SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
SHOWSTAR ONLINE.COM INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title to each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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SHOWSTAR ONLINE.COM INC.
70 WASHINGTON ST., #409
BROOKLYN, NEW YORK 10011
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 15, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Showstar Online.com, Inc., a Colorado corporation (the "Company"), will be held
on Friday, September 15, 2000 at 10:00 a.m. local time at The Hotel
International, 5621 - 196th S.W., Lynnwood, Washington, U.S.A. (the "Annual
Meeting") for the purpose of considering and voting upon the following matters:
1. To approve an amendment to the Company's Bylaws to increase the number
of authorized directors and to provide for staggered terms for the Board by
providing that the Directors be divided into three equal classes whose terms of
office shall respectively expire at different times, but no such term to
continue longer than three years.
2. To elect five (5) Directors to the Company's Board of Directors, each to
serve a staggered term as outlined in the proposed restructuring of the Board
and until their respective successors have been elected and qualified, or until
their earlier resignation or removal. The Board of Directors intends to nominate
the following individuals for election to the Board: John Punzo, Barry Forward,
Louis Bianchi, Lloyd E. Dohner, and William Peterson.
3. To approve an amendment to the Company's Articles of Incorporation to
increase the authorized capital stock of the Company from 50,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock to 75,000,000 shares of
Common Stock and 25,000,000 shares of Preferred Stock, and to provide authority
to the Board of Directors to designate the rights and preferences of series of
preferred stock.
4. To approve a proposal to change the state of incorporation of the
Company from Colorado to Washington, which proposal would also effect certain
other changes in the Company's corporate charter documents and in the rights of
shareholders.
5. To approve the adoption of the Company's 2000 Stock Option Plan and to
reserve 7,500,000 shares of the Company's Common Stock for issuance thereunder.
6. To ratify the appointment of Cordovano & Harvey, P.C. as the Company's
independent public accountants for the current fiscal year.
7. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Page 2
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The Board of Directors is not aware of any
other business to be transacted at the Annual Meeting.
Shareholders should note that the proposed reincorporation of the Company
in Washington is a transaction giving rise to shareholder dissenters' rights
under Section 102 of the Colorado Corporation Code, Article 113, Title 7 of the
Colorado Revised Statutes. Shareholders may be entitled to assert dissenters'
rights thereunder. Accordingly, copies of the relevant provisions of the
Colorado Corporation Code are provided to shareholders as an Exhibit to the
accompanying Proxy Statement.
The Board of Directors has fixed the close of business on August 25, 2000
as the record date for the determination of shareholders entitled to notice of
and to vote at the Annual Meeting. Only shareholders of record at the close of
business on August 25, 2000 shall be entitled to vote at the Annual Meeting or
at any adjournments thereof.
A copy of the Company's Annual Report to Shareholders (Form 10-KSB) for the
year ended April 30, 2000, which contains consolidated financial statements and
other information of interest to shareholders, accompanies this Notice and the
enclosed Proxy Statement.
All shareholders are invited to attend the Annual Meeting in person.
However, to assure your representation at the Annual Meeting, you are urged to
sign and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the Annual Meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors
/s/ John Punzo
JOHN PUNZO
President and Chief Executive Officer
Seattle, Washington
August 15, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
PROMPTLY COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN
THE ACCOMPANYING ENVELOPE.
Page 3
SHOWSTAR ONLINE.COM INC.
70 WASHINGTON ST., #409
BROOKLYN, NEW YORK 10011
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 15, 2000
GENERAL
The enclosed Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of SHOWSTAR ONLINE.COM INC. (the "Company") of
proxies for use at the Annual Meeting of Shareholders to be held on September
15, 2000 at 10:00 a.m. local time, and at any adjournment thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders.
The Annual Meeting will be held at The Hotel International, 5621 - 196th S.W.,
Lynnwood, Washington 98036. The Company's telephone number is (888) 616-9333.
The Notice of Meeting, this Proxy Statement, the enclosed Proxy and the
Company's Annual Report on Form 10-KSB (without exhibits) for the year ended
April 30, 2000 are first being sent or given to shareholders entitled to vote at
the Annual Meeting on or about August 31, 2000. The Company will, upon written
request of any shareholder, furnish a copy of the Exhibits to its Annual Report
on Form 10-KSB for the year ended April 30, 2000, as filed with the Securities
and Exchange Commission. Please address all such requests to the Company at its
administrative and technical operations office at 90-10551 Shellbridge Way,
Richmond, B.C., V6X 2W9, Attention: Secretary.
