As filed with the Securities and Exchange Commission on February 15, 2002
File No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
REALITY INTERACTIVE, INC.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 41-1781991
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
EMPLOYEE STOCK INCENTIVE PLAN
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(Full title of the plan)
The Corporation Trust Company of Nevada
6100 Neil Road, Suite 500, Reno, NV 89511
(Name and Address of Agent for Service)
(775) 688-3061
(Telephone number including area code, of agent for service)
1
CALCULATION OF REGISTRATION FEE
Title of Amount to be Proposed Proposed Amount of
Securities Registered Maximum Aggregate Registration
to be Offering Offering Fee
Registered Price Per Price
Share
- --------------------------------------------------------------------------------
$0.001 par value 5,000,000 $0.04(1) $200,000 $48.80
Common Stock
Totals 5,000,000 $0.04 $200,000 $48.80
- --------------------------------------------------------------------------------
Total No. of pages: 33
(1) Value stated for purpose of calculating the registration fee.
2
PROSPECTUS
REALITY INTERACTIVE, INC.
42543 COLUMBIA SQUARE
NEW WESTMINSTER, BRITISH COLUMBIA, CANADA, V3M 6H5
(604) 574-8308
(5,000,000 SHARES OF COMMON STOCK)
This Prospectus relates to the offer and sale by Reality Interactive,
Inc., ("RII"), a Nevada corporation ("the Company") of shares of its $0.001 par
value common stock (the "Common Stock) pursuant to its Stock Incentive Plan
where by certain individuals receive stock options to stimulate their
involvement and continued involvement in the Company. The Company is registering
hereunder and then issuing upon receipt of adequate consideration therefor to
the Employee, Officer, Director or Consultant 5,000,000 shares of the Common
Stock in consideration for services rendered and/or to be rendered and payments
made under the Stock Incentive Plan.
The Common Stock is not subject to any restriction on transferability.
Recipients of shares other than persons who are affiliates of the Company within
the meaning of the Securities Act of 1933 (the Act) may sell all or part of the
shares in any way permitted by law including sales in the over-the-counter
market at prices prevailing at the time of such sale. Shares registered
hereunder are being sold to both affiliates and non-affiliates of the Company.
An affiliate is, summarily, any director, executive officer or controlling
shareholder of the Company. The affiliates of the Company may become subject to
Section 16(b) of the Securities Exchange Act of 1934 as amended (the Exchange
Act) which would limit their discretion in transferring the shares acquired in
the Company. If the individual who is not now an affiliate becomes an affiliate
of the Company in the future; he would then be subject to Section I(b) of the
Exchange Act (See General Information --- Restrictions on Resale).
The Common Stock is Listed on the OTC bulletin board under the symbol RINT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 8, 2002
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This Prospectus is not part of any Registration Statement which was
filed and been effective under the Securities Act of 1933 as amended (the
Securities Act) and does not contain all of the information set forth in the
Registration Statement, certain portions of which have seen offered pursuant to
the rules and regulations promulgated by the U.S. Securities and Exchange
Commission (The Commission) under the Securities Act. The statements in this
Prospectus as to the contents of any contracts or other documents filed as an
exhibit to either the Registration Statement or other filings of the Company
with the Commission are qualified in their entirety by the reference thereto.
A copy of any document or part thereof incorporated by reference in
this Prospectus but not delivered herewith will be furnished without charge upon
written or oral request. Requests should be addressed to: Reality Interactive,
Inc., 42543 Columbia Square, New Westminster, British Columbia, Canada, V3M 6H5,
telephone (604) 574-8308.
The Company is subject to the reporting requirements of the Exchange
Act and in accordance therewith files reports and other information with the
Commission. These reports as well as the proxy statements, information
statements and other information filed by the Company under the Exchange Act may
be reviewed and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street N.C. Washington D.C. 20549. Copies my be obtained
at the prescribed rates. In addition the Common Stock is quoted on the a
automated quotation system maintained by the National Association of Securities
Dealers, Inc. (NASD). Thus copies of these reports, proxy statements,
information statements and other information may also be examined at the offices
of the NASD at 1735 K Street N.C. Washington DC 20549.
No person has been authorized to give any information or to make any
representation, other than those contained in this Prospectus, and if given or
made, such other information or representation must not be relied upon as having
been authorized by the Company. This Prospectus does not constitute an offer or
a solicitation by anyone in any state in which such is not authorized or in
which the person making such is not qualified or to any one to whom it is
unlawful to make an offer or solicitation
Neither the delivery of this Prospectus nor any sale made hereunder
shall under any circumstances create any implication that there has not been a
change in the affairs of the Company since the date hereof.
4
TABLE OF CONTENTS
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS 6
ITEM 1. PLAN lNFORMATION 6
GENERAL lNFORMATION 6
The Company 6
Purpose 6
Common Stock 6
The Consultant 6
No Restrictions on Transfer 6
Tax Treatment to the Individual Who Exercises the Option 6
Tax Treatment to the Company 7
Restrictions on Resales 7
DOCUMENTS INCORPORATED BY REFERENCE & ADDITIONAL INFORMATION 7
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
Legal Opinion and Experts 8
Indemnification of Officers and Directors 8
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT 8
ITEM 3. lNCORPORATION OF DOCUMENTS BY REFERENCE 8
ITEM 4. DESCRIPTION OF SECURITIES 8
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL 9
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS 9
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED 9
ITEM 8. EXHIBITS 10
ITEM 9. UNDERTAKINGS 11
EXHIBIT INDEX 14
5
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION
GENERAL INFORMATION
THE COMPANY
The Company has its principal offices at 42543 Columbia Square, New
Westminster, British Columbia, Canada, V3M 6H5, telephone (604) 574-8308.
PURPOSES
The Common Stock will be issued by the Company pursuant to its Stock
Incentive Plan which has been approved by the Board of Directors of the Company
(the "Board of Directors"). The Stock Incentive Plan is hoped to provide a
method whereby the Company's current employees and officers and non employee
directors and consultants may be stimulated and allow the Company to secure and
retain highly qualified employees, officers, directors and non employee
directors and consultants, thereby advancing the interests of the Company, and
all of its shareholders. A copy of the Stock Incentive Plan has been filed as an
exhibit to this Registration Statement.
COMMON STOCK
The Board has authorized the issuance of up to 5,000,000 shares of the
Common stock pursuant to the Company's Stock Incentive Plan upon effectiveness
of this registration Statement.
