructure, and that many areas with high Internet use have begun to
experience interruptions in telephone service. These carriers have petitioned
the Federal Communications Commission (the "FCC") to impose access fees on
internet service providers and on-line service providers. If such access fees
are imposed, the costs of communicating on the Internet could increase
substantially, potentially slowing the growth in use of the Internet, which
could in turn decrease demand for our services or increase our cost of doing
business, and thus have a material adverse effect on our business, results of
operations and financial condition.
Although our servers are located in the Province of British Columbia, the
governments of other provinces, states and foreign countries might attempt to
take action against us for violations of their laws. There can be no assurance
that violations of such laws will not be alleged or charged by provincial, state
or foreign governments and that such laws will not be modified, or new laws
enacted, in the future. Any of the foregoing could have a material adverse
effect on our business, results of operations and financial condition.
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We may be exposed to liability for information retrieved from or transmitted
over our websites or for products sold over our websites.
Because materials may be downloaded by the online or Internet services
operated or facilitated by us or the Internet access providers with which we
have relationships and that material may be subsequently distributed to others,
there is a potential that claims will be made against us for defamation,
negligence, copyright or trademark infringement or other theories based on the
nature and content of such materials. Such claims have been brought against
providers of online services in the past. Such claims could be material in the
future. In addition, the increased attention focused upon liability issues and
legislative proposals could materially impact the overall growth of Internet
use.
We could also be exposed to liability with respect to third-party
information that may be accessible through our Web sites, or through content and
materials that may be posted by viewers on discussion forums offered by us. Such
claims might include, among others, that, by directly or indirectly providing
hyperlink text links to Web sites operated by third parties or by providing
discussion forums for viewers, we are liable for copyright or trademark
infringement or other wrongful actions by such third parties through such Web
sites. It is also possible that, if any third-party content information provided
on our Web site contains errors, third parties could make claims against us for
losses incurred in reliance on such information.
We offer e-mail service, which is provided by a third party. See "We have a
strong dependence on..." p.16. Such service may expose us to potential risk,
such as liabilities or claims resulting from unsolicited e-mail ("spamming"),
lost or misdirected messages, illegal or fraudulent use of e-mail or
interruptions or delays in e-mail service.
We also enter into agreements with advertisers and commerce partners under
which we are entitled to receive a commission or share of any revenue from the
purchase of goods and services through direct links from our Web site. Such
arrangements may expose us to additional legal risks and uncertainties,
including pursuant to regulation by local, provincial, state, federal and
foreign authorities and potential liabilities to consumers of such products and
services, even if we do not ourselves provide such products or services. There
can be no assurance that any indemnification provided to us in our agreements
with these parties, if available, will be adequate.
Even to the extent such claims do not result in liability to us, we could
incur significant costs in investigating and defending against such claims. The
imposition on us of potential liability for information carried on or
disseminated through our systems could require us to implement measures to
reduce its exposure to such liability, which may require the expenditure of
substantial resources and limit the attractiveness of our services to members
and users.
Our general liability insurance may not cover all potential claims to which
we are exposed or may not be adequate to indemnify us for all liability that may
be imposed. Any
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imposition of liability that is not covered by insurance or is in excess of
insurance coverage could have a material adverse effect on our business, results
of operations and financial condition.
Our strategy to commence international operations and other expansions expose us
to several risks that could have an adverse affect on our business, results of
operations and financial condition.
A part of our strategy is to expand our sales offices network throughout
the United States, Canada and international markets. There can be no assurance
that our products or services will become widely accepted for corporate clients,
advertising in the U.S., Canada or any international markets. In addition, we
expect that the success of any additional foreign operations we initiate in the
future will also be dependent upon local service providers and/or partners. If
revenues from international ventures are not adequate to cover the investments
in such activities, our business, results of operations and financial condition
could be materially and adversely affected. We may experience difficulty in
managing international operations as a result of difficulty in locating
effective foreign service providers and/or partners, competition, technical
problems, local laws and regulations, distance and language and cultural
differences, and there can be no assurance that we or our international partners
will be able to successfully market and operate in foreign markets. We also
believe that, in light of substantial anticipated competition, it will be
necessary to aggressively market our products and services into the United
States and international markets in order to effectively obtain market share,
and there can be no assurance that we will be able to do so. There are certain
risks inherent in doing business on an international level, such as unexpected
changes in regulatory requirements, trade barriers, difficulties in staffing and
managing foreign operations, fluctuations in currency exchange rates, longer
payment cycles in general, problems in collecting accounts receivable,
difficulty in enforcing contracts, political and economic instability, seasonal
reductions in business activity in certain other parts of the world and
potentially adverse tax consequences. There can be no assurance that one or more
of such factors will not have a material adverse effect on our future
international operations and, consequently, on our business, results of
operations and financial condition.
Year 2000 issues may materially affect our business.
The Year 2000 issue is the potential for system and processing failures of
date-related data and the result of computer-controlled systems using two digits
rather than four to define the applicable year. For example, computer programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the Year 2000. This could result in system failures or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities.
We may be affected by Year 2000 issues related to non-compliant information
technology systems or non-information technology systems operated by us or by
third parties. We have substantially completed assessment of our internal and
external (third party)
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information technology systems and non-information technology systems. At this
point in our assessment, we are not currently aware of any Year 2000 problems
relating to systems operated by us or by third parties that would have a
material effect on our business, results of operations or financial condition,
without taking into account our efforts to avoid such problems. Based on our
assessment to date, we do not anticipate that costs associated with remediating
our non-compliant information technology systems or non-information technology
systems will be material, although there can be no assurance to such effect.
To the extent that our assessment is finalized without identifying any
additional material non-compliant information technology systems operated by us
or by third parties, the most reasonably likely worst case Year 2000 scenario is
the failure of one or more of our vendors of hardware or software or one or more
providers of non-information technology systems to us to properly identify any
Year 2000 compliance issues and remediate any such issues prior to December 31,
1999. We believe that the primary business risks, in the event of such failure,
would include, but not be limited to, lost advertising revenues, increased
operating costs, loss of customers or persons accessing our Web site, or other
business interruptions of a material nature, as well as claims of mismanagement,
misrepresentation, or breach of contract, any of which could have a material
adverse effect on our business, results of operations and financial condition.
Any significant deterioration in the general economic conditions would have an
adverse effect on our business, result of operations or financial condition.
Time spent on the Internet by individuals, purchases of new computers and
purchases of membership subscriptions to Internet sites are typically
discretionary for consumers and may be particularly affected by adverse trends
in the general economy. The success of our operations depends to a significant
extent upon a number of factors relating to discretionary consumer spending,
including economic conditions (and perceptions of such conditions by consumers)
affecting disposable consumer income such as employment, wages and salaries,
business conditions, interest rates, availability of credit and taxation, for
the economy as a whole and in regional and local markets where we operate. There
can be no assurance that consumer spending will not be adversely affected by
general economic conditions, which could negatively impact our results of
operations or financial condition. Any significant deterioration in general
economic conditions or increases in interest rates may inhibit consumers' use of
credit and cause a material adverse effect on our revenues and profitability. In
addition, our business strategy relies on advertising by and agreements with
other Internet companies. Any significant deterioration in general economic
conditions that adversely affected these companies could also have a material
adverse effect on our business, results of operations and financial condition.
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If the trading price of our common stock remains volatile, the long-term trading
price may be adversely affected regardless of our performance and a class action
litigation may be instituted against us which would have an adverse effect on
our business, results of operations and financial condition.
The trading price of our common stock has been volatile and may continue to
be subject to wide fluctuations in response to quarterly variations in operating
results, announcements of technological innovations or new products and services
by us or our competitors, changes in financial estimates by securities analysts,
the operating and stock price performance of other companies that investors may
deem comparable to ours and other events or factors. In addition, the stock
market in general, and the market prices for Internet-related companies in
particular, have experienced extreme volatility that often has been unrelated to
the operating performance of such companies. These broad market and industry
fluctuations may adversely affect the trading price of our common stock,
regardless of our operating performance. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such company. Such
litigation, if instituted, whether or not successful, could result in
substantial costs and a diversion of management's attention and resources, which
would have a material adverse effect on our business, results of operations and
financial condition.
Shares Eligible for Future Sale; Limited Trading Market
Potential Future 144 Sales:
As of October 31, 1999, of the shares of our common stock authorized, there
were issued and outstanding 8,195,000 of which 5,000,000 are "restricted shares"
as that term is defined under the Securities Act, and in the future may be sold
in compliance with Rule 144 of the Securities Act, or pursuant to a Registration
Statement filed under the Act. Rule 144 provides, in essence, that a person
holding restricted securities for a period of 1 year may sell those securities
in unsolicited brokerage transactions or in transactions with a market maker, in
an amount equal to the greater of (i) 1% of our outstanding common stock or (ii)
the average weekly trading volume for the four week period prior to the proposed
date of sale, every 3 months. Additionally, Rule 144 requires that an issuer of
securities make available adequate current public information with respect to
the issuer. Such information is deemed available if the issuer satisfies the
reporting requirements of Sections 13 or 15(d) of the Exchange Act and of
Rule15c2-11 thereunder. Rule 144 also permits, under certain circumstances, that
sale of shares by a person who is not an affiliate (and has not been an affilate
for the 90 day period preceding the prosposed sale) of the company and who has
satisfied a 2 year holding period without any quantity limitation and whether or
not there is adequate current public information available.