RECORD DATE
Shareholders of record at the close of business on August 25, 2000 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting. As of the
Record Date, 39,234,084 shares of the Company's Common Stock, no par value (the
"Common Stock"), were issued and outstanding. For information regarding security
ownership by management and by the beneficial owners of more than 5% of the
Company's Common Stock, see "Beneficial Security Ownership of Management and
Certain Beneficial Owners."
REVOCABILITY OF PROXIES
A shareholder may revoke any proxy at any time before its exercise by delivery
of a written revocation to the President of the Company or a duly executed proxy
bearing a later date. Attendance at the Annual Meeting will not itself be deemed
to revoke a proxy unless the shareholder gives affirmative notice at the Meeting
that the shareholder intends to revoke the proxy and vote in person.
VOTING AND SOLICITATION
All proxies will be voted in accordance with the instructions of the
shareholder. If no choice is specified, the shares will be voted (i) FOR the
amendment to the Company's Bylaws to increase the number of Directors and to
provide for staggered terms for Directors; (ii) FOR the election of Directors as
listed in this proxy statement; (iii) FOR the amendment to the Company's
Articles of
Page 4
Incorporation to increase the authorized capital stock of the Company; (iv) FOR
the proposal described herein to reincorporate the Company in the State of
Washington; (v) FOR the approval of the Company's 2000 Stock Option Plan; and
(vi) FOR the appointment of Cordovano & Harvey, P.C. as the Company's certified
public accountants for the fiscal year. Each shareholder is entitled to one vote
for each share of Common Stock held by him or her on all matters presented at
the Annual Meeting. There are no shares of Preferred Stock outstanding.
Shareholders do not have the right to cumulate their votes in the election of
Directors.
The cost of soliciting proxies will be borne by the Company. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may also be solicited by certain of the Company's
Directors, officers and regular employees, without additional compensation,
personally or by telephone, telegram, letter or facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
At the Annual Meeting, the presence, in person or by proxy, of shareholders
owning a majority of the shares of Common Stock issued and outstanding on the
Record Date shall constitute a quorum for the transaction of business at the
Annual Meeting. Shares of Common Stock present in person or represented by proxy
(including shares which abstain or do not vote with respect to one or more of
the matters presented for shareholder approval) will be counted for purposes of
determining whether a quorum exists at the Annual Meeting.
If a quorum is present, the affirmative vote of the holders of a majority of the
votes cast by the shareholders entitled to vote at the Annual Meeting is
required to approve any proposal submitted at the Annual Meeting, including the
election of Directors. Although the Company will include abstentions and broker
non-votes as present or represented for purposes of establishing a quorum for
the transaction of business, the Company intends to exclude abstentions and
broker non-votes from the tabulation of voting results on the election of
Directors, the proposed amendment of the Company's Bylaws and Articles of
Incorporation, the adoption of the Stock Option Plan, the appointment of
auditors, or on any other issues requiring approval of a majority of the votes
cast.
Abstentions, however, may be specified on the proposal to reincorporate the
Company in the State of Washington and will have the effect of a vote against
such proposal. Brokerage firms who hold shares in "street name" for customers
will not have authority to vote shares with respect to the proposal to
reincorporate the Company in Washington; the failure of a broker to vote shares
in the absence of instructions (a "broker non-vote") will have the effect of a
vote against such proposal.
BENEFICIAL SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of Common Stock of the
Company as of the Record Date for the following: (i) each person or entity who
is known to the Company to beneficially own more than 5% of the outstanding
shares of the Company's Common Stock; (ii) each of the Company's Directors (and
nominees for election as Directors); (iii) the Company's Chief Executive Officer
and each of the officers ("Named Officers") named in the Summary Compensation
Table herein; and (iv) all Directors and executive officers of the Company as a
group.
The number and percentage of shares beneficially owned is determined under rules
of the Securities and Exchange Commission ("SEC"), and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under such
rules, beneficial ownership includes any shares as to
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which the individual has sole or shared voting power or dispositive power and
also any shares that the individual has the right to acquire within sixty days
of the Record Date through the exercise of any stock option or other right.
Unless otherwise indicated in the footnotes, each person has sole voting and
dispositive power (or shares such power) with respect to the shares shown as
beneficially owned.
TITLE OF CLASS
-------------- NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
---------------- -------------------- -----
Common Stock Punzo Family Group (1) 3,443,333(2) 8.60%
John Punzo 1,633,333(2,3) 4.08%
Surrey, B.C.