THE COMPANY STOCK INCENTIVE PLAN
The Company has established a Stock Incentive Plan which awards stock
options in an effort to further compensate its existing employees and officers
and non employee directors and consultants, secure their continued employment,
and attract highly qualified employee's and consultants as they are needed.
NO RESTRICTIONS ON TRANSFER
Upon the exercise of an option, that individual will become the record and
beneficial owners of the shares of Common Stock upon issuance and delivery and
are entitled to all of the rights of ownership, including the right to vote any
shares awarded and to receive ordinary cash dividends on the Common Stock.
TAX TREATMENT TO THE INDIVIDUAL WHO EXERCISES THE OPTION
The individuals receiving shares of common stock pursuant to the exercises
of an option or options at an exercise price below the fair market value of the
shares on the date of exercise, the difference between the exercise price and
the fair market value of the stock on the date of exercise may
6
be deemed ordinary income for federal income tax purposes. The recipient is
urged to consult his tax advisor on this matter. Further, if any recipient is an
"affiliate", Section 16(b) of the Exchange Act is applicable and will affect the
issue of taxation.
TAX TREATMENT TO THE COMPANY
The amount of income recognized by any recipient hereunder in
accordance with the foregoing discussion may be an expense deductible by the
Company for federal income tax purposes of the taxable year of the Company
during which the recipient recognizes income.
RESTRICTIONS OF RESALES
In the event that an affiliate of the Company acquires shares of Common
Stock hereunder, the affiliate will be subject to Section 16(b) of the Exchange
Act. Further, in the event that any affiliate acquiring shares hereunder has
sold or sells any shares of Common Stock in the six months preceding or
following the receipt of shares hereunder, any so called "profit", as computed
under Section 16(b) of the Exchange Act, would be required to be disgorged from
the recipient to the Company. Services rendered have been recognized as valid
consideration for the "purchase" of shares in connection with the "profit"
computation under Section 16(b) of the exchange Act. The Company has agreed that
for the purpose of any "profit" computation under 16(b) the price paid for the
common stock issued to affiliates is equal to the value of services rendered.
Shares of common Stock acquired hereunder by persons other than affiliates are
not subject to Section 16(b) of the Exchange Act.
DOCUMENTS INCORPORATED BY REFERENCE AND ADDITIONAL INFORMATION
The Company hereby incorporates by reference (i) its annual report of
Form 10-KSB for the year ended December 31, 2000, filed pursuant to Section 13
of the Exchange Act, (ii) any and all Forms 10-Q (10-QSB) filed under the
Securities or Exchange Act subsequent to any filed form 10-K (or 10- KSB), as
well as all other reports filed under Section 13 of the Exchange Act, and (iii)
its annual report, if any, to shareholders delivered pursuant to Rule 14a-3 of
the Exchange Act. In addition, all further documents filed by the Company
pursuant to Section 13, 14, or 15(d) of the Exchange Act prior to the
termination of this offering are deemed to be incorporated by reference into
this Prospectus and to be a part hereof from the date of filing. All documents
which when together, constitute this Prospectus, will be sent or given to
participants by the Registrant as specified by Rule 428(b)(1) of the Securities
Act.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
A copy of any document or part hereof incorporated by reference in this
Registration Statement but not delivered with this Prospectus or any document
required to be delivered pursuant to Rule 428(b) under the Securities Act will
be furnished without charge upon written or oral request. Requests should be
addressed to: Reality Interactive, Inc., 42543 Columbia Square, New Westminster,
British Columbia, Canada, V3M 6H5, telephone (604) 574-8308.
7
LEGAL OPINIONS AND EXPERTS
Warren J. Soloski has rendered an opinion on the validity of the securities
being registered. Mr. Soloski is not an "affiliate" of the Company and does not
have any interest in the registrant.
The financial statements of Reality Interactive, Inc., incorporated by
reference in the Company's Annual Report (Form 10-KSB) for the period ended
December 31, 2000, have been audited by Virchow, Krause & Company, LLP Certified
Public Accountants, independent auditor, as set forth in their report
incorporated herein by reference and are incorporated herein in reliance upon
such report given upon the authority of the firm as experts in auditing and
accounting.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Insofar as indemnification of liabilities arising under the Securities Act
may be permitted to directors, officers, or persons controlling the company, the
company has been informed that in the opinion of the commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Registrant hereby states that (i) all documents set forth in (a) through
(c), below, are incorporated by reference in this registration statement, and
(ii) all documents subsequently filed by registrant pursuant to Section 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this registration
statement and to be a part hereof from the date of filing of such documents.
(a) Registrant's latest Annual Report, whether filed pursuant to
Section 13(a) or 15(d) of the Exchange Act;
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the annual report
referred to in (a), above; and
(c) The latest prospectus filed pursuant to Rule 424(b) under the
Securities Act.
ITEM 4. DESCRIPTION OF SECURITIES
No description of the class of securities (i.e., the $0.001 par value
Common Stock ) is required under this item because the common Stock is
registered under Section 12 of the Exchange Act.
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ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Mr. Soloski, whose firm is rendering the legal opinion for this
registration, will not benefit from the registration of shares under the terms
of the Stock Incentive Plan.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The company's by-laws, in accordance with the Nevada Revised Statutes,
provide that to the extent he/she is otherwise fairly and reasonably entitled
thereto, the Company shall indemnify a Director or Officer, a former Director or
Officer, or a person who acts or acted at the Company's request as a Director or
Officer of a body corporate of which the Corporation is or was a shareholder or
creditor (or a person who undertakes or has undertaken any liability on behalf
of the Company or any such body corporate and his heirs and legal
representatives, against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, reasonably incurred by him in
respect of any civil, criminal or administrative action or proceeding to which
he is made a party by reason of being or having been a Director or Officer of
the Company or such body corporate, if
(a) he acted honestly and in good faith with a view to the best interests
of the Company; and
(b) in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, he had reasonable grounds for
believing that his conduct was lawful.
The Nevada Revised Statutes provide that directors shall not be personally
liable to the Company or its shareholders for monetary damages for breach of
fiduciary duty as a director except for liability (i) for any breach of the
directors' duty of loyalty to the Company or its shareholders, (ii) for acts or
omissions not in good faith or which involved intentional misconduct or a
knowing violation of law, (iii) for authorizing a distribution that is unlawful,
or (iv) for any transaction from which the director derived an improper personal
benefit. Such provision protects directors against personal liability for
monetary damages for breaches of their duty of care.