Possible Issuance of Additional Shares:
Our Articles of Incorporation, authorizes the issuance of common stock. No
information is currently available and no prediction can be made as to the
timing or amount of future sales of such shares or the effect, if any, that
future sales of shares, or the availability of shares for future sale, will have
on the market price of the common stock prevailing from time to time. Sales of
substantial amounts of common stock (including shares issuable upon the exercise
of stock options), or the perception that such sales could occur, could
materially adversely affect prevailing market prices for the common stock and
the ability of Stockgroup.com to raise equity capital in the future.
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There is a limited market for our common stock.
Our common stock has been quoted for trading on the OTC BB since March 17,
1999. Accordingly, there has been a limited public market for our common stock.
The following table sets forth high and low bid prices for the common stock for
the periods ending March 31, 1999, June 30, 1999 and September 30, 1999. These
prices represent quotations between dealers without adjustment for retail
markup, markdown or commission and may not represent actual transactions.
Quarter Ending: High Low Volume
March 31, 1999 $ 10.25 $ 6.00 3,339,000
June 30, 1999 $ 9.00 $ 3.125 4,859,200
September 30, 1999 $ 5.00 $ 2.125 3,297,500
The closing price on November 3, 1999 was $2.625.
No assurance can be given that a market for our common stock will be
sustained or that the common stock will continue to be quoted on the NASD's Over
the Counter Bulletin Board.
On October 31, 1999, Stockgroup.com had 43 registered shareholders owning
8,195,000 shares.
The sale or transfer of our common stock by shareholders may be subject to the
so-called "Penny Stock Rules."
Under Rule 15g-9 of the Exchange Act, a broker or dealer may not sell a
"penny stock" (as defined in Rule 3a51-1) to or effect the purchase of a penny
stock by any person unless:
(a) such sale or purchase is exempt from Rule 15g-9;
(b) prior to the transaction the broker or dealer has (1) approved the
person's account for transaction in penny stocks in accordance with
Rule 15g-9, and (2) received from the person a written agreement to
the transaction setting forth the identity and quantity of the penny
stock to be purchased; and
(c) the purchaser has been provided an appropriate disclosure statement as
to penny stock investment.
The Securities and Exchange Commission adopted regulations that generally
define a penny stock to be any equity security other than a security excluded
from such definition by Rule 3a51-1. Such exemptions include, but are not
limited to (1) an equity security issued by an issuer that has (i) net tangible
assets of at least US$2,000,000, if such issuer has been in continuous
operations for at least three years, (ii) net tangible assets of at least
US$5,000,000, if such issuer has been in continuous operation for less than
three years, or (iii) average revenue of at least US$6,000,000 for the preceding
three years; (2) except for purposes of Section 7(b) of the Exchange Act and
Rule 419, any security that has a price of US$5.00 or more; and (3) a security
that is authorized or approved for authorization upon notice of issuance for
quotation on the NASDAQ Stock Market, Inc.'s Automated Quotation System. It is
likely that shares of common stock, assuming a market were to develop therefore,
will be subject to the regulations on penny stocks; consequently, the market
liquidity for the common stock may be adversely affected by such regulations
limiting the ability of broker/dealers to sell our common stock and the ability
of shareholders to sell their securities in the secondary market.
Moreover, our shares may only be sold or transferred by our shareholders in
those jurisdictions in which an exemption for such "secondary trading" exists or
in which the shares may have been registered.
We have not declared any dividends or intend to do so in the foreseeable future.
We have not declared any dividends since inception, and have no present
intention of paying any cash dividends on our common stock in the foreseeable
future. The payment by us of dividends, if any, in the future, rests with the
discretion of our Board of Directors and will depend, among other things, upon
our earnings, our capital requirements and our financial condition, as well as
other relevant factors.
As we maintain our accounts in Canadian Dollars, we are subject to foreign
currency fluctuations, which could have an adverse effect on our business.
We maintain our accounts in Canadian Dollars. Our operations in the
United States make us subject to foreign currency fluctuations and such
fluctuations may materially affect our financial position and results. At the
present time we do not engage in hedging activities.
If issued, the shares reserved for future issuance, may cause the current
stockholders to suffer an equity dilution.
We have reserved, as of October 31, 1999, 2,000,000 shares of common stock
("Shares") for issuance upon the exercise of non-qualified stock options. Such
amount of Shares represents a potential equity dilution of 24.41% based upon the
number of outstanding Shares at October 31,
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<PAGE>
1999. Furthermore, we may enter into commitments in the future which would
require the issuance of additional shares and may grant additional stock options
or warrants. At October 31, 1999, we had 91,805,000 authorized but unissued and
unreserved Shares. Issuance of additional Shares would be subject to certain
regulatory approvals and compliance with applicable securities legislation. We
currently have no plans to issue preferred shares and no plans to issue
additional shares other than for the purposes of raising funds for general
working capital requirements which issuance would be subject to regulatory
approval.
Forward Looking Statements
This Prospectus contains statements that plan for or contemplate the
future. These statements are based upon a number of assumptions and estimates
which are inherently subject to significant uncertainties and contingencies,
many of which are beyond our control and reflect future business decisions which
are subject to change. Some of these assumptions inevitably will not
materialize, and unanticipated events will occur which will affect our future
results. In this Prospectus such statement are generally identified by words
such as "anticipate," "plan," "believe," "expect," "estimate" and the like. All
such forward looking statements are qualified by reference to matters discussed
under the section entitled, "Risk Factors."
The Private Securities Litigation Reform Act of 1995 which provides a "safe
harbor" for similar statements by certain public companies may not apply to the
offer and sale of the Award Shares.
USE OF PROCEEDS
We will not receive any of the proceeds from the offering hereunder. All
expenses of registration incurred in connection with this offering are being
paid by us, but all selling and other expenses incurred by the individual
Selling Shareholders will be paid by them. However, we will receive proceeds
from the exercise, if any, of the stock options granted pursuant to the Plan.
SELLING SHAREHOLDERS
The following table sets forth the information as of October 31, 1999 with
respect to the number of Shares beneficially owned by the Selling Shareholders.
================================================================================
Name Of Selling Shareholder Award Shares Acquired Or Which May Be
Acquired And Offered
- --------------------------------------------------------------------------------
Marcus New 325,000(1)
Chief Executive Officer, Director,
Chairman of the Board
- --------------------------------------------------------------------------------
Les Landes 745,800
President, Chief Operating Officer, Director
- --------------------------------------------------------------------------------
John Dawe 15,000(2)
Vice President of Finance, Secretary, Treasurer
- --------------------------------------------------------------------------------
Craig Faulkner 195,000(3)
Chief Technology Officer, Director
================================================================================
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(1) Mr. Marcus New beneficially owns 2,817,000 shares of common stock.
(2) Mr. John Dawe beneficially owns 800 shares of common stock.
(3) Mr. Craig Faulkner beneficially owns 915,000 shares of common stock.
PLAN OF DISTRIBUTION
The Award Shares may be sold from time to time to purchasers directly by
any of the Selling Shareholders. Alternatively, the Selling Shareholders may
sell the Award Shares in one or more transactions (which may involve one or more
block transactions) in sales occurring in the over-the-counter public market, in
separately negotiated transactions, or in a combination of such transactions.
Each sale may be made either at market prices prevailing at the time of such
sale or at negotiated prices; some or all of the Award Shares may be sold
through brokers acting on behalf of the Selling Shareholders or to dealers for
resale by such dealers; in connection with such sales, such brokers or dealers
may receive compensation in the form of discounts or commissions from the
Selling Shareholders and/or the purchasers of these Award Shares for whom they
may act as broker or agent (which discounts or commissions are not anticipated
to exceed those customary in the types of transactions involved). However, any
securities covered by this Prospectus which qualify for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than pursuant to
this Prospectus.
All expenses of registration incurred in connection with this offering are
being paid by us, but all brokerage commissions and other expenses incurred by
individual Selling Shareholders will be paid by that Selling Shareholder. We
will not receive any of the proceeds from such sales, although we may receive
the exercise price in cash upon the exercise of the options under which the
Award Shares are acquired by the Selling Shareholders.
The Selling Shareholders and any dealer participating in the distribution
of any of the Award Shares, or any broker executing selling orders on behalf of
the Selling Shareholders, may be deemed to be "underwriters" within the meaning
of the Securities Act, in which event any profit on the sale of any or all of
the Award Shares by them and any discounts or commissions received by any such
brokers or dealers may be deemed to be underwriting discounts and commissions
under the Securities Act, and such broker or dealer will be required to deliver
a copy of this Prospectus, including a Prospectus Supplement, if required, to
any person who purchases any of the Award Shares from or through such broker or
directly.
In order to comply with the securities laws of certain states which may be
applicable, the Award Shares will be sold only through registered or licensed
brokers or dealers in such states.
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In addition, in certain states, the Award Shares may not be sold unless they
have been registered or qualified for sale in such state or an exemption from
such registration or qualification requirement is available and complied with.
DESCRIPTION OF SECURITIES
Our common stock is entitled to share, on a ratable basis, in such
dividends as may be declared by the Board of Directors out of funds legally
available for that purpose. Each share of common stock entitles its holder to
one vote. Holders of common stock do not have cumulative voting rights. In
addition, the shares of common stock do not have preemptive, subscription or
conversion rights nor are they redeemable by us.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Joseph Sierchio and Stephen A. Albert, members of Sierchio & Albert, P.C.,
our counsel, each own 9,500 shares of our common stock. We have not awarded
options under the Plan to either of Messrs. Sierchio and Albert.