Barry Forward 855,000 2.13%
North Vancouver, B.C.
Louis Bianchi 280,000 0.70%
Kirkland, WA
Lloyd E. Dohner 34,000 0.08%
Houston, Texas
William E. Peterson 14,000 0.03%
Missouri City, Texas
Kenneth Linsner 600,000(4) 1.50%
Sloatsburgh, NY
Abraham Joel 600,000(4) 1.50%
New York, NY
All Directors and Officers as a Group 4,916,333(2,3,4,5) 12.27%
(9 individuals)
(1) Various members of the Punzo family have agreed to invest in and to vote
their shares of Showstar's Common Stock, owned directly and indirectly, as
a group in order to influence control and direction of Showstar. Members of
the group include John Punzo, Dean Punzo, Ernesto Punzo, Steve Punzo, Gino
Punzo, Lynn Evans and Emma Piccolo. The amount shown excludes those shares
held directly by Directors and Officers. The group beneficially owns,
directly and indirectly, including restricted shares and options that
become vested in the next 60 days, 5,076,666 shares of Company Common
Stock, or 12.68 % of all outstanding Common Stock.
(2) Excludes shares beneficially owned by other members of the Punzo Family
Group. Includes options for 400,000 shares that are currently exercisable
or will become exercisable on or before September 30, 2000.
(3) Includes 400,000 restricted shares that become vested on or before
September 30, 2000 and options on 400,000 shares that are or will become
exercisable on or before September 30, 2000.
(4) Includes options on 100,000 shares that are or will become exercisable on
or before September 30, 2000.
(5) Includes restricted shares that become vested in the next 60 days and
options on 225,000 shares that are or will become exercisable on or before
September 30, 2000 held by officers not listed above.
Page 6
PROPOSAL NO. 1
APPROVAL OF AN AMENDMENT TO THE BYLAWS
The Company's Board currently has five (5) members, each of whom holds office
for a term of one year. The Company's Bylaws provide that the shareholders, by
amendment to the Bylaws, may provide that the directors be divided into not more
than four classes, as nearly equal in number as possible, whose terms of office
shall respectively expire at different times, but no such term to continue
longer than four years, and at least one-fifth (1/5) in number of the directors
are to be elected annually.
The Board of Directors has approved, and is recommending to the Company's
shareholders for approval at the Annual Meeting, an amendment to Article III,
Section 2 of the Company's Bylaws to increase the authorized number of Directors
to not less than three (3) nor more than nine (9). The proposed amendment to the
Bylaws also would provide for staggered terms for the Board of Directors by
providing that the Directors be divided into three (3) equal classes whose terms
of office shall respectively expire at different times, but no such term to
continue longer than three (3) years. The Board of Directors would be divided
into Class I, Class II and Class III Directors, and each class would have the
same rights and privileges as the other classes. The initial Class I Directors
would serve until the Annual Meeting of Shareholders to be held in 2001, the
initial Class II Directors would serve until the Annual Meeting of Shareholders
to be held in 2002, and the initial Class III Directors would serve until the
Annual Meeting of Shareholders to be held in 2003, or until their respective
successors are elected and/or appointed. The full text of the proposed amendment
to the Company's Bylaws is set forth in EXHIBIT A hereto.
Providing for staggered terms for the Company's Board of Directors could
discourage, or make more difficult, efforts to obtain control of the Company or
to remove the incumbent Board of Directors, and may discourage unsolicited
takeover attempts which might be desirable to shareholders. For example, a party
attempting to obtain control of the Company by acquiring a majority of the
outstanding shares of stock of the Company would be able to elect only two
Directors each year, and it would take two years for that party to elect a
majority of the Board of Directors. The Company is not aware of any pending or
threatened efforts to acquire control of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE
COMPANY'S BYLAWS.
PROPOSAL NO. 2
ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR DIRECTOR
The Company's Bylaws currently provide for a Board of Directors of not less than
three (3) nor more than seven (7) members. The Company's Board currently has
five (5) members. The Company's management recommends the five (5) nominees for
Director listed below. Each of the nominees has indicated his willingness to
serve if elected. At the Annual Meeting, shares represented by the accompanying
Proxy will be voted for the election of the five (5) nominees recommended by the
Company's management unless the Proxy is marked in such a manner as to withhold
authority to so vote. If any nominee for any reason is unable to serve or for
good cause will not serve, the proxies may be voted for such substitute nominee
as the proxy holder may
Page 7
determine. The Company is not aware of any nominee who will be unable to, or for
good cause will not, serve as a Director.