The Company may purchase and maintain insurance for the benefit of its Directors
and Officers as such, as the Board of directors may from time to time determine.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
9
ITEM 8. EXHIBITS
(a) The following exhibits are filed as part of this S-8 registration
statement pursuant to Item 601 of Regulation S-B and are specifically
incorporated herein by this reference:
Exhibit No. Title
- ---------- -----
4. Not Applicable
5. Opinion of Warren J. Soloski regarding the legality of the
securities registered.
10. Stock Incentive Plan.
15. Not Required
23.1 Consent of Warren J. Soloski, special counsel to registrant,
to the use of his opinion with respect to the legality of
the securities being registered hereby and to the references
to him in the Prospectus filed as a part hereof.
23.2 Consent of Virchow, Krause & Company, LLP Certified Public
Accountants.
27. Not Required
28. Not Required
29. Not Required
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Item 9. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
registrant pursuant to the foregoing provisions, or otherwise, registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. If a claim for indemnification against such
liabilities (other than the payment by registrant of expenses incurred or paid
by a director, officer or controlling person of registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered,
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 is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
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
to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represents a fundamental
change in the information set forth in the registration
statement; and
(iii) include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
provided, however, paragraphs (i) and (ii) shall not apply if
the information required to be included in a post-effective
amendment by those paragraphs is incorporated by reference
from periodic reports filed by the registrant small business
issuer under the Exchange Act.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment to 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.
(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.
11
(4) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual
report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X is not
set forth in the prospectus, to deliver, or cause to be delivered
to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of registrant's annual
report pursuant to Section 13(a) of the Securities Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
Securities at that time shall be deemed to be the initial bona fide offering
thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned thereunto duly
authorized in the City of West Newminster, British Columbia, on the 15th day of
February, 2002.
REALITY INTERACTIVE, INC.
(Registrant)
/s/ Brian Koehn
------------------------
Brian Koehn, President
Pursuant to the requirements of the 1933 Act, this registration
statement or amendment has been signed by the following persons in the
capacities and on the dates indicated:
Signatures Title Date
---------- ----- ----
/s/ Brian Koehn President February 15, 2002
- ------------------------ Director
Brian Koehn
/s/ F. Albert Landewehr Secretary/Treasurer February 15, 2002
- ------------------------ Director
F. Albert Landewehr
13
FORM S-8 REGISTRATION STATEMENT
EXHIBIT INDEX
The following Exhibits are filed as part of this registration statement
pursuant to Item 601 of Regulation S-B and are specifically incorporated herein
by this reference:
Exhibit Number
In Registration
Statement Descriptions Numbered Page
- -------------------------------------------------------------------------------
5. Opinion of Counsel 15
10. Stock Incentive Plan 17
23.1 Consent of Warren J. Soloski 32
23.2 Consent of Virchow, Krause & Company, LLP, 33
Certified Public Accountants
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EXHIBIT 5.1
Brian Koehn, President
Reality Interactive, Inc.
42543 Columbia Square
New Westminster, British Columbia
Canada, V3M 6H5
Re: Legal Opinion for S-8 Registration Statement
Dear Mr. Koehn:
At your request, I have examined the form of Registration Statement
which Reality Interactive, Inc. (the "Company") is filing with the Securities
and Exchange Commission, on Form S-8 (the "Registration Statement"), in
connection with the registration under the Securities Act of 1933, as amended,
of 5,000,000 shares of your Common Stock (the "Stock") issuable pursuant to
satisfaction of conditions set forth in the Stock Incentive Plan of the Company
(the "Stock Incentive Plan").
In rendering the following opinion, I have examined and relied only
upon the documents, and certificates of officers and directors of the Company as
are specifically described below. In my examination, I have assumed the
genuineness of all signatures, the authenticity, accuracy and completeness of
the documents submitted to me as originals, and the conformity with the original
documents of all documents submitted to me as copies. My examination was limited
to the following documents and no others:
1. Certificate of Incorporation of the Company, as amended to date;
2. Bylaws of the Company, as amended to date;
3. Resolutions adopted by the Board of Directors of the Company
authorizing entry into a Stock Incentive Plan;
4. The Registration Statement;
5. The Stock Incentive Plan which the shares are being registered in
the Registration Statement.
I have not undertaken, nor do I intend to undertake, any independent
investigation beyond such documents and records, or to verify the adequacy or
accuracy of such documents and records. Based upon the foregoing, it is my
opinion that: (i) the Stock to be issued under the agreements, subject to
effectiveness of the Registration Statement and compliance with applicable blue
sky laws, and pursuant to the Stock Incentive Plan in accordance with the Stock
Incentive Plan as contemplated, when issued, will be duly and validly
authorized, fully paid and non-assessable; and (ii) no consent, approval, order
or authorization of any regulatory board, agency, or instrumentality having
jurisdiction over the Company or its properties (other than registration under
the Act or qualification under state securities or Blue Sky laws or clearance
from the NASD) is required for the valid authorization, issuance and delivery of
the Stock, or, if required, it has been obtained and is in full force and
effect.
15
I express no opinion as to compliance with the securities or "blue sky"
laws of any state in which the stock delivered pursuant to the Stock Incentive
Plan is proposed to be offered and sold or as to the effect, if any, which
non-compliance with such laws might have on the validity of issuance of the
stock.
I consent to the filing of this opinion as an exhibit to any filing
made with the Securities and Exchange Commission or under any state or other
jurisdiction's securities act for the purposes of registering, qualifying or
establishing eligibility for an exemption from registration or qualification of
the stock issued as described in the Registration Statement in connection with
the offering described therein. Other than as provided in the preceding
sentence, this opinion (i) is addressed solely to you, (ii) may not be relied
upon by any other party, (iii) covers only matters of federal law and nothing in
this opinion shall be deemed to imply any opinion related to the laws of any
other jurisdiction, (iv) may not be quoted or reproduced or delivered by you to
any Other person, and (v) may not be relied upon for any other purpose
whatsoever. Nothing in this opinion shall be deemed to relate to or constitute
an opinion concerning any matters not specifically set forth above.