SEC POSITION REGARDING INDEMNITY
The laws of the State of Colorado and the Company's Articles of
Incorporation permit indemnification of its directors and officers against
certain liabilities, including liability arising under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 (the "Exchange Act") and in accordance with the Exchange Act, we
file reports, proxy statements, and other information with the Securities and
Exchange Commission. Such reports, proxy statements, and other information can
be inspected and copied at the public reference facilities maintained by the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 or at the Regional Offices of the Securities and Exchange Commission: 500
West Madison Street, 14th Floor, Chicago, Illinois 60661 and Seven World Trade
Center, New York, NY 10048. Copies of these materials can be obtained at
prescribed rates from the Public Reference Section of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the Securities and Exchange Commission at 1-800-SEC-0330. In addition,
the Securities and Exchange Commission maintains an Internet Site
(http://www.sec.gov) that contains reports, proxy, and information statements,
and other information regarding the issuers that file electronically with the
Commissioner.
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We are currently subject to the rules under the Exchange Act prescribing
the furnishing and content of proxy statements, and its officers, directors and
principal shareholders are subject to the reporting and short-swing profit
recovery provisions contained in Section 16 of that Act. We are required under
that Act to publish periodic reports prepared in accordance with United States
Generally Accepted Accounting Principles. We are also required to file annual
reports containing audited financial statements and quarterly reports containing
unaudited results of operations as well as such other reports as may from time
to time be authorized by the Board of Directors or be required under law. Our
management has solicited proxies from our shareholders and intends to continue
this policy.
Our common stock is traded on the NASD Electronic Bulletin Board under the
symbol OTC-BB: SWEB. We have filed with the Securities and Exchange Commission a
Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act, as amended (the "Act"), with respect to 2,000,000 shares of our
common stock, to be issued to employees, directors, advisors and/or consultants
of the company pursuant to the 1999 Incentive Stock Option Plan. This
Prospectus, which is Part I of the Registration Statement, omits certain
information contained in the Registration Statement. For further information
with respect to us and the shares of common stock offered by this Prospectus,
reference is made to the Registration Statement, including the exhibits thereto.
Statements in this Prospectus as to any document are not necessarily complete,
and where any such document is an exhibit to the Registration Statement or is
incorporated by reference herein, each such statement is qualified in all
respects by the provisions of such exhibit or other document, to which reference
is hereby made, for a full statement of the provision thereof. A copy of the
Registration Statement, with exhibits, may be obtained from the Securities and
Exchange Commission's office in Washington, D.C. (at the above address) upon
payment of the fees prescribed by the rules and regulations of the Commission,
or examined there without charge.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The documents listed in (1) through (3) below are incorporated by reference
in this registration statement.
(1) Stockgroup.com Holdings, Inc. ("Stockgroup.com") latest annual report
filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or, in the case of Stockgroup.com, either (1)
the latest prospectus filed pursuant to Rule 424(b) under the Securities Act of
1933, as amended (the "Act"), that contains audited financial statements for
Stockgroup.com's latest fiscal year for which statement have been filed or (2)
Stockgroup.com's effective registration statement on Form 10-SB filed under the
Exchange Act containing audited financial statements for Stockgroup.com's latest
fiscal year.
(2) All other reports and documents filed by Stockgroup.com pursuant to
Section 13(a) or 15(d) of the Exchange Act.
(3) The description of Stockgroup.com's securities contained in a
Registration Statement filed under the Exchange Act, including any amendments or
report filed for the purpose of updating such description.
All documents subsequently filed by Stockgroup.com pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date hereof and prior
to the filing of a post-effective amendment which indicate that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in and to be a part
thereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for the purposes of this Registration
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
The class of securities to be offered hereby is registered under Section
12(g) of the Exchange Act, as amended. A description of Stockgroup.com's
securities is set forth in the Registration Statement filed pursuant to Form
10-SB, as amended. Stockgroup.com registered common stock which is entitled to
share, on a ratable basis, in such dividends as may be declared by the Board of
Directors out of funds legally available therefor. Each share of common stock
entitles the holders thereof to one vote. Holders of common stock do not have
cumulative voting rights nor does the common stock have preemptive, subscription
or conversion rights and is not
29
<PAGE>
redeemable by Stockgroup.com.
ITEM 5. INTERESTS OF NAMED EXPERTS OR COUNSEL
Joseph Sierchio and Stephen A. Albert, members of Sierchio & Albert, P.C.,
our counsel, each own 9,500 shares of our common stock. We have not awarded
options under the Plan to either of Messrs. Sierchio and Albert.
ITEM 6 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The applicable laws of Colorado and Stockgroup.com's Articles of
Incorporation permit indemnification of its directors and officers against
certain liabilities, which would include liabilities arising under the
Securities Act.
Under Section 7-109-102 of the Colorado Business Corporations Act (the
"Colorado Act"), a corporation may indemnify a person made a party to a
proceeding because the person is or was a director, against liability incurred
in the proceeding. Indemnification permitted under this section in connection
with a proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
Indemnification is only possible under this section 7-109-102, however if
(a) the person conducted him/herself in good faith and (b) the person reasonably
believed (i) in the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best interests;
and (ii) in all other cases, that his or her conduct was at least not opposed to
the corporation's best interests; and (c) in the case of any criminal
proceeding, the person had no reasonable cause to believe his or her conduct was
unlawful.
It should be noted, however, that under Section 7-109-102(4), a corporation
may not indemnify a director (i) in connection with a proceeding by or in the
right of the corporation in which the director is adjudged liable to the
corporation; or (ii) in connection with any other proceeding in which a director
is adjudged liable on the basis that he or she derived improper personal
benefit.
Under Section 7-109-103, a director is entitled to mandatory
indemnification, when he/she is wholly successful in the defense of any
proceeding to which the person was a party because the person is or was a
director, against reasonable expenses incurred in connection to the proceeding.
Under Section 7-109-105, unless restricted by a corporation's articles of
incorporation, a director who is or was a party to a proceeding may apply for
indemnification to a court of competent jurisdiction. The court, upon receipt of
the application, may order indemnification after giving any notice the court
considers necessary. The court, however, is limited to awarding the reasonable
expenses incurred in connection with the proceeding and reasonable expenses
incurred to obtain court-ordered indemnification.
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Under Section 7-109-107, unless restricted by the corporation's articles of
incorporation, an officer of a corporation is also entitled to mandatory
indemnification and to apply for court-ordered indemnification to the same
extent as a director.
A corporation may also indemnify an officer, employee, fiduciary, or agent
of the corporation to the same extent as a director.
Under Section 7-109-108, a corporation may purchase and maintain insurance
on behalf of a person who is or was a director, officer, employee, fiduciary, or
agent of the corporation against liability asserted against or incurred by the
person in that capacity, whether or not the corporation would have the power to
indemnify such person against the same liability under other sections of the
Colorado Act.
Article XIII of Stockgroup.com's Articles of Incorporation also contains
provisions providing for the indemnification of directors and officers of the
company as follows:
"The Board of Directors of the Corporation shall have the power to:
A. 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 (other than 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 attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonable incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Corporation and, with
respect to any criminal action or proceedings, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement or conviction or upon a plea of nolo
contendere or its equivalent shall not of itself create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to
be in the best interests of the Corporation and, with respect to any criminal
action or proceeding, had reasonable cause to believe the action was unlawful.
B. 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 the Corporation, partnership, joint venture, trust or other or agent
of the Corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in the best
interests of the Corporation; but no indemnification shall be made in respect of
any claim, issue or matter as to which such person has been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to
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the extent that the court in which such action or suit was brought determines
upon application that, despite the adjudication of liability, but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses which such court deems proper.
C. Indemnify a Director, officer, employee or agent of the Corporation to
the extent that such person has been successful on the merits in defense of any
action, suit or proceeding referred to in Subparagraph A or B of this Article or
in defense of any claim, issue, or matter therein, against expenses (including
attorney's fees) actually and reasonably incurred by him in connection
therewith.
D. Authorize indemnification under Subparagraph A or B of this Article
(unless ordered by a court) in the specific case upon a determination that
indemnification of the Director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Subparagraph A or B. Such determination shall be made by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or, if such a quorum is not
obtainable or even if obtainable a quorum of disinterested directors so directs,
by independent legal counsel in a written option, or by the shareholders.
E. Authorize payment of expenses (including attorney's fees) incurred in
defending a civil or criminal action, suit or proceeding in advance of the final
disposition of such action, suit or proceeding as authorized in Subparagraph D
of this Article upon receipt of an undertaking by or on behalf of the Director,
officer, employee or agent to repay such amount unless it is ultimately
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article.
F. Purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation or who 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 any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the provision
of this Article.
The indemnification provided by this Article shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled under
these Articles of Incorporation, and the Bylaws, agreement, vote of the
shareholders or disinterested directors or otherwise, and any procedure provided
for by any of the foregoing, both as to action in his official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a Director, officer, employee or agent and
shall inure to the benefit of heirs, executors and administrators of such a
person."
Stockgroup.com has no agreements with any of its directors or executive
officers providing for indemnification of any such persons with respect to
liability arising out of their capacity or status as officers and directors.
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At present, there is no pending litigation or proceeding involving a
director or executive officer of Stockgroup.com as to which indemnification is
being sought.
ITEM 7 - EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8 - EXHIBITS
(A) EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
3.1 Articles of Incorporation (Colorado)-Incorporated by
reference to Exhibit 2.1 of Stockgroup.com's Form 10-SB
filed January 29, 1998.
3.2 By-Laws - Incorporated by reference to Exhibit 2.2 of
Stockgroup.com's Form 10-SB, filed January 29, 1998.
5.0 Legal opinion of Sierchio & Albert, P.C.
10.01 1999 Incentive Stock Option Plan
23.1 Consent of Sierchio & Albert, P.C., included in the opinion
filed as Exhibit 5 hereto.