The term of office of each person elected as a Director will continue for the
applicable term of such Director's class, or until his successor has been duly
elected and qualified. In the event the Reincorporation Proposal is approved,
the nominees named below will serve as the Directors of the Washington
corporation that will be the surviving corporation as a result of the merger
(see "Proposal No. 4: Reincorporation of the Company in Washington").
In the event Proposal No. 1 providing for three classes of Directors is not
approved, all Directors elected at this Annual Meeting shall serve for
one-year terms ending at the Annual Meeting of Shareholders to be held in
2001.
The following table indicates the name of each nominee/director, the Director's
class, and certain information regarding each nominee, including their age,
principal occupation or employment, and the year in which each nominee first
became a Director of the Company, if such person has previously served on the
Company's Board of Directors.
NAME OF NOMINEE AGE CURRENT POSITION/ DIRECTOR
OFFICE SINCE
- -----------------------------------------------------------------------------------------------
John Punzo 45 Chairman of the Board, President 1999
Class III (term expires in 2003) and Chief Executive Officer
Barry Forward 41 Director, Secretary 1998
Class III (term expires in 2003)
Louis Bianchi 51 Director, President ALS Sportswear 2000
Class II (term expires in 2002)
Lloyd E. Dohner 5 L.E. Dohner & Co. Inc. - Consultant 2000
Class II (term expires in 2002)
William E. Peterson 49 Consultant 2000
Class I (term expires in 2001)
JOHN PUNZO, DIRECTOR (CHAIRMAN), PRESIDENT & CHIEF EXECUTIVE OFFICER
Mr. Punzo has been Showstar's President and Chief Executive Officer since
January 7, 1999. Since 1981, he has been a businessman and entrepreneur,
launching and operating several businesses, including a successful restaurant
operation in Vancouver, Canada. Mr. Punzo also has played a key role in
obtaining funding for a number of public and private companies. In June 1997,
Mr. Punzo filed for bankruptcy under Canadian bankruptcy law as a result of one
of his restaurant's local market demographics changing adversely and the
restaurant not being able to relocate due to restrictive lease provisions. Mr.
Punzo is the brother of Ernesto Punzo, who was a director up until August 14,
2000, and is an uncle of Dean Punzo, who also was a director up until August 14,
2000.
BARRY FORWARD, DIRECTOR, CORPORATE SECRETARY
Mr. Forward is the past president of Showstar and has been a director since
May 14, 1998. He has worked in the communications industry since 1983 as a
consultant, programmer, on-air host and journalist. Mr. Forward has developed
Internet communications strategies for corporate clients and non-profit groups.
He also has developed several online marketing projects and has operated his own
non-commercial web sites since 1995.
Page 8
LOUIS BIANCHI, DIRECTOR, PRESIDENT ALS SPORTSWEAR
Mr. Bianchi, who joined the Board as of July 11, 2000, has extensive
experience in merchandising, sales and promotions, new product development, and
the development of national marketing networks and distribution channels. Based
in Kirkland, Washington, he has spent the past 25 years developing new business
opportunities and revenue models for a wide range of business interests
including art leasing, merchandising and corporate identification programs.
During the past 10 years, he has operated ALS Sportswear which was acquired
by the Company in May 2000.
LLOYD E. DOHNER
Mr. Dohner, a Penn State University graduate in finance, has over 30 years
of experience in the securities industry as both a stockbroker and a partner in
a commodities firm, and also has extensive knowledge of marketing and database
administration. Since 1984, Mr. Dohner has been the owner and director of L.E.
Dohner & Company, Inc., a management and consulting firm specializing in
assisting start-up and development stage businesses with managing and achieving
their venture capital requirements.
WILLIAM E. PETERSON
Mr. Peterson has over 20 years of experience in the financial and insurance
markets as owner and founder of Peterson Insurance Agency. Since 1996, Mr.
Peterson has developed several oil and gas projects, of which two were major
successes (Wharton County, Texas). Mr. Peterson is also an Associate of L.E.
Dohner & Company, Inc., a business consulting firm specializing in financial,
marketing and venture capital for developing companies in the technology and
manufacturing sectors.
REQUIRED VOTE
The nominees receiving the highest number of affirmative votes of the shares
present or represented and entitled to vote for them at the Annual Meeting shall
be elected as Directors. Votes withheld from any Director are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but they have no legal effect under Colorado law.