By giving you this opinion and consent, I do not admit that I am an
expert with respect to any part of the Registration Statement within the meaning
of the term "expert" as used in Section 11 of the Securities Act of 1993, as
amended, or the Rules and Regulations of the Securities and Exchange Commission
promulgated thereunder.
The information set forth herein is as of the date of this letter. I
disclaim any undertaking to advise you of changes which may be brought to my
attention after the effective date of the Registration Statement.
Very truly yours,
/s/ Warren J. Soloski
- ----------------------
Warren J. Soloski
16
EXHIBIT 10
REALITY INTERACTIVE, INC. 2002 STOCK INCENTIVE PLAN
1. GENERAL PROVISIONS
1.1 Purpose.
------------
The 2002 Stock Incentive Plan (the "Plan") is intended to allow designated
officers and employees (all of whom are sometimes collectively referred to
herein as "Employees") and certain Non-Employee Directors and Consultants (all
of whom are sometimes collectively referred to as "Selected Persons") of Reality
Interactive, Inc. ("RII") and its Subsidiaries which it may have from time to
time (RII and such Subsidiaries are referred to herein as the "Company") to
receive certain options ("Stock Options") to purchase RII common stock, $0.001
par value ("Common Stock"), and to receive grants of Common Stock subject to
certain restrictions ("Awards"). As used in this Plan, the term "Subsidiary"
shall mean each corporation which is a "subsidiary corporation" of RII within
the meaning of Section 424(f) of the Internal Revenue Code of 1986, as amended
(the "Code"). The main purpose of this Plan is to provide Employees and Selected
Persons with equity-based compensation incentives to make significant and
extraordinary contributions to the long-term performance and growth of the
Company, and to attract and retain Employees and Selected Persons of exceptional
ability.
1.2 Administration.
-------------------
1.2.1 The Plan shall be administered by the Compensation Committee
(the "Committee") of, or appointed by, the Board of Directors of RII(the
"Board"). Each member of the Committee shall be a "disinterested person" as that
term is defined in Rule 16b-3 promulgated by the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of 1934
(the "Exchange Act"), but no action of the Committee shall be invalid if this
requirement is not met. The Committee shall select one of its members as
Chairman and shall act by vote of a majority of a quorum, or by unanimous
written consent. A majority of its members shall constitute a quorum. The
Committee shall be governed by the provisions of RII By-Laws and of Nevada law
applicable to the Board, except as otherwise provided herein or determined by
the Board.
1.2.2 The Committee shall have full and complete authority, in its
discretion, but subject to the express provisions of the Plan to approve the
Employees and Selected Persons nominated by the management of the Company to be
granted Awards or Stock
17
Options; to determine the number of Awards or Stock Options to be granted to an
Employee or Selected Person; to determine the time or times at which Awards or
Stock Options shall be granted; to establish the terms and conditions upon which
Awards or Stock Options may be exercised; to remove or adjust any restrictions
and conditions upon Awards or Stock Options; to specify, at the time of grant,
provisions relating to exercisability of Stock Options and to accelerate or
otherwise modify the exercisability of any Stock Options; and to adopt such
rules and regulations and to make all other determinations deemed necessary or
desirable for the administration of the Plan. All interpretations and
constructions of the Plan by the Committee, and all of its actions hereunder,
shall be binding and conclusive on all persons for all purposes.
1.2.3 The Company hereby agrees to indemnify and hold harmless each
Committee member and each employee of the Company, and the estate and heirs of
such Committee member or employee, against all claims, liabilities, expenses,
penalties, damages or other pecuniary losses, including legal fees, which such
Committee member or employee, his or her estate or heirs may suffer as a result
of his or her responsibilities, obligations or duties in connection with the
Plan, to the extent that insurance, if any, does not cover the payment of such
items. No member of the Committee or the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any Award or Stock
Option granted pursuant to the Plan.
1.3 Eligibility and Participation.
----------------------------------
Employees eligible under the Plan shall be approved by the Committee from
those Employees and officers and Selected Persons who, in the opinion of the
management of the Company, are in positions which enable them to make
significant and extraordinary contributions to the long-term performance and
growth of the Company. In selecting Employees and officers and Selected Persons
to whom Stock Options or Awards may be granted, consideration shall be given to
factors such as employment position, duties and responsibilities, ability,
productivity, length of service, morale, interest in the Company and
recommendations of supervisors. No member of the Committee shall be eligible to
participate under the Plan or under any other Company plan if such participation
would contravene the standard of paragraph 1.2.1 above relating to
"disinterested persons."
1.4 Shares Subject to the Plan.
-------------------------------
The maximum number of shares of Common Stock that may be issued pursuant to
the Plan shall be 5,000,000, subject to adjustment pursuant to the provisions of
paragraph 4.1. If shares of Common Stock awarded or issued under the Plan are
reacquired by the
18
Company due to a forfeiture or for any other reason, such shares shall be
cancelled and thereafter shall again be available for purposes of the Plan. If a
Stock Option expires, terminates or is cancelled for any reason without having
been exercised in full, the shares of Common Stock not purchased thereunder
shall again be available for purposes of the Plan.
2. PROVISIONS RELATING TO STOCK OPTIONS
2.1 Grants of Stock Options.
-----------------------------
The Committee may grant Stock Options in such amounts, at such times, and
to such Employees and Selected Persons nominated by the management of the
Company as the Committee, in its discretion, may determine. Stock Options
granted under the Plan shall constitute "incentive stock options" within the
meaning of Section 422 of the Code, if so designated by the Committee on the
date of grant. The Committee shall also have the discretion to grant Stock
Options which do not constitute incentive stock options, and any such Stock
Options shall be designated non-statutory stock options by the Committee on the
date of grant. The aggregate fair market value (determined as of the time an
incentive stock option is granted) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by any Employee or
Selected Person during any one calendar year (under all plans of the Company and
any parent or Subsidiary of the Company) may not exceed the maximum amount
permitted under Section 422 of the Code (currently $100,000.00). Non-statutory
stock options shall not be subject to the limitations relating to incentive
stock options contained in the preceding sentence. Each Stock Option shall be
evidenced by a written agreement (the "Option Agreement") in a form approved by
the Committee, which shall be executed on behalf of the Company and by the
Employee or Selected Person to whom the Stock Option is granted, and which shall
be subject to the terms and conditions of this Plan. In the discretion of the
Committee, Stock Options may include provisions (which need not be uniform),
authorized by the Committee in its discretion, that accelerate an Employee's
rights to exercise Stock Options following a "Change in Control," upon
termination of such Employee employment by the Company without "Cause" or by the
Employee for "Good Reason," as such terms are defined in paragraph 3.1 hereof.