23.2 Consent of Independent Certified Public Accountant.
ITEM 9 - UNDERTAKINGS
(a) The undersigned Registrant 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 additional or changed material information on the
plan of distribution.
(2) That for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement
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<PAGE>
relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide
offering thereof.
(3) 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) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
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 Commission such indemnification is
against public policy as expressed in the Securities 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 or 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 Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vancouver, Province of British Columbia, Canada, on
the 5th day of November, 1999.
STOCKGROUP.COM HOLDINGS, INC.
By: s/ Marcus New
-----------------------------------
Marcus New, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
s/ Marcus New Dated: November 5, 1999
- ------------------------------------------------
Marcus New, Director and Chief Executive Officer
s/ John Dawe Dated: November 5, 1999
- ------------------------------------------------
John Dawe, V.P. Finance, Treasurer, Secretary
s/ Les Landes Dated: November 5, 1999
- ------------------------------------------------
Les Landes, Chief Operating Officer
s/ David Caddey Dated: November 5, 1999
- ------------------------------------------------
David Caddey, Director
s/ Craig Faulkner Dated: November 5, 1999
- ------------------------------------------------
Craig Faulkner, Chief Technology Officer, Director
s/Louis deBoer II Dated: November 5, 1999
- ------------------------------------------------
Louis deBoer II, Director
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
3.1 Articles of Incorporation (Colorado)-Incorporated by
reference to Exhibit 2.1 of Stockgroup.com's Form 10-SB
filed January 29, 1998.
3.2 By-Laws - Incorporated by reference to Exhibit 2.2 of
Stockgroup.com's Form 10-SB, filed January 29, 1998.
5.0 Legal opinion of Sierchio & Albert, P.C.
10.01 1999 Incentive Stock Option Plan
23.1 Consent of Sierchio & Albert, P.C., included in the opinion
filed as Exhibit 5 hereto.
23.2 Consent of Independent Certified Public Accountants.
Exhibit 5.0
SIERCHIO & ALBERT, P.C.
150 East 58th Street, 25th Floor
New York, New York 10155
Phone: (212) 446-9500 o Telefax: (212) 446-9504
November 9, 1999
Stockgroup.com Holdings, Inc.
500-750 W. Pender Street
Vancouver, British Columbia
Canada V6C 2T7
Re: Stockgroup.com Holdings, Inc.
Registration Statement on Form S-8.
Dear Sir or Madam:
We have acted as counsel for Stockgroup.com Holdings, Inc., a corporation
existing under the laws of the State of Colorado (the "Company") in connection
with the preparation and filing of a registration statement on Form S-8 (the
"Registration Statement") relating to the registration and the offer and sale of
up to 2,000,000 of the Company's common shares, no par value (the "Common
Shares") issuable upon exercise of options (the "Options") granted, or to be
granted, under the Company's 1999 Incentive Stock Option Plan, as amended, (the
"Plan") and as in effect on the date hereof.
In this connection, we have examined such documents, corporate records and
other instruments as we have deemed necessary or appropriate for purposes of
this opinion. We have assumed the legal capacity to sign and the genuineness of
all signatures of all persons executing instruments or documents examined or
relied upon by us and have assumed the conformity with the original documents of
all documents examined by us as copies of such documents. We also have assumed
that (1) each of the Plan and Options were duly authorized by all appropriate
corporate action; and (2) to the extent necessary, appropriate action will be
taken, prior to the offer and sale of the Common Shares, to register and qualify
those securities for issuance and sale under any applicable state "Blue Sky" or
securities laws.
Based upon and subject to the foregoing, we are of the opinion that when
offered and sold as described in the Registration Statement and in accordance
with the terms and conditions of the Plan, the Options and the Option Agreement,
the Common Shares will be validly issued, fully paid and non-assessable.
We are members of the bar of the States of New York and New Jersey and do
not hold ourselves out as being conversant with the laws of any jurisdiction
other than those of the United States of America, the States of New York and New
Jersey and to the extent required by the foregoing opinion, the State of
Colorado.
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We hereby consent to the reference to this firm under the caption
"Interests of Named Experts and Counsel" in the Prospectus and to the filing of
this opinion as an exhibit to the Registration Statement. In giving this
consent, we do not thereby concede that we are within the category of persons
whose consent is required under the Securities Act of 1933, as amended, or the
rules and Regulations of the Securities and Exchange Commission thereunder.
Very truly yours
Sierchio & Albert, P.C.
By: /s/ Joseph Sierchio
STOCKGROUP.COM HOLDINGS, INC.
(formerly, I-Tech Holdings Group, Inc.)
1999 INCENTIVE STOCK OPTION PLAN
As Amended as at July 12, 1999
1. Purposes of the Plan.
The purposes of this Plan are to (i) attract and retain the best available
personnel for positions of responsibility within Stockgroup.com Holdings, Inc.
(formerly, I-Tech Holdings Group, Inc.) (the "Company"), (ii) provide additional
incentives to Employees of the Company, (iii) provide Directors, Consultants and
Advisors of the Company with an opportunity to acquire a proprietary interest in
the Company to encourage their continued provision of services to the Company,
and to provide such persons with incentives and rewards for superior performance
more directly linked to the profitability of the Company's business and
increases in shareholder value, and (iv) generally to promote the success of the
Company's business and the interests of the Company and all of its stockholders,
through the grant of options to purchase shares of the Company's Common Stock
and other incentives.
Incentive benefits granted hereunder may be either Incentive Stock Options,
Non-qualified Stock Options, stock awards, Restricted Shares or cash awards, as
such terms are hereinafter defined. The types of options or other incentives
granted shall be reflected in the terms of written agreements.
2. Definitions.
As used herein, the following definitions shall apply:
2.1 "Board" shall mean the Board of Directors of Stockgroup.com Holdings,
Inc.
2.2 "Change of Control" means a change in ownership or control of the
Company effected through either of the following transactions:
(a) the direct or indirect acquisition by any person or related group
of persons (other than by the Company or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than 50% of the total combined
voting power of the Company's outstanding securities pursuant to a tender
or exchange offer made directly to the Company's shareholders, or other
transaction, in each case which the Board does not recommend such
shareholders to accept; or
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(b) a change in the composition of the Board over a period of 24
consecutive months or less such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more
contested elections for Board membership, to be comprised of individuals
who either (i) have been Board members continuously since the beginning of
such period or (ii) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (i) who were still in office at the time such election
or nomination was approved by the Board; or
(c) a Corporate Transaction as defined below.
2.3 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder.
2.4 "Committee" shall mean the Committee appointed by the Board in
accordance with Section 4.1 of the Plan, if one is appointed.
2.5 "Common Stock" or "Common Shares" shall mean (i) shares of the Common
Stock, no par value, of the Company described in the Company's Articles of
Incorporation, as amended, and (ii) any security into which Common Shares may be
converted by reason of any transaction or event of the type referred to in
Section 12 of this Plan.
2.6 "Company" shall mean Stockgroup.com Holdings, Inc., a Colorado
corporation, and shall include any parent or subsidiary corporation of the
Company as defined in Sections 424(e) and (f), respectively, of the Code.
2.7 "Consultants" and "Advisors" shall include any third party retained or
engaged by the Company to provide service to the Company, including any employee
of such third party providing such services.
2.8 "Corporate Transaction" means any of the following shareholder-approved
transactions to which the Company is a party:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the state in which the Company is incorporated;
(b) the sale, transfer or other disposition of all or substantially
all of the assets of the Company in complete liquidation or dissolution of
the Company; or
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(c) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than 50% of the total combined
voting power of the Company's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such merger.
2.9 "Date of Grant" means the date specified by the Board or the Committee
on which a grant of Options, Stock Appreciation Rights, Performance Shares of
Performance Units or a grant or sale of Restricted Shares or Deferred Shares
shall become effective.
2.10 "Deferral Period" means the period of time during which Deferred
Shares are subject to deferral limitations under Section 9.3 of this Plan.
2.11 "Deferred Shares" means an award pursuant to Section 9 of this Plan of
the right to receive Common Shares at the end of a specified Deferral Period.
2.12 "Director" shall mean a member of the Board.
2.13 "Effective Date" shall have the meaning ascribed thereto in Section 6.
2.14 "Employee" shall mean any person, including officers and directors,
employed by the Company. The payment of a director's fee by the Company shall
not be sufficient to constitute "employment" by the Company.
2.15 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
2.16 "Fair Market Value" shall mean, with respect to the date a given
Option is granted or exercised, the value of the Common Stock determined by the
Board in such manner as it may deem equitable for Plan purposes but, in the case
of an Incentive Stock Option, no less than is required by applicable laws or
regulations; provided, however, that where there is a public market for the
Common Stock, the fair Market Value per share shall be the average of the bid
and asked prices of the Common Stock on the Date of Grant, as reported in the
Wall Street Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation System - Small
Cap or National Markets or the National Association of Security Dealers Over the
Counter Bulletin Board).
2.17 "Incentive Agreement" shall mean the written agreement between the
Company and the Participant relating to Incentive Stock Options, Non-qualified
Stock Options, stock awards, Restricted Shares and cash awards granted under the
Plan, and shall include an Incentive Stock Option Agreement, Non-qualified Stock
Option Agreement or other form of Agreement which may be approved by the Board.
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2.18 "Incentive Award" shall mean the award of one or more Incentives.
2.19 "Incentive Stock Option" shall mean an Option which is intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code, or any successor provision thereto.