BOARD AND COMMITTEE MEETINGS
During the Company's fiscal year ending April 30, 2000, the Board of Directors
held a total of nine meetings and approved eighteen Actions by Written Consent.
During that time, no incumbent Director attended fewer than 75% of the aggregate
of the total number of meetings of the Board of Directors (held during the
period for which he has been a Director).
There is currently only one committee of the Board of Directors, the Audit and
Compensation Committee, which was established by the Board of Directors on
August 14, 2000. This committee is composed exclusively of directors who are not
employees of the Company and who are, in the opinion of the Board of Directors,
free from any relationship that will interfere with the exercise of independent
judgment as a committee member. The Directors who serve on this committee are
Lloyd E. Dohner and William E. Peterson. The functions of the Audit and
Compensation Committee are: (i) to recommend the engagement of the Company's
independent auditors and review with them the plan, scope and results of their
audit for each year; (ii) to consider and review other matters relating to the
financial and accounting affairs of the Company; and (iii) to review and
recommend to the Board of Directors all compensation packages, including the
number and terms of stock options, offered to officers and executive employees
of the Company. Prior to the
Page 9
establishment of the Audit and Compensation Committee, the entire Board of
Directors performed the functions now assigned to this committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF THE
NOMINEES LISTED ABOVE.
COMPENSATION OF DIRECTORS
No Director of the Company received any compensation for his services as a
Director of the Company during the past fiscal year.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
Officers and Directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the
Securities and Exchange Commission (the "SEC"). Such Officers, Directors and ten
percent shareholders are also required by SEC rules to furnish the Company with
copies of all such forms that they file. The Company's initial registration
statement on Form 10-SB became effective on or about April 5, 2000. All of
the Directors and officers at that time inadvertently failed to file Form
3's, "Initial Statement of Benenficial Ownership of Securities," on or prior
to that effective date. All of these individuals have since filed their Form
3's and all current officers and Directors have filed such forms. Based upon
a review of the forms submitted to the Company with regard to its fiscal year
ended April 30, 2000, the Company is not aware of any other late filings with
repsect to that period.
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate annual remuneration of Showstar's
Chief Executive Officer and the three other executive officers whose annual
salary and bonus exceeded $100,000 in the fiscal year ended April 30, 2000
(collectively, the "named executive officers"), and for the fiscal years ended
April 30, 1999 and April 30, 2000, the Company's most recent and only meaningful
fiscal years. All amounts are in U.S. dollars unless otherwise noted. For this
purpose, compensation paid in Canadian dollars has been converted to U.S.
dollars based upon a conversion rate of $1.00 CDN equal to $0.70 US.
LONG-TERM COMP
ANNUAL COMPENSATION AWARDS
--------------------------- --------------------
ALL
NAME AND OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER RES.STK OPTIONS COMP
- ------------------ ---- ------ ----- ----- ------- ------- ----
John Punzo(1) 1999 0(1) 97,162(2)
Chief Executive Officer 2000 139,936 1,000,000 1,000,000
Gary L. Diamond 1999 $ 50,000(3) 128,000(4)
Chief Financial Officer 2000 $ 76,002 0 0 0 0
Abraham Joel 1999 3,750 500,000 250,000
Vice President 2000 $ 115,000 0 0
Kenneth Linsner 1999 3,750 500,000 250,000
Vice President 2000 $ 115,000 0 0
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(1) Mr. Punzo became President and Chief Executive Officer on January 7, 1999.
During the fiscal year ended April 30, 1999, Mr. Punzo did not receive
compensation as CEO.
(2) Prior to becoming Chief Executive Officer, Mr. Punzo, or companies he owned
an interest in, received fees for providing various investor relations and
advisory services to the Company. These fees aggregated $97,167 in the
fiscal year ended April 30, 1999.
(3) Includes (a) $20,000 in fees received by Mr. Diamond for part-time
financial services performed for the Company prior to commencing full-time
employment with the Company, and (b) $30,000 in salary received by Mr.
Diamond during the fiscal year ended April 30, 1999.
(4) Reflects the value at $0.32 per share of 400,000 shares of the Company's
Common Stock granted to Mr. Diamond as an inducement to join the Company.
OPTION GRANTS IN FISCAL YEAR 2000
The following table sets forth the option grants in fiscal year ended April
30, 2000, made to the "named executive officers" in the Summary Compensation
Table above. Grants were only made to John Punzo. No stock appreciation
rights were granted in fiscal year April 30, 2000. All amounts are in U.S.
dollars unless otherwise noted.