The holder of a Stock Option shall not be entitled to the privileges of stock
ownership as to any shares of Common Stock not actually issued to such holder.
2.2 Purchase Price.
-------------------
The purchase price (the "Exercise Price") of shares of Common Stock subject
to each Stock Option ("Option Shares") shall equal the fair market value ("Fair
Market Value") of such shares on the date of grant of such Stock Option.
Notwithstanding the foregoing, the Exercise Price of Option Shares subject to an
19
incentive stock option granted to an Employee or Selected Person who at the time
of grant owns stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or of any parent or Subsidiary shall be
at least equal to 110% of the Fair Market Value of such shares on the date of
grant of such Stock Option. The Fair Market Value of a share of Common Stock on
any date shall be equal to the closing price (or if no closing price is
reported, the average of the last bid and asked prices) of the Common Stock for
the last preceding day on which RII's shares were traded, and the method for
determining the closing price shall be determined by the Committee.
2.3 Option Period.
------------------
The Stock Option period (the "Term") shall commence on the
date of grant of the Stock Option and shall be ten years or such shorter period
as is determined by the Committee. Notwithstanding the foregoing, the Term of an
incentive stock option granted to an Employee or Selected Person who at the time
of grant owns stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or of any parent or Subsidiary shall not
exceed five years. Each Stock Option shall provide that it is exercisable over
its term in such periodic installments as the Committee in its sole discretion
may determine. Such provisions need not be uniform. Notwithstanding the
foregoing, but subject to the provisions of paragraphs 1.2.2 and 2.1, Stock
Options granted to Employees and Selected Persons who are subject to the
reporting requirements of Section 16(a) of the Exchange Act ("Section 16
Reporting Persons") shall not be exercisable until at least six months and one
day from the date the Stock Option is granted.
2.4 Exercise of Options.
------------------------
2.4.1 Each Stock Option may be exercised in whole or in part (but not
as to fractional shares) by delivering it for surrender or endorsement to the
Company, attention of the Corporate Secretary, at the principal office of the
Company, together with payment of the Exercise Price and an executed Notice and
Agreement of Exercise in the form prescribed by paragraph 2.4.2. Payment may be
made (i) in cash, (ii) by cashier's or certified check, (iii) by surrender of
previously owned shares of the Company's Common Stock valued pursuant to
paragraph 2.2 (if the Committee authorizes payment in stock in its discretion),
(iv) by withholding from the Option Shares which would otherwise be issuable
upon the exercise of the Stock Option that number of Option Shares having an
aggregate fair market value (determined in the manner prescribed by paragraph
2.2) as of the date of the exercise of the Stock Option equal to the exercise
price of the Stock Option, if such withholding is authorized by the Committee in
its discretion, or (v) in the discretion of the
20
Committee, by the delivery to the Company of the optionee's promissory note
secured by the Option Shares, bearing interest at a rate sufficient to prevent
the imputation of interest under Sections 483 or 1274 of the Code, and having
such other terms and conditions as may be satisfactory to the Committee.
2.4.2 Exercise of each Stock Option is conditioned upon the agreement
of the Employee or Selected Person to the terms and conditions of this Plan and
of such Stock Option as evidenced by the Employee's or Selected Person's
execution and delivery of a Notice and Agreement of Exercise in a form to be
determined by the Committee in its discretion. Such Notice and Agreement of
Exercise shall set forth the agreement of the Employee or Selected Person that:
(a) no Option Shares will be sold or otherwise distributed in violation of the
Securities Act of 1933 (the "Securities Act") or any other applicable federal or
state securities laws, (b) each Option Share certificate may be imprinted with
legends reflecting any applicable federal and state securities law restrictions
and conditions, (c) the Company may comply with said securities law restrictions
and issue "stop transfer" instructions to its Transfer Agent and Registrar
without liability, (d) if the Employee or Selected Person is a Section 16
Reporting Person, said person will furnish to the Company a copy of each Form 4
or Form 5 filed by said Employee or Selected Person and will timely file all
reports required under federal securities laws, and (e) the Employee or Selected
Person will report all sales of Option Shares to the Company in writing on a
form prescribed by the Company.
2.4.3 No Stock Option shall be exercisable unless and until any
applicable registration or qualification requirements of federal and state
securities laws, and all other legal requirements, have been fully complied
with. The Company will use reasonable efforts to maintain the effectiveness of a
Registration Statement under the Securities Act for the issuance of Stock
Options and shares acquired thereunder, but there may be times when no such
Registration Statement will be currently effective. The exercise of Stock
Options may be temporarily suspended without liability to the Company during
times when no such Registration Statement is currently effective, or during
times when, in the reasonable opinion of the Committee, such suspension is
necessary to preclude violation of any requirements of applicable law or
regulatory bodies having jurisdiction over the Company. If any Stock Option
would expire for any reason except the end of its term during such a suspension,
then if exercise of such Stock Option is duly tendered before its expiration,
such Stock Option shall be exercisable and exercised (unless the attempted
exercise is withdrawn) as of the first day after the end of such suspension. The
Company shall have no obligation to file any Registration Statement covering
resales of Option Shares.
21
2.5 Continuous Employment.
--------------------------
Except as provided in paragraph 2.7 below, an Employee may not
exercise a Stock Option unless from the date of grant to the date of exercise
such Employee remains continuously in the employ of the Company. For purposes of
this paragraph 2.5, the period of continuous employment of an Employee with the
Company shall be deemed to include (without extending the term of the Stock
Option) any period during which such Employee is on leave of absence with the
consent of the Company, provided that such leave of absence shall not exceed
three months and that such Employee returns to the employ of the Company at the
expiration of such leave of absence. If such Employee fails to return to the
employ of the Company at the expiration of such leave of absence, such
Employee's employment with the Company shall be deemed terminated as of the date
such leave of absence commenced. The continuous employment of an Employee with
the Company shall also be deemed to include any period during which such
Employee is a member of the Armed Forces of the United States, provided that
such Employee returns to the employ of the Company within 90 days (or such
longer period as may be prescribed by law) from the date such Employee first
becomes entitled to discharge. If an Employee does not return to the employ of
the Company within 90 days (or such longer period as may be prescribed by law)
from the date such Employee first becomes entitled to discharge, such Employee's
employment with the Company shall be deemed to have terminated as of the date
such Employee's military service ended.