2.20 "Incentives" shall mean those incentive benefits which may be granted
from time to time under the terms of the Plan which include Incentive Stock
Options, Non-qualified Stock Options, stock awards, Restricted Shares and cash
awards.
2.21 "Management Objectives" means the achievement of performance
objectives established pursuant to this Plan for Participants who have received
grants of Performance Shares of Performance Units or, when so determined by the
Board of the Committee, Restricted Shares.
2.22 "Non-qualified Stock Option" means an Option that is not intended to
qualify as a Tax-Qualified Option.
2.23 "Option Price" means the purchase price payable upon the exercise of
an Option.
2.24 "Option" means the right to purchase Common Shares from the Company
upon the exercise of a Non-qualified Stock Option or a Tax-Qualified Option
granted pursuant to Section 7 of this Plan.
2.25 "Optioned Stock" shall mean the Common Stock subject to an Option.
2.26 "Option Term" shall have the meaning ascribed to it in Section 7.3.
2.27 "Optionee" shall mean an Employee, Director, Consultant or Advisor of
the Company who has been granted one or more Options.
2.28 "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
2.29 "Participant" means a person who is selected by the Board or a
Committee to receive benefits under this Plan and (i) is at that time an
officer, including without limitation an officer who may also be a member of the
Board, director, or other employee of, or a Consultant or Advisor, to the
Company, or (ii) has agreed to commence serving in any such capacity.
2.30 "Performance Period" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 10 of this
Plan within which the Management objectives relating thereto are to be achieved.
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2.31 "Performance Share" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 10 of this Plan.
2.32 "Performance Unit" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 10 of this Plan.
2.33 "Plan" shall mean this 1999 Incentive Stock Option Plan, as amended
from time to time in accordance with the terms hereof.
2.34 "Restricted Shares" means Common Shares granted or sold pursuant to
section 8 of this Plan as to which neither the substantial risk of forfeiture
nor the restrictions on transfer referred to in Section 8.9 hereof has expired.
2.35 "Rule 16b-3" means Rule 16b-3, as promulgated and amended from time to
time by the Securities and Exchange Commission under the Exchange Act, or any
successor rule to the same effect.
2.36 "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
2.37 "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
2.38 "Tax Date" shall mean the date an Optionee is required to pay the
Company an amount with respect to tax withholding obligations in connection with
the exercise of an option.
2.39 "Tax-Qualified Option" means an Option that is intended to qualify
under particular provisions of the Code, including without limitation an
Incentive Stock Option.
2.40 "Termination Date" shall have the meaning ascribed thereto in Section
6.
3. Common Stock Subject to the Plan.
Subject to the provisions of Section 11 of the Plan, the maximum aggregate
number of shares which may be optioned and sold or otherwise awarded under the
Plan is Two Million (2,000,000) Common Shares. Any Common Shares available for
grants and awards at the end of any calendar year shall be carried over and
shall be available for grants and awards in the subsequent calendar year. For
the purposes of this Section 3:
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3.1 Upon payment in cash of the benefit provided by any award granted under
this Plan, or upon expiration or cancellation of any award granted under this
Plan, any Common Shares that were covered by such award shall again be available
for issuance or transfer hereunder.
3.2 Common Shares covered by any award granted under this Plan shall be
deemed to have been issued or transferred, and shall cease to be available for
future issuance or transfer in respect of any other award granted hereunder, at
the earlier of the time when they are actually issued or transferred or the time
when dividends or dividend equivalents are paid thereon; provided, however, that
Restricted Shares shall be deemed to have been issued or transferred at the
earlier of the time when they cease to be subject to a substantial risk of
forfeiture or the time when dividends are paid thereon.
3.3 Performance Units that are granted under this Plan and are paid in
Common Shares or are not earned by the Participant at the end of the Performance
Period shall be available for future grants of Performance Units hereunder.
4. Administration of the Plan.
4.1 Procedure.
(a) The Board shall administer the Plan; provided, however, that the
Board may appoint a Committee consisting solely of two (2) or more
"Non-Employee Directors" to administer the Plan on behalf of the Board, in
accordance with Rule 16b-3.
(b) Once appointed, the Committee shall continue to serve until
otherwise directed by the Board. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove
members (with or without cause), appoint new members in substitution
therefor, and fill vacancies however caused; provided, however, that at no
time may any person serve on the Committee if that person's membership
would cause the committee not to satisfy the requirements of Rule 16b-3.
(c) A majority of the Committee shall constitute a quorum, and the
acts of the members of the Committee who are present at any meeting thereof
at which a quorum is present, or acts unanimously approved by the members
of the Committee in writing, shall be the acts of the Committee.
(d) Any reference herein to the Board shall, where appropriate,
encompass a Committee appointed to administer the Plan in accordance with
this Section 4.
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4.2 Power of the Board or the Committee
(a) Subject to the provisions of the Plan, the Board shall have the
authority, in its discretion: (i) to grant Options or Incentive Awards to
Participants; (ii) to determine, upon review of relevant information and in
accordance with Section 2.16 of the Plan, the Fair Market Value of the
Common stock; (iii) to determine the exercise price per share of Options to
be granted, which exercise price shall be determined in accordance with
Section 7.14 of the Plan; (iv) to determine the number of Common Shares to
be represented by each Option or Incentive Award; (v) to determine the
Participants to whom, and the time or times at which, Options and Incentive
Awards shall be granted; (vi) to interpret the Plan; (vii) to prescribe,
amend and rescind rules and regulations relating to the Plan; (viii) to
determine the terms and provisions of each Option and Incentive Award
granted (which need not be identical) and, with the consent of the grantee
thereof, modify or amend such Option or Incentive Award; (ix) to accelerate
or defer (with the consent of the grantee) the exercise date of any Option
or Incentive Award; (x) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option or
Incentive Award previously granted by the Board; (xi) to accept or reject
the election made by a grantee pursuant to Section 7.5 of the Plan; and
(xii) to make all other determinations deemed necessary or advisable for
the administration of the Plan.
(b) The Board or a Committee may delegate to an officer of the Company
the authority to make decisions pursuant to this Plan, provided that no
such delegation may be made that would cause any award or other transaction
under the Plan to cease to be exempt from Section 16(b) of the Exchange
Act. A Committee may authorize any one or more of its members or any
officer of the Company to execute and deliver documents on behalf of the
Committee.
4.3 Effect of Board or Committee Decisions. All decisions and
determinations and the interpretation and construction by the Board or a
Committee of any provision of this Plan or any agreement, notification or
document evidencing the grant of Options, Restricted Shares, Deferred Shares,
Performance Shares or Performance Units, and any determination by the Board or a
Committee pursuant to any provision of this plan or any such agreement,
notification or document, shall be final, binding and conclusive with respect to
all grantees and any other holders of any Option or Incentive Award granted
under the Plan. No member of the Board or a Committee shall be liable for any
such action taken or determination made in good faith.
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5. Eligibility.
Consistent with the Plan's purposes, Options and Incentive Awards may be
granted only to such Directors, Officers, Employees, Consultants and Advisors of
the Company as determined by the Board or a Committee. Subject to the terms of
the Plan, an Employee, Officer, Director, Consultant or advisor who has been
granted an Option or Incentive Award may, if he is otherwise eligible, be
granted an additional Option or Incentive Award. Incentive Stock Options may be
granted only to those Participants who meet the requirements applicable under
Section 422 of the Code.
6. Board Approval; Effective Date; Termination Date.
The Plan shall take effect on March 11, 1999 (the "Effective Date"), the
date on which the Board approved the Plan. The Plan shall terminate on March 11,
2009 (the "Termination Date"); accordingly, no Option may be granted after the
Termination Date or have an Option Term that extends beyond the Termination
Date.
7. Stock Options.
The Board or the Committee may from time to time authorize grants to
Participants of Options to purchase Common Shares upon such terms and conditions
as the Board or the Committee may determine in accordance with the following
provisions:
7.1 Options to be Granted; Terms.
(a) Options granted pursuant to this Section 7 may be Non-qualified
Stock Options or Tax-Qualified Options or combinations thereof. The Board
or the Committee shall determine the specific terms of Options.
(b) Each grant shall specify the period or periods of continuous
employment, or continuous engagement of the consulting or advisory
services, of the Optionee by the Company or any Subsidiary that are
necessary before the Options or installments thereof shall become
exercisable.
(c) Any grant of a Non-qualified Stock Option may provide for the
payment to the Optionee of dividend equivalent thereon in cash or Common
Shares on a current, deferred or contingent basis, or the Board or the
Committee may provide that any dividend equivalents shall be credited
against the Option Price.
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7.2 Number of Shares Subject to Options. Each grant shall specify the
number of Common Shares to which it pertains. Successive grants may be made to
the same Optionee regardless of whether any Options previously granted to the
Optionee remain unexercised.
7.3 Term of Option; Earlier Termination. Subject to the further provisions
of this Section 7, unless otherwise provided in the Incentive Agreement, the
term (the "Option Term") of each Option shall be six (6) years from the Date of
Grant. In no case shall the term of any Option go beyond the Effective Date.
Notwithstanding the above, in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns ten
percent (10%) or more of the Common Stock as such amount is calculated under
Section 422(b)(6) of the Code ("Ten Percent Stockholder"), the term of the
Incentive Stock Option shall be five (5) years from the Date of Grant thereof or
such shorter time as may be provided in the Incentive Agreement.