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED TO
NAME AND UNDERLYING THE EMPLOYEES IN FISCAL EXERCISE PRICE EXPIRATION
PRINCIPAL POSITION OPTIONS GRANTED YEAR 2000 ($/SH) DATE
- ------------------ --------------- ------------------- -------------- ------------
John Punzo 1,000,000 28% $0.50 May 27, 2009
Chief Executive Officer
EMPLOYMENT AGREEMENTS
In the first quarter (ended July 31, 1999) of the fiscal year ended April 30,
2000, Showstar executed employment agreements with Messrs. Punzo, Barson, Joel
and Linsner. (The agreements were filed as Exhibits to the Showstar Form 10-SB.)
The following summaries of the agreements are qualified in their entirety by the
terms of the actual agreements, which are incorporated herein by reference.
John Punzo executed an employment agreement with Showstar, effective May 27,
1999, that provides for base salary of $150,000 per annum, a restricted stock
award of 1,000,000 shares that vests at the rate of 100,000 shares every three
months and stock options on 1,000,000 shares exercisable at $.50 per share that
vest at the rate of 100,000 shares every three months. The agreement is for an
initial term of five years followed by automatic annual renewals unless
terminated at the end of any term by 90 days' prior written notice from either
party to the other.
John Barson executed an employment contract with Showstar to serve for up to
three years as Chief Technical Officer of Showstar. The agreement provides for a
base salary of CDN $120,000 per annum, which is equivalent to US$84,000 based
upon an exchange rate of $0.70. Pursuant to such employment agreement, Mr.
Barson also received 300,000 shares of Showstar's Common Stock in July 1999. The
agreement further provides that Mr. Barson shall receive another 200,000 shares
of Common Stock upon the first anniversary of his employment (March 2000), and
options at $.50 and $1.00 to acquire another 150,000 shares on each subsequent
anniversary of his employment.
Abraham Joel executed an employment agreement effective April 1999 that provides
for base annual compensation of US$120,000. In addition, Mr. Joel received
500,000 shares of Company Common Stock as an incentive to join Showstar. The
agreement provides for a term of 3 years and stock options on 250,000 shares.
Kenneth Linsner executed an employment agreement effective April 1999 that
provides for base annual compensation of US$120,000. In addition, Mr. Linsner
received 500,000 shares of Company Common Stock as an incentive to join
Showstar. The agreement provides for a term of 3 years and stock options on
250,000 shares.
CERTAIN TRANSACTIONS
From time to time the Company has engaged in various transactions with the
Company's Directors, executive officers and other affiliated parties. The
following paragraphs summarize certain
Page 11
information concerning transactions which have occurred in the past two years or
which are currently proposed.
During the fiscal year ended April 30, 1999, Showstar paid $97,167 in fees to
John Punzo and a company in which he had an interest for investor relations and
advisory services to Showstar. Showstar also issued 119,600 common shares valued
at $89,700 to that company as payment for assisting Showstar in its private
stock placements during the year ended April 30, 1999. The $89,700 has been
deducted from the proceeds of the placements as placement costs on Showstar's
financial statements.
During the fiscal year ended April 30, 1999, Flavio Bidese, Emma Piccolo and
Bonnie Klassen, members of John and Gino Punzo's family, transferred 1,515,000
shares of Showstar's Common Stock owned by them to various companies and
individuals in satisfaction of services rendered to Showstar. In connection
therewith, Showstar recorded an expense of $466,500 and included such amount in
"Indebtedness to Related Parties" as of April 30, 1999. On August 4, 2000, the
Company converted this outstanding debt to equity in the Company and issued
1,665,000 shares of restricted Common Stock to these individuals.
During the fiscal year ended April 30, 1999, Gino Punzo, a director of Showstar
until January 1999, advanced $40,300 for working capital and CAFE DE MEDICI, a
restaurant owned by Gino Punzo, provided meeting and catering services to
Showstar. These services were valued at approximately $8,084. These amounts were
included in "Indebtedness to Related Parties" as of April 30, 1999.
Showstar's Nevada subsidiary, Showstar Entertainment Corporation, entered into
two different management contracts with Gordon Thompson, a former officer, and
Mr. Barry Forward, whereby the subsidiary would pay these officers $5,000 each
per month commencing June 1, 1997 (as amended) for a period of five years.