2.6 Restrictions on Transfer.
-----------------------------
Each Stock Option granted under this Plan shall be transferable only by
will or the laws of descent and distribution. No interest of any Employee or
Selected Person under the Plan shall be subject to attachment, execution,
garnishment, sequestration, the laws of bankruptcy or any other legal or
equitable process. Each Stock Option granted under this Plan shall be
exercisable during an Employee's or Selected Person's lifetime only by such
Employee or Selected Person or by such Employee's or Selected Persons legal
representative.
2.7 Termination of Employment.
------------------------------
2.7.1 Upon an Employee's or Selected Persons Retirement, Disability or
death, (a) all Stock Options to the extent then presently exercisable shall
remain in full force and effect and may be exercised pursuant to the provisions
thereof, including expiration at the end of the fixed term thereof, and (b)
unless otherwise provided by the Committee, all Stock Options to the extent not
then presently exercisable by such Employee or Selected Person
22
shall terminate as of the date of such termination of employment and shall not
be exercisable thereafter.
2.7.2 Upon the termination of the employment of an Employee or
Selected Person with the Company for any reason other than the reasons set forth
in paragraph 2.7.1 hereof, (a) all Stock Options to the extent then presently
exercisable by such Employee or Selected Person shall remain exercisable only
for a period of 90 days after the date of such termination of employment (except
that the 90- day period shall be extended to 12 months if the Employee or
Selected Person shall die during such 90-day period), and may be exercised
pursuant to the provisions thereof, including expiration at the end of the fixed
term thereof, and (b) unless otherwise provided by the Committee, all Stock
Options to the extent not then presently exercisable by such Employee or
Selected Person shall terminate as of the date of such termination of employment
and shall not be exercisable thereafter.
2.7.3 For purposes of this Plan:
(a) "Retirement" shall mean an Employee's or Selected Person's
retirement from the employ of the Company on or after the date on which such
Employee or Selected Person attains the age of sixty-five (65) years; and
(b) "Disability" shall mean total and permanent incapacity of
an Employee or Selected Person, due to physical impairment or legally
established mental incompetence, to perform the usual duties of such Employee's
or Selected Person's employment with the Company, which disability shall be
determined: (i) on medical evidence by a licensed physician designated by the
Committee, or (ii) on evidence that the Employee or Selected Person has become
entitled to receive primary benefits as a disabled employee under the Social
Security Act in effect on the date of such disability.
3. PROVISIONS RELATING TO AWARDS
3.1 Grant of Awards.
--------------------
Subject to the provisions of the Plan, the Committee shall have full and
complete authority, in its discretion, but subject to the express provisions of
this Plan, to (i) grant Awards pursuant to the Plan, (ii) determine the number
of shares of Common Stock subject to each Award ("Award Shares"), (iii)
determine the terms and conditions (which need not be identical) of each Award,
including the consideration (if any) to be paid by the Employee or Selected
Person for such Common Stock, which may, in the Committee's discretion, consist
of the delivery of the Employee's or Selected
23
Person's promissory note meeting the requirements of paragraph 2.4.1, (iv)
establish and modify performance criteria for Awards, and (v) make all of the
determinations necessary or advisable with respect to Awards under the Plan.
Each award under the Plan shall consist of a grant of shares of Common Stock
subject to a restriction period (after which the restrictions shall lapse),
which shall be a period commencing on the date the award is granted and ending
on such date as the Committee shall determine (the "Restriction Period"). The
Committee may provide for the lapse of restrictions in installments, for
acceleration of the lapse of restrictions upon the satisfaction of such
performance or other criteria or upon the occurrence of such events as the
Committee shall determine, and for the early expiration of the Restriction
Period upon an Employee's or Selected Person's death, Disability or Retirement
as defined in paragraph 2.7.3, or, following a Change of Control, upon
termination of an Employee's or Selected Person's employment by the Company
without "Cause" or by the Employee or Selected Person for "Good Reason," as
those terms are defined herein. For purposes of this Plan:
"Change of Control" shall be deemed to occur (a) on the date the
Company first has actual knowledge that any person (as such term is used in
Sections 13(d) and 14(d) (2) of the Exchange Act) has become the beneficial
owner (as defined in Rule 13(d)-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 40% or more of the
combined voting power of the Company's then outstanding securities, or (b) on
the date the shareholders of the Company approve (i) a merger of the Company
with or into any other corporation in which the Company is not the surviving
corporation or in which the Company survives as a subsidiary of another
corporation, (ii) a consolidation of the Company with any other corporation, or
(iii) the sale or disposition of all or substantially all of the Company's
assets or a plan of complete liquidation.
"Cause," when used with reference to termination of the
employment of an Employee or Selected Person by the Company for "Cause," shall
mean:
(a) the individual's continuing wilful and material breach of his
or her duties to the Company after he or she receives a demand from the Chief
Executive of the Company specifying the manner in which he or she has wilfully
and materially breached such duties, other than any such failure resulting from
Disability of the individual or his or her resignation for "Good Reason," as
defined herein; or
(b) the conviction of a felony; or
(c) the commission of fraud in the course of his or
24
her employment with the Company, such as embezzlement or other
material and intentional violation of law against the Company; or
(d) the gross misconduct causing material harm to the Company.
"Good Reason" shall mean any one or more of the following,
occurring following or in connection with a Change of Control and within 90 days
prior to the Employee's or Selected Persons resignation, unless the Employee or
Selected Person shall have consented thereto in writing:
(a) the assignment to the Employee of duties inconsistent with
his or her executive status prior to the Change of Control or a substantive
change in the officer or officers to whom he or she reports from the officer or
officers to whom he or she reported immediately prior to the Change of Control;
or
(b) the elimination or reassignment of a majority of the duties
and responsibilities that were assigned to the Employee or Selected Person
immediately prior to the Change of Control; or
(c) a reduction by the Company in the Employee's annual base
salary as in effect immediately prior to the Change of Control; or
(d) the Company's requiring the Employee or Selected Person to
be based anywhere outside a 35-mile radius from his or her place of employment
immediately prior to the Change of Control, except for required travel on the
Company's business to an extent substantially consistent with the Employee's or
Selected Persons business travel obligations immediately prior to the Change of
Control; or
(e) the failure of the Company to grant the Employee a
performance bonus reasonably equivalent to the same percentage of salary the
Employee normally received prior to the Change of Control, given comparable
performance by the Company and the Employee; or
(f) the failure of the Company to obtain a satisfactory
Assumption Agreement (as defined in paragraph 4.12 of the Plan) from a
successor, or the failure of such successor to perform such Assumption
Agreement.