7.4 Exercise Price.
(a) Each grant shall specify an Option Price per Common Share for the
Common Share to be issued pursuant to exercise of an Option, which shall be
determined by the Board or the Committee, but in the case of an Incentive
Stock Option shall be no less than one hundred percent (100%) of the Fair
Market Value per share on the Date of Grant, and in the case of a
Non-qualified Stock Option shall be no less than seventy-five percent (75%)
of the Fair Market Value per share on the Date of Grant. Notwithstanding
the foregoing, in the case of an Incentive Stock Option granted to a
Participant who, at the time of the grant of such Incentive Stock Option,
is a Ten Percent Stockholder, the per share exercise price shall be no less
than one hundred ten percent (110%) of the Fair Market Value per share on
the Date of Grant.
(b) With respect to Incentive Stock Options, the aggregate Fair Market
Value (determined as of the respective Date or Dates of Grant) of the
Common Shares for which one or more options granted to any Optionee under
this Plan may for the first time become exercisable as Incentive Stock
Options under the federal tax laws during any one calendar year (under all
employee benefit plans of the Company) shall not exceed $100,000. To the
extent that the Optionee holds two or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Stock Options
under the deferral tax laws shall be applied on the basis of the order in
which such options are granted. Should the number of Common Shares for
which any Incentive Stock Option first becomes exercisable in any calendar
year exceed the applicable $100,000 limitation, then that Option may
nevertheless be exercised in such calendar year for the excess number of
Shares as a Non-qualified Stock Option under the federal tax laws.
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7.5 Payment for Shares. The price of an exercised Option and any taxes
attributable to the delivery of Common Stock under the Plan, or portion thereof,
shall be paid as follows:
(a) Each grant shall specify the form of consideration to be paid in
satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of United States
currency or check or other cash equivalent acceptable to the Company, (ii)
nonforfeitable, unrestricted Common Shares, which are already owned by the
Optionee and have a value at the time of exercise that is equal to the
Option Price, (iii) any other legal consideration that the Board or the
Committee may deem appropriate, including without limitation any form of
consideration authorized pursuant to this Section 7 on such basis as the
Board or the Committee may determine in accordance with this Plan, and (iv)
any combination of the foregoing. The Board (or Committee) in its sole
discretion may permit a so-called "cashless exercise" of the Options.
In the event of a cashless exercise of the Option the Company shall issue
the Option holder the number of Shares determined as follows:
X = Y (A-B)/A where:
X = the number of Shares to be issued to the Optionholder.
Y = the number of Shares with respect to which the Option is
being exercised.
A = the average of the closing sale prices of the Common Stock
for the five (5) Trading Days immediately prior to (but not
including) the Date of Exercise.
B = the Exercise Price.
(b) Any grant of a Non-qualified Stock Option may provide that payment
of the Option Price may also be made in whole or in part in the form of
Restricted Shares or other Common Shares that are subject to risk of
forfeiture or restrictions on transfer. Unless otherwise determined by the
Board or the Committee on or after the Date of Grant, whenever any Option
Price is paid in whole or in part by means of any of the forms of
consideration specified in this Section 7.5, the Common Shares received by
the Optionee upon the exercise of the Non-qualified Stock Option shall be
subject to the same risks of forfeiture or restrictions on transfer as
those that applied to the consideration surrendered by the Optionee;
provided, however, that such risks of forfeiture and restrictions on
transfer shall apply only to the same number of Common Shares received by
the Optionee as applied to the forfeitable or restricted Common Shares
surrendered by the Optionee.
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(c) Any grant may allow for deferred payment of the Option Price
through a sale and remittance procedure by which a Participant shall
provide concurrent irrevocable written instructions to (i) a
Company-designated brokerage firm to effect the immediate sale of the
purchased Common Shares and remit to the company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
Option Price payable for the purchased Common Share, and (ii) the Company
to deliver the certificates for the purchased Common Shares directly to
such brokerage firm to complete the sale transaction.
(d) The Board or Committee shall determine acceptable methods for
tendering Common Stock as payment upon exercise of an Option and may impose
such limitations and prohibitions on the use of Common Stock to exercise an
Option as it deems appropriate.
7.6 Rights as a Stockholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Common Shares, no
right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. No adjustment will be made for a dividend or the right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.
7.7 Loans or Installment Payments; Bonuses.
(a) The Board or the Committee may, in its discretion, assist any
Participant in the exercise of one or more awards under the plan, including
the satisfaction of any federal, state, local and foreign income and
employment tax obligations arising therefrom, by (i) authorizing the
extension of a loan from the Company to such Participant; or (ii)
permitting the participant to pay the exercise price or purchase price for
the purchased shares in installments; or (iii) a guaranty by the Company of
a loan obtained by the Optionee from a third party; or (iv) granting a cash
bonus to the Participant to enable the Participant to pay federal, state,
local and foreign income and employment tax obligations arising from an
award.
(b) Any loan or installment method of payment (including the interest
rate and terms of repayment) shall be upon such terms as the Board or the
Committee specifies in the applicable Incentive Agreement or otherwise
deems appropriate under the circumstances. Loans or installment payments
may be authorized with or without security or collateral. However, the
maximum credit available to the Participant may not exceed the exercise or
purchase price of the acquired shares (less the par value of such shares)
plus any federal, state and local income and employment tax liability
incurred by the Participant in connection with the acquisition of such
shares. The amount of any bonus shall be determined by the Board or the
Committee in its sole discretion under the circumstances.
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(c) The Board or the Committee may, in its absolute discretion,
determine that one or more loans extended under this financial assistance
program shall be subject to forgiveness by the Company in whole or in part
upon such terms and conditions as the Board or the Committee may deem
appropriate; provided, however, that the Board or the Committee shall not
forgive that portion of any loan owed to cover the par value of the Common
Shares.
7.8 Exercise of Option.
(a) Procedure for Exercise.
(i) Any Option granted hereunder shall be exercisable at such
times and under such conditions as determined by the Board, including
performance criteria with respect to the Company and/or the Optionee,
and as shall be permissible under the terms of the Plan. Unless
otherwise determined by the Board at the time of grant, an Option may
be exercised in whole or in part. An Option may not be exercised for a
fraction of a share.
(ii) An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the
Option and full payment for the Common Shares with respect to which
the Option is exercised has been received by the Company. Full payment
may, as authorized by the Board, consist of any consideration and
method of payment allowable under Section 7.5 of the Plan.
(iii) Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available,
both for purposes of the Plan and for sale under the Option, by the
number of Common Shares as to which the Option is exercised.
(b) Termination of Status as an Employee. Unless otherwise provided in
an Incentive Agreement, if an Employee's employment by the Company is
terminated, except if such termination is voluntary or occurs due to
retirement with the consent of the Board or due to death or disability,
then the Option, to the extent not exercised, shall terminate on the date
on which the Employee's employment by the company is terminated. If an
Employee's termination is voluntary or occurs due to retirement with the
consent of the Board, then the Employee may after the date such Employee
ceases to be an employee of the Company, exercise his Option at any time
within three (3) months after the date he ceases to be an Employee of the
Company, but only to the extent that he was entitled to exercise it on the
date of such termination. To the extent that he was not entitled to
exercise the Option at the date of such termination, or if he does not
exercise such Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate. In no event may the period of
exercise in the case of Incentive Stock Options extend more than three (3)
months beyond termination of employment.
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(c) Disability. Unless otherwise provided in the Incentive Agreement,
notwithstanding the provisions of Section 7.8(b) above, in the event an
Employee is unable to continue his employment with the Company as a result
of his permanent and total disability (as defined in Section 22(e)(3) of
the Code), he may exercise his Option at any time within six (6) months
from the date of termination, but only to the extent he was entitled to
exercise it at the date of such termination. To the extent that he was not
entitled to exercise the Option at the date of termination, or if he does
not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate. In no event may the
period of exercise in the case of an Incentive Stock Option extend more
than six (6) months beyond the date the Employee is unable to continue
employment due to such disability.
(d) Death. Unless otherwise provided in the Incentive Agreement, if an
Optionee dies during the term of the Option and is at the time of his death
an Employee who shall have been in continuous status as an Employee since
the date of Grant of the Option, the Option may be exercised at any time
within six (6) months following the date of death by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that an Optionee was entitled to
exercise the Option on the date of death, or if the Optionee's estate, or
person who acquired the right to exercise the Option by bequest or
inheritance, does not exercise such Option (which he was entitled to
exercise) within the time specified herein, the Option shall terminate. In
no event may the period of exercise in the case of an Incentive Stock
Option extent more than six (6) months beyond the date of the employee's
death.
7.9 Option Reissuance. The Board or the Committee shall have the authority
to effect, at any time and from time to time, with the consent of the affected
Participant, the cancellation of any or all outstanding Options under this
Section 7 and grant in substitution new Options under the Plan covering the same
or a different number of Common Shares but with an exercise price not less than
(i) 75% of the Fair Market Value per share on the new Date of Grant or (ii) 100%
of the Fair Market Value per share in the case of Incentive Stock Options.
7.10 Incentive Stock Options - Disposition of Shares. In the case of an
Incentive Stock Option, a Participant who disposes of Common Shares acquired
upon exercise of such Incentive Stock Option by sale or exchange (i) within two
(2) years after the Date of Grant of the Option, or (ii) within one (1) year
after the exercise of the Option, shall notify the Company of such disposition
and the amount realized upon such disposition.
7.11 Incentive Agreement. Each grant shall be evidenced by an agreement,
which shall be executed on behalf of the Company by any officer thereof and
delivered to and accepted by the Optionee and shall contain such terms and
provisions as the Board or the Committee may determine consistent with this
Plan.
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8. Restricted Shares.