Amounts accrued but unpaid totaling $65,000 are included in "Indebtedness to
Related Parties" as of April 30, 1998. During the fiscal year ended April 30,
1999, Mr. Thompson entered into a settlement agreement with Showstar which
provided for the cancellation of indebtedness of $35,000, which is reflected as
a reduction of administrative costs for the year ended April 30, 1999. The
remaining $30,000 is included as a liability owing to Mr. Forward as of April
30, 1999 and was paid during the fiscal year ended April 30, 2000.
The Board of Directors requires that all transactions between the Company and
its Officers, Directors, principal shareholders and affiliates be approved by a
majority of the independent and disinterested outside Directors and must be on
terms no less favorable to the Company than could be obtained from an
unaffiliated third party under similar circumstances.
Page 12
PROPOSAL NO. 3
APPROVAL OF AMENDMENT OF ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED SHARES
The Company's Articles of Incorporation currently authorize the issuance of
55,000,000 shares of capital stock, each having no par value per share. Of such
authorized shares, 50,000,000 shares are classified and designated as Common
Stock, and 5,000,000 shares are classified and designated as Preferred Stock. On
August 14, 2000 the Board of Directors unanimously adopted resolutions, subject
to shareholder approval, proposing that the Articles of Incorporation be amended
to: (1) increase the number of shares of Common Stock which the Company is
authorized to issue from 50,000,000 to 75,000,000 shares, no par value; (2) to
increase the number of shares of Preferred Stock which the Company is authorized
to issue from 5,000,000 to 25,000,000 shares, no par value; and (3) to provide
authority to the Company's Board of Directors to designate the rights and
preferences of series of preferred stock from time to time.
If the amendment is approved, the additional shares of Common Stock will become
a part of the existing class of Common Stock, and if and when issued, would have
the same rights and privileges as the shares of Common Stock presently issued
and outstanding. As of the Record Date, the Company had 39,234,084 shares of
Common Stock issued and outstanding, and an aggregate of 7,500,000 shares of
Common Stock reserved for future issuance in connection with the Company's stock
option plan. As of the Record Date, no shares of Preferred Stock have been
issued.
PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION
The Board of Directors has adopted resolutions setting forth the proposed
amendment to Article V of the Articles of Incorporation (the "Amendment"), the
advisability of the Amendment, and a call for submission of the Amendment for
approval by the Company's shareholders at the Annual Meeting. The full text of
the proposed Amendment to Article V of the Articles of Incorporation is set
forth in EXHIBIT B hereto.
PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT
The Board of Directors believes that it is in the Company's best interest to
increase the number of authorized shares of Common Stock and Preferred Stock in
order to provide the Company with adequate flexibility in the future. The
Company is contemplating the advisability of acquiring other companies or rights
to products or strategic alliances with third parties (each a "Strategic
Transaction") as part of its strategy to broaden its software solutions,
services and expertise. In connection with these contemplated acquisitions, the
Company may wish to use shares of Common Stock and/or Preferred Stock to raise
sufficient funding for, or as all or part of the consideration required to
effect any Strategic Transaction. The Board believes that the proposed increase
in its number of authorized shares of Common Stock and Preferred Stock is
desirable to maintain the Company's flexibility in its ability to raise
additional capital and in choosing the form of consideration to be used to fund
a potential Strategic Transaction. The Board of Directors will make the
determination for future issuance of authorized shares of Common Stock and
Preferred Stock, and such determinations will not require further action by the
shareholders, unless required by law, regulation or stock market rule. While the
Company, from time to time, considers potential Strategic Transactions that may
require the issuance of shares of Common Stock and/or Preferred Stock and has
had preliminary discussions with third parties regarding potential Strategic
Transactions, as of the date of this Proxy Statement, the Company has not
entered into any agreements or arrangements that will or could result in any
such Strategic Transaction. There can be no assurance that any such preliminary
discussions will result in any Strategic Transaction.
Page 13
The Board also believes that the advisability of additional shares of Common
Stock and Preferred Stock will provide the Company with the flexibility to issue
shares for a variety of other purposes that the Board of Directors may deem
advisable without further action by the Company's shareholders, unless required
by law, regulation or stock market rule. These purposes could include, among
other things, the sale of stock to obtain additional capital funds, the use of
additional shares for various equity compensation and other employee benefit
plans, and other bona fide corporate purposes. In some situations the issuance
of additional shares could have a dilutive effect on earnings per share and, for
a person who does not purchase additional shares to maintain his or her pro rata
interest, on a shareholder's percentage voting power in the Company.