3.2 Incentive Agreements.
-------------------------
Each Award granted under the Plan shall be evidenced by a written agreement
(an "Incentive Agreement") in a form approved by the Committee and executed by
the Company and the Employee or Selected Person to whom the Award is granted.
Each Incentive
25
Agreement shall be subject to the terms and conditions of the Plan and other
such terms and conditions as the Committee may specify.
3.3 Waiver of Restrictions.
---------------------------
The Committee may modify or amend any Award under the Plan or waive any
restrictions or conditions applicable to such Awards; provided, however, that
the Committee may not undertake any such modifications, amendments or waivers if
the effect thereof materially increases the benefits to any Employee or Selected
Person, or adversely affects the rights of any Employee or Selected Person
without his or her consent.
3.4 Terms and Conditions of Awards.
-----------------------------------
3.4.1 Upon receipt of an Award of shares of Common Stock under the
Plan, even during the Restriction Period, an Employee or Selected Person shall
be the holder of record of the shares and shall have all the rights of a
shareholder with respect to such shares, subject to the terms and conditions of
the Plan and the Award.
3.4.2 Except as otherwise provided in this paragraph 3.4, no shares of
Common Stock received pursuant to the Plan shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of during the
Restriction Period applicable to such shares. Any purported disposition of such
Common Stock in violation of this paragraph 3.4.2 shall be null and void.
3.4.3 If an Employee's or Selected Persons employment with the Company
terminates prior to the expiration of the Restriction Period for an Award,
subject to any provisions of the Award with respect to the Employee's or
Selected Persons death, Disability or Retirement, or Change of Control, all
shares of Common Stock subject to the Award shall be immediately forfeited by
the Employee or Selected Person and reacquired by the Company, and the Employee
or Selected Person shall have no further rights with respect to the Award. In
the discretion of the Committee, an Incentive Agreement may provide that, upon
the forfeiture by an Employee or Selected Person of Award Shares, the Company
shall repay to the Employee or Selected Person the consideration (if any) which
the Employee or Selected Person paid for the Award Shares on the grant of the
Award. In the discretion of the Committee, an Incentive Agreement may also
provide that such repayment shall include an interest factor on such
consideration from the date of the grant of the Award to the date of such
repayment.
3.4.4 The Committee may require under such terms and conditions as it
deems appropriate or desirable that (i) the certificates for Common Stock
delivered under the Plan are to be held
26
in custody by the Company or a person or institution designated by the Company
until the Restriction Period expires, (ii) such certificates shall bear a legend
referring to the restrictions on the Common Stock pursuant to the Plan, and
(iii) the Employee or Selected Person shall have delivered to the Company a
stock power endorsed in blank relating to the Common Stock.
4. MISCELLANEOUS PROVISIONS
4.1 Adjustments Upon Change in Capitalization.
----------------------------------------------
4.1.1 The number and class of shares subject to each outstanding Stock
Option, the Exercise Price thereof (but not the total price), the maximum number
of Stock Options that may be granted under the Plan, the minimum number of
shares as to which a Stock Option may be exercised at any one time, and the
number and class of shares subject to each outstanding Award, shall be
proportionately adjusted in the event of any increase or decrease in the number
of the issued shares of Common Stock which results from a split-up or
consolidation of shares, payment of a stock dividend or dividends exceeding a
total of 5% for which the record dates occur in any one fiscal year, a
recapitalization (other than the conversion of convertible securities according
to their terms), a combination of shares or other like capital adjustment, so
that (i) upon exercise of the Stock Option, the Employee or Selected Person
shall receive the number and class of shares such Employee or Selected Person
would have received had such Employee or Selected Person been the holder of the
number of shares of Common Stock for which the Stock Option is being exercised
upon the date of such change or increase or decrease in the number of issued
shares of the Company, and (ii) upon the lapse of restrictions of the Award
Shares, the Employee or Selected Person shall receive the number and class of
shares such Employee or Selected Person would have received if the restrictions
on the Award Shares had lapsed on the date of such change or increase or
decrease in the number of issued shares of the Company.
4.1.2 Upon a reorganization, merger or consolidation of the Company
with one or more corporations as a result of which RIIis not the surviving
corporation or in which RII survives as a wholly-owned subsidiary of another
corporation, or upon a sale of all or substantially all of the property of the
Company to another corporation, or any dividend or distribution to shareholders
of more than 10% of the Company's assets, adequate adjustment or other
provisions shall be made by the Company or other party to such transaction so
that there shall remain and/or be substituted for the Option Shares and Award
Shares provided for herein, the shares, securities or assets which would have
been issuable or payable in respect of or in exchange for such Option Shares and
Award Shares then remaining, as if the Employee or Selected Person had been the
27
owner of such shares as of the applicable date. Any securities so substituted
shall be subject to similar successive adjustments.
4.2 Withholding Taxes.
----------------------
The Company shall have the right at the time of exercise of any Stock
Option, the grant of an Award, or the lapse of restrictions on Award Shares, to
make adequate provision for any federal, state, local or foreign taxes which it
believes are or may be required by law to be withheld with respect to such
exercise ("Tax Liability"), to ensure the payment of any such Tax Liability. The
Company may provide for the payment of any Tax Liability by any of the following
means or a combination of such means, as determined by the Committee in its sole
and absolute discretion in the particular case: (i) by requiring the Employee or
Selected Person to tender a cash payment to the Company, (ii) by withholding
from the Employee's salary or Selected Person's payment, (iii) by withholding
from the Option Shares which would otherwise be issuable upon exercise of the
Stock Option, or from the Award Shares on their grant or date of lapse of
restrictions, that number of Option Shares or Award Shares having an aggregate
fair market value (determined in the manner prescribed by paragraph 2.2) as of
the date the withholding tax obligation arises in an amount which is equal to
the Employee's or Selected Person's Tax Liability or (iv) by any other method
deemed appropriate by the Committee. Satisfaction of the Tax Liability of a
Section 16 Reporting Person may be made by the method of payment specified in
clause (iii) above only if the following two conditions are satisfied:
(a) the withholding of Option Shares or Award Shares and the exercise
of the related Stock Option occur at least six months and one day following
the date of grant of such Stock Option or Award; and
(b) the withholding of Option Shares or Award Shares is made either
(i) pursuant to an irrevocable election ("Withholding Election") made by
such Employee or Selected Person at least six months in advance of the
withholding of Options Shares or Award Shares, or (ii) on a day within a
ten-day "window period" beginning on the third business day following the
date of release of the Company's quarterly or annual summary statement of
sales and earnings.