Restricted Shares are shares of Common Stock which are sold or transferred
by the Company to a Participant at a price which may be below their Fair Market
Value, or for no payment, but subject to restrictions on their sale or other
transfer by the Participant. The transfer of Restricted Shares and the transfer
and sale of Restricted Shares shall be subject to the following terms and
conditions:
8.1 Number of Shares. The number of Restricted Shares to be transferred or
sold by the Company to a Participant shall be determined by the Board or
Committee, if any.
8.2 Sale Price. The Board shall determine the prices, if any, at which
Restricted Shares shall be sold to Participant, which may vary from time to time
and among Participants, and which may be below the Fair Market Value of such
shares of Common Stock on the date of sale.
8.3 Restrictions. All Restricted Shares transferred or sold hereunder shall
be subject to such restrictions as the Board may determine, including, without
limitation, any or all of the following:
(a) a prohibition against the sale, transfer, pledge or other
encumbrance of the Restricted Shares, such prohibition to lapse at such
time or times as the Board or the Committee shall determine (whether in
annual or more frequent installments, at the time of the death, disability
or retirement of the holder of such Restricted Shares, or otherwise);
(b) a requirement that the holder of Restricted Shares forfeit or
resell back to the Company, at his cost, all or a part of such Restricted
Shares in the event of termination of his employment during any period in
which such Restricted Shares are subject to restrictions; and
(c) a prohibition against employment of the holder of such Restricted
Shares by any competitor of the Company or a subsidiary of the Company, or
against such holder's dissemination of any secret or confidential
information belonging to the Company or a subsidiary of the Company.
8.4 Escrow. In order to enforce the restrictions imposed by the Board
pursuant to Section 8.3 above, the Participant receiving Restricted Shares shall
enter into an agreement with the Company setting forth the conditions of the
grant. Restricted Shares shall be registered in the name of the Participant and
deposited, together with a stock power endorsed in blank, with the Company.
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8.5 End of Restrictions. Subject to Section 8.3, at the end of any time
period during which the Restricted Shares are subject to forfeiture and
restrictions on transfer, such Restricted Shares will be delivered, free of all
restrictions, to the Participant or to the Participant's legal representative,
beneficiary or heir.
8.6 Stockholder. Subject to the terms and conditions of the Plan, each
Participant receiving Restricted Shares shall have all the rights of a
stockholder with respect to such shares of stock during any period which such
shares are subject to forfeiture and restrictions on transfer, including,
without limitation, the right to vote such shares. Dividends paid in cash or
property other than Common Stock with respect to the Restricted Shares shall be
paid to the Participant currently.
8.7 Ownership of Restricted Shares. Each grant or sale shall constitute an
immediate transfer of the ownership of the Restricted Shares to the Participant
in consideration of the performance of services, entitling such Participant to
dividend, voting and other ownership rights, subject to the "substantial risk of
forfeiture" and restrictions on transfer referred to hereinafter.
8.8 Additional Consideration. Each grant or sale may be made without
additional consideration from the Participant or in consideration of a payment
by the Participant that is less than the Fair Market Value per share on the Date
of Grant.
8.9 Substantial Risk of Forfeiture.
(a) Each grant or sale shall provide that the Restricted Shares
covered thereby shall be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period to be determined
by the Board or the Committee on the Date of Grant.
(b) Each grant or sale shall provide that, during the period for which
substantial risk of forfeiture is to continue, the transferability of the
Restricted Shares shall be prohibited or restricted in the manner and to
the extent prescribed by the Board or the Committee on the Date or Grant.
Such restrictions may include without limitation rights of repurchase or
first refusal in the Company or provisions subjecting the Restricted Shares
to a continuing substantial risk of forfeiture in the hands of any
transferee.
8.10 Dividends. Any grant or sale may require that any or all dividends or
other distributions paid on the Restricted Shares during the period of such
restrictions be automatically sequestered and reinvested on an immediate or
deferred basis in additional Common Shares, which may be subject to the same
restrictions as the underlying award or such other restrictions as the Board of
the Committee may determine.
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8.11 Additional Grants. Successive grants or sales may be made to the same
Participant regardless of whether any Restricted Shares previously granted or
sold to a Participant remain restricted.
9. Deferred Shares.
The Board or the Committee may authorize grants or sales of Deferred Shares
to Participants upon such terms and conditions as the Board or the Committee may
determine in accordance with the following provisions:
9.1 Performance Conditions. Each grant or sale shall constitute the
agreement by the Company to issue or transfer Common Shares to the Participant
in the future in consideration of the performance of services, subject to the
fulfillment during the Deferral Period of such conditions as the Board or the
Committee may specify.
9.2 Additional Consideration. Each grant or sale may be made without
additional consideration from the Participant or in consideration of a payment
by the participant that is less than the Fair Market Value per shares on the
Date of Grant.
9.3 Deferral Period. Each grant or sale shall provide that the Deferred
Shares covered thereby shall be subject to a Deferral Period, which shall be
fixed by the Board or the Committee on the Date of Grant.
9.4 Ownership of Shares. During the Deferral Period, the Participant shall
not have any right to transfer any rights under the subject award, shall not
have any rights of ownership in the Deferred Shares and shall not have any right
to vote the Deferred Shares, but the Board or the Committee may on or after the
Date of Grant authorize the payment of dividend equivalents on the Deferred
Shares in cash or additional Common Shares on a current, deferred or contingent
basis.
9.5 Additional Grants. Successive grants or sales may be made to the same
Participant regardless of whether any Deferred Shares previously granted or sold
to a Participant have vested.
9.6 Agreement. Each grant or sale shall be evidenced by an agreement, which
shall be executed on behalf of the Company by any officer thereof and delivered
to and accepted by the Participant and shall contain such terms and provisions
as the Board or the Committee may determine consistent with this Plan.
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10. Performance Shares and Performance Units.
The Board or the Committee may authorize grants of Performance Shares and
Performance Units, which shall become payable to the Participant upon the
achievement of specified Management Objectives, upon such terms and conditions
as the Board or the Committee may determine in accordance with the following
provisions:
10.1 Number. Each grant shall specify the number of Performance Shares or
Performance Units to which it pertains, which may be subject to adjustment to
reflect changes in compensation or other factors.
10.2 Performance Period. The Performance Period with respect to each
Performance Share or Performance Unit shall be determined by the Board or the
Committee on the Date of Grant.
10.3 Management Objectives.
(a) Each grant shall specify the Management Objectives that are to be
achieved by the Participant, which may be described in terms of
Company-wide objectives or objectives that are related to the performance
of the individual Participant or the Subsidiary, division, department or
function within the Company or Subsidiary in which the Participant is
employed or with respect to which the participant provides consulting
services.
(b) Each grant shall specify in respect of the specified Management
Objectives a minimum acceptable level of achievement below which no payment
will be made and shall set forth a formula for determining the amount of
any payment to be made if performance is at or above the minimum acceptable
level but falls short of full achievement of the specified Management
Objectives.
(c) The Board or the Committee may adjust Management Objectives and
the related minimum acceptable level of achievement if, in the sole
judgment of the Board or the Committee, events or transactions have
occurred after the Date of Grant that are unrelated to the performance of
the Participant and result in distortion of the Management Objectives or
the related minimum acceptable level of achievement.
10.4 Payment.
(a) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that shall have been earned, and
any grant may specify that any such amount may be paid by the Company in
cash, Common Shares or any combination thereof and may either grant to the
Participant or reserve to the Board or the Committee the right to elect
among those alternatives.
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(b) Any grant of Performance Shares may specify that the amount
payable with respect thereto may not exceed a maximum specified by the
Board or the Committee on the Date of Grant. Any grant of Performance Units
may specify that the amount payable, on the number of Common Shares issued,
with respect thereto may not exceed maximums specified by the Board or the
Committee Shares on the Date of Grant.
10.5 Dividends. On or after the Date of Grant of Performance Shares, the
Board or the Committee may provide for the payment to the Participant of
dividend equivalents thereon in cash or additional Common Shares on a current,
deferred or contingent basis.
10.6 Additional Grants. Successive grants may be made to the same
Participant regardless of whether any Performance Shares or Performance Units
granted to any Participant have vested.
10.7 Agreement. Each grant shall be evidenced by an agreement, which shall
be executed on behalf of the Company by any officer thereof and delivered to and
accepted by the Participant and shall contain such terms and provisions as the
Board or the Committee may determine consistent with this Plan.
11. Adjustments Upon Changes in Capitalization or Merger.
Subject to any required action by the stockholders of the Company, the
number of shares of Common Stock covered by each outstanding Option or Incentive
Award, and the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options nor Incentive Awards have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option or Incentive Award, as well as the price per share of
Common Stock covered by each such outstanding Option or Incentive Award, shall
be proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof, shall be made
with respect to the number or price of shares of Common Stock subject to an
Option or Incentive Award.
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In the event of the proposed dissolution or liquidation of the Company, all
Options and Incentive Awards will terminate immediately prior to the
consummation of such proposed action unless otherwise provided by the Board. The
Board may, in the exercise of its sole discretion in such instances, declare
that any Option or Incentive Award shall terminate as of a date fixed by the
Board and give each holder the right to exercise of its sole discretion in such
instances, declare that any Option or Incentive Award shall terminate as of a
date fixed by the Board and give each holder the right to exercise his Option or
Incentive Award as to all or any part thereof, including Shares as to which the
Option or Incentive Award would not otherwise be exercisable. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, the Option or Incentive
Award shall be assumed or an equivalent Option or Incentive Award shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, that the holder shall
have the right to exercise the Option or Incentive Award as to all of the
Shares, including Shares as to which the Option or Incentive Award would not
otherwise be exercisable. If the Board makes an Option or Incentive Award
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Board shall notify the holder that the Option or Incentive
Award shall be fully exercisable for a period of sixty (60) days from the date
of such notice (but not later than the expiration of the term of the Option or
Incentive Award), and the Option or Incentive Award will terminate upon the
expiration of such period.
12. Transferability.
Except to the extent otherwise expressly provided in the Plan, the right to
acquire Common Shares or other assets under the Plan may not be assigned,
encumbered or otherwise transferred by a Participant and any attempt by a
Participant to do so will be null and void. No Option or Incentive Award granted
under this Plan may be transferred by a Participant except by will or the laws
of descent and distribution or pursuant to a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement Income Security
Act, as amended, or the rules thereunder. Options and other awards granted under
this Plan may not be exercised during a Participant's lifetime except by the
Participant or, in the event of the Participant's legal incapacity, by his
guardian or legal representative acting in a fiduciary capacity on behalf of the
Participant under state law and court supervision.
13. Time of Granting Incentives.
The Date of Grant of an Option or Incentive Award shall, for all purposes,
be the date on which the Board or Committee makes the determination granting
such Option or Incentive Award. Notice of the determination shall be given to
each Participant to whom an Option or Incentive Award is so granted within a
reasonable time after the date of such grant.
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14. Amendment and Termination of the Plan.
14.1 The Board may amend or terminate the Plan from time to time in such
respects as the Board may deem advisable; provided, however, that the following
revisions or amendments shall require approval of the holders of a majority of
the outstanding Shares of the Company entitled to vote thereon, to the extent
required by law, rule or regulation:
(a) Any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 11 of the Plan;
(b) Any change in the designation of the persons eligible (or any
change in the class of Employees eligible, in the case of Incentive Stock
Options) to be granted Options or Incentive Awards involving Shares; or
(c) If the Company has a class of equity security registered under
Section 12 of the Exchange Act at the time of such revision or amendment,
any material increase in the benefits accruing to participants under the
Plan.
14.2 Notwithstanding the foregoing, stockholder approval under this Section
14 shall only be required at such time as (A) any rules of the National
Association of Securities Dealers' Automated Quotation System-National Market
System shall require stockholder approval of a plan or arrangement pursuant to
which Common Stock may be acquired by officers or directors of the Company,
and/or (B) any rule or regulation promulgated by the Securities and Exchange
Commission, or (C) if Section 422 of the Code shall require shareholder approval
of an amendment to the Plan.
14.3 Any such amendment or termination of the Plan shall not affect Options
already granted and such Options shall remain in full force and effect as if
this Plan had not been amended or terminated, unless mutually agreed otherwise
between the Optionee and the Board, which agreement must be in writing and
signed by the Optionee and the Company.
14.4 Notwithstanding the foregoing, this Plan shall terminate upon the
earlier of (i) March 11, 2009 or such earlier date as the Board shall determine,
or (ii) the date on which all awards available for issuance in the last year of
the Plan shall have been issued or canceled. Upon termination of the Plan, no
further awards may be granted, but all grants outstanding on such date shall
thereafter continue to have force and effect in accordance with the provisions
of the agreements evidencing such grants.
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15. Withholding Taxes.
The Company is authorized to withhold income taxes as required under
applicable laws or regulations. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for the withholding are insufficient, it
shall be a condition to the receipt of any such payment or the realization of
any such benefit that the Participant or such other person make arrangements
satisfactory to the Company for payment of the balance of any taxes required to
be withheld. At the discretion of the Board or the Committee, any such
arrangements may without limitation include relinquishment of a portion of any
such payment or benefit or the surrender of outstanding Common Shares. The
Company and any Participant or such other person may also make similar
arrangements with respect to the payment of any taxes with respect to which
withholding is not required.
16. Corporate Transaction or Change of Control.
The Board or the Committee shall have the right in its sole discretion to
include with respect to any award granted to a Participant hereunder provisions
accelerating the benefits of the award in the event of a Corporate Transaction
or Change of Control, which acceleration rights may be granted in connection
with an award pursuant to the agreement evidencing the same or at any time after
an award has been granted to a Participant.
17. Miscellaneous Provisions.
17.1 Plan Expense. Any expenses of administering this Plan shall be borne
by the Company.
17.2 Construction of Plan. The place of administration of the Plan shall be
in the State of Colorado, and the validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined in accordance with the laws of
the State of Colorado without regard to conflict of law principles and, where
applicable, in accordance with the Code.
17.3 Other Compensation. The Board or the Committee may condition the grant
of any award or combination of awards authorized under this Plan on the
surrender or deferral by the Participant of his or her right to receive a cash
bonus or other compensation otherwise payable by the Company or a Subsidiary to
the Participant.
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17.4 Continuation of Employment or Services. This Plan shall not confer
upon any Participant any right with respect to continuance of employment or
other service with the Company or any Subsidiary and shall not interfere in any
way with any right that the Company or any Subsidiary would otherwise have to
terminate any Participant's employment or other service at any time. Nothing
contained in the Plan shall prevent the Company or any Subsidiary from adopting
other or additional compensation arrangements for its employees.
17.5 Tax-Qualified Options. To the extent that any provision of this Plan
would prevent any Option that was intended to qualify as a Tax-Qualified Option
from so qualifying, any such provision shall be null and void with respect to
any such Option; provided, however, that any such provision shall remain in
effect with respect to other Options, and there shall be no further effect on
any provision of this Plan.
17.6 Certain Terminations of Employment or Consulting Services, Hardship
and Approved Leaves of Absence. Notwithstanding any other provision of this Plan
to the contrary, in the event of termination of employment or consulting
services by reason of death, disability, normal retirement, early retirement
with the consent of the Company, termination of employment or consulting
services to enter public or military service with the consent of the Company or
leave of absence approved by the Company, or in the event of hardship or other
special circumstances, of a Participant who holds an Option that is not
immediately and fully exercisable, any Restricted Shares as to which the
substantial risk of forfeiture or the prohibition or restriction on transfer has
not lapsed, any Performance Shares or Performance Units that have not been fully
earned, or any Common Shares that are subject to any transfer restriction
pursuant to Section 8 of this Plan, the Board or the Committee may take any
action that it deems to be equitable under the circumstances or in the best
interest of the Company, including without limitation waiving or modifying any
limitation or requirement with respect to any award under this Plan.
17.7 Binding Effect. The provisions of the Plan shall inure to the benefit
of, and be binding upon, the Company and its successors or assigns, and the
Participants, their legal representatives, their heirs or legacees and their
permitted assignees.
17.8 Exchange Act Compliance. With respect to persons subject to Section 16
of the Exchange Act, transactions under this Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successors under the Exchange
Act. To the extent any provisions of the Plan or action by the Board or the
Committee fails to so comply, they shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Board or the Committee.
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17.9 Conditions upon Issuance of Shares.
(a) Shares shall not be issued pursuant to the exercise of an Option
or Incentive Award unless the exercise of such Option or Incentive Award
and the issuance and delivery of such Shares pursuant thereto shall comply
with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Option or Incentive Award,
the Company may require the person exercising such Option or Incentive
Award to represent and warrant at the time of any such exercise that the
Shares are being purchased or otherwise acquired only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company such a representation is required by any
of the aforementioned relevant provisions of law.
(c) Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Share
hereunder, shall relieve the Company of any liability in respect of the
failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
17.10 Fractional Shares. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Board or the Committee may
provide for the elimination of fractions or for the settlement thereof in cash.
17.11 Reservation of Shares. The Company will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
17.12 Indemnification. In addition to such other rights of indemnification
as they may have as members of the Board, the members of the Board and of the
Committee shall be indemnified by the Company against all costs and expenses
reasonably incurred by them in connection with any action, suit or proceeding to
which they or any of them may be party by reason of any action taken or failure
to act under or in connection with the Plan or any Option or Incentive Award,
and against all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the Company) or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except a judgment based upon a finding of bad faith; provided that
upon the institution of any such action, suit or proceeding a Board member or
Committee member shall, in writing, give the Company notice thereof and an
opportunity, at its own expense, to handle and defend the same before such Board
member or Committee member undertakes to handle and defend it on his own behalf.
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17.13 Gender. For purposes of this Plan, words used in the masculine gender
shall include the feminine and neuter, and the singular shall include the plural
and vice versa, as appropriate.
17.14 Use of Proceeds. Any cash proceeds received by the Company from the
sale of Common Shares under the Plan shall be used for general corporate
purposes.
17.15 Regulatory Approvals.
(a) The implementation of the Plan, the granting of any awards under
the Plan and the issuance of any Common Shares shall be subject to the
Company's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the awards granted under it
and the Common Shares issued pursuant to it.
(b) No Common Shares or other assets shall be issued or delivered
under this Plan unless and until there shall have been compliance with all
applicable requirements of federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the
Common Shares issuable under the Plan, and all applicable listing
requirements of any securities exchange on which the Common Shares are then
listed for trading.
17.16 Other Tax Matters. Reference herein to the Code and any described tax
consequences related to the Plan or the granting or exercise of an award
hereunder pertain only to those persons (including the Company) subject to the
tax laws of the United States of America or any state or territory thereof.
24
[Kish, Leake & Associates, P.C. Letterhead]
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the use in this Registration Statement on Form S-8 and in
the Prospectus constituting a part thereof of our report dated January 22, 1999
relating to the financial statements of Stockgroup.com Holdings, Inc. f/k/a
I-Tech Holdings Group Inc. as of December 31, 1998 which appears in
Stockgroup.com Holdings, Inc.'s Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998.
Kish, Leake & Associates, P.C.
Englewood, Colorado
November 8, 1999