Anything herein to the contrary notwithstanding, a Withholding Election may be
disapproved by the Committee at any time.
4.3 Relationship to Other Employee Benefit Plans.
-------------------------------------------------
Stock Options and Awards granted hereunder shall not be deemed to be salary
or other compensation to any Employee or
28
Selected Person for purposes of any pension, thrift, profit-sharing, stock
purchase or any other employee benefit plan now maintained or hereafter adopted
by the Company.
4.4 Amendments and Termination.
-------------------------------
The Board of Directors may at any time suspend, amend or terminate this
Plan. No amendment or modification of this Plan may be adopted, except subject
to stockholder approval, which would: (a) materially increase the benefits
accruing to Employees or Selected Persons and officers under this Plan, (b)
materially increase the number of securities which may be issued under this Plan
(except for adjustments pursuant to paragraph 4.1 hereof), or (c) materially
modify the requirements as to eligibility for participation in the Plan.
4.5 Successors in Interest.
---------------------------
The provisions of this Plan and the actions of the Committee shall be
binding upon all heirs, successors and assigns of the Company and of Employees,
Selected Persons and officers.
4.6 Other Documents.
--------------------
All documents prepared, executed or delivered in connection with this Plan
(including, without limitation, Option Agreements and Incentive Agreements)
shall be, in substance and form, as established and modified by the Committee;
provided, however, that all such documents shall be subject in every respect to
the provisions of this Plan, and in the event of any conflict between the terms
of any such document and this Plan, the provisions of this Plan shall prevail.
4.7 No Obligation to Continue Employment.
-----------------------------------------
This Plan and grants hereunder shall not impose any obligation on the
Company to continue to employ any Employee or Selected Person. Moreover, no
provision of this Plan or any document executed or delivered pursuant to this
Plan shall be deemed modified in any way by any employment contract between an
Employee (or other employee) or Selected Person and the Company.
4.8 Misconduct of an Employee.
------------------------------
Notwithstanding any other provision of this Plan, if an Employee or
Selected Person commits fraud or dishonesty toward the Company or wrongfully
uses or discloses any trade secret, confidential data or other information
proprietary to the Company, or intentionally takes any other action materially
inimical to the best interests of the Company, as determined by the Committee,
in its sole
29
and absolute discretion, such individual shall forfeit all rights and benefits
under this Plan.
4.9 Term of Plan.
-----------------
This Plan was adopted by the Board effective October 2, 2001. No Stock
Options or Awards may be granted under this Plan after October 1, 2011.
4.10 Governing Law.
-------------------
This Plan shall be construed in accordance with, and governed by, the laws
of the State of Nevada.
4.11 Shareholder Approval.
--------------------------
No Stock Option shall be exercisable, or Award granted, unless and until
the Shareholders of the Company have approved this Plan and all other legal
requirements have been fully complied with.
4.12 Assumption Agreements.
---------------------------
The Company will require each successor, (direct or indirect, whether by
purchase, merger, consolidation or otherwise), to all or substantially all of
the business or assets of the Company, prior to the consummation of each such
transaction, to assume and agree to perform the terms and provisions remaining
to be performed by the Company under each Incentive Agreement and Stock Option
and to preserve the benefits to the Employees and officers and non employee
directors thereunder. Such assumption and agreement shall be set forth in a
written agreement in form and substance satisfactory to the Committee (an
"Assumption Agreement"), and shall include such adjustments, if any, in the
application of the provisions of the Incentive Agreements and Stock Options and
such additional provisions, if any, as the Committee shall require and approve,
in order to preserve such benefits to the Employees, Selected Persons and
officers. Without limiting the generality of the foregoing, the Committee may
require an Assumption Agreement to include satisfactory undertakings by a
successor:
(a) to provide liquidity to the Employees and Selected Persons at the end
of the Restriction Period applicable to Common Stock awarded to them under the
Plan, or on the exercise of Stock Options;
(b) if the succession occurs before the expiration of any period specified
in the Incentive Agreements for satisfaction of performance criteria applicable
to the Common Stock awarded thereunder, to refrain from interfering with the
Company's ability to
30
satisfy such performance criteria or to agree to modify such performance
criteria and/or waive any criteria that cannot be satisfied as a result of the
succession;
(c) to require any future successor to enter into an Assumption Agreement;
and
(d) to take or refrain from taking such other actions as the Committee may
require and approve, in its discretion.
The Committee referred to in this paragraph 4.12 is the Committee appointed by a
Board of Directors in office prior to the succession then under consideration.
4.13 Compliance With Rule 16B-3.
--------------------------------
Transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent that any provision of the Plan or action
by the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
IN WITNESS WHEREOF, this Plan has been executed effective as of the 8th
day of February, 2002.
Reality Interactive, Inc.
By: /s/ Brian Koehn
-------------------------
Brian Koehn
President
31
EXHIBIT 23.1
WARREN J. SOLOSKI Letterhead
CONSENT OF COUNSEL
I consent to the filing of this opinion as an exhibit to any filing
made with the Securities and Exchange Commission or under any state or other
jurisdiction's securities act for the purposes of registering, qualifying or
establishing eligibility for an exemption from registration or qualification of
the stock issued as described in the Registration Statement in connection with
the offering described therein.
/s/ Warren J. Soloski
-----------------------
Warren J. Soloski
Special Counsel to Reality Interactive, Inc.
32
EXHIBIT 23.2
Virchow, Krause & Company
[Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in the Registration Statement on Form S-8 of Reality Interactive,
Inc. of our report dated March 23, 2001 appearing in Reality Interactive Inc.'s
Form 10-KSB for the year ended December 31, 2000.
/s/ Virchow, Krause & Company, LLP
----------------------------------
Virchow, Krause & Company, LLP
Minneapolis, Minnesota
February 14, 2002
33