In addition, depending upon the nature and terms thereof, such issuances could
enable the Board to render more difficult or discourage an attempt to obtain a
controlling interest in the Company or the removal of the incumbent Board and
may discourage unsolicited takeover attempts which might be desirable to
shareholders. For example, the issuance of shares of Common Stock in a public or
private sale, merger or similar transaction would increase the number of the
Company's outstanding shares, thereby diluting the interest of a party seeking
to take over the Company. Also, the issuance of preferred stock with special
rights or preferences could discourage or make more difficult a hostile
attempt to obtain control of the Company.
If this proposal is approved by the shareholders at the Annual Meeting, upon
filing of the Amendment with the Secretary of State of the State of Colorado,
the Company will have 75,000,000 authorized shares of Common Stock and
25,000,000 authorized shares of Preferred Stock.
Holders of Common Stock do not have preemptive rights to subscribe to additional
securities that may be issued by the Company. This means that current
shareholders do not have a prior right to purchase any new issue of Common Stock
of the Company in order to maintain their proportionate ownership interest.
Accordingly, the issuance of additional shares of Common Stock might dilute,
under certain circumstances, the ownership and voting rights of shareholders.
The Board of Directors is not proposing this Amendment in response to any effort
to accumulate the Company's stock or to obtain control of the Company by means
of a merger, tender offer or solicitation in opposition to management. In
addition, the Amendment is not part of any plan by management to recommend a
series of similar amendments to the Board of Directors and the shareholders.
Finally, the Board does not currently contemplate recommending the adoption of
any other amendments to the Articles of Incorporation that could be construed to
affect the ability of third parties to take over or change control of the
Company.
THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF THE AMENDMENT TO THE
COMPANY'S ARTICLES OF INCORPORATION IS IN THE BEST INTERESTS OF THE COMPANY AND
ITS SHAREHOLDERS AND RECOMMENDS A VOTE FOR THIS PROPOSAL.
Page 14
PROPOSAL NO. 4
REINCORPORATION OF THE COMPANY IN WASHINGTON
GENERAL
The Board of Directors has unanimously approved an Agreement and Plan of Merger
(the "Reincorporation") by which the Company's state of incorporation will be
changed from Colorado to Washington. The proposed Reincorporation would be
accomplished by merging the Company with and into Showstar Online.com
Washington, Inc. ("Showstar Washington"), a newly-formed Washington corporation
which is a wholly-owned subsidiary of the Company, pursuant to an Agreement and
Plan of Merger (the "Merger Agreement"), a copy of which is attached to this
Proxy Statement as EXHIBIT C. Showstar Washington was incorporated solely for
the purpose of merging with the Company, and upon effectiveness of the
Reincorporation, Showstar Washington's name will be changed to Showstar
Online.com, Inc., the name under which the Company has operated since June 1999.
Prior to the Reincorporation, Showstar Washington will have no material assets
or liabilities and will not carry on any business. The Reincorporation will
effect a change in the legal domicile of the Company. However, it will not
result in any changes in the Company's business, management, officers, assets or
liabilities (other than as a result of the costs incident to the
Reincorporation, which are not material), will not cause its corporate
headquarters to be moved and will not result in any relocation of management or
other employees.
On the effective date of the proposed Reincorporation, each issued and
outstanding share of Common Stock of the Company would automatically convert
into one share of Common Stock of Showstar Washington, and shareholders of the
Company would automatically become shareholders of Showstar Washington. On the
effective date of the Reincorporation, the number of outstanding shares of
Common Stock of Showstar Washington would be equal to the number of shares of
Common Stock of the Company outstanding immediately prior to the effective date
of the Reincorporation. In addition, each outstanding option, warrant or right
to acquire shares of Common Stock of the Company would convert automatically
into a right to acquire an equal number of shares of Common Stock of Showstar
Washington on the same terms and conditions as applicable to the original
options, warrants or rights. All of the Company's employee benefit plans would
be continued by Showstar Washington following the Reincorporation.
The Common Stock of the Company is quoted on the Over-the-Counter Bulletin Board
(OTCBB) under the symbol "ABID." After the merger, Showstar Washington's Common
Stock will continue to be traded on the OTCBB, without interruption, under the
symbol "ABID."
On or after the effective date of the proposed Reincorporation, holders of
certificates of Common Stock of the Company will be required to surrender such
certificates to Showstar Washington or its appointed transfer agent. Upon
receipt of such certificate or certificates, Showstar Washington will issue in
exchange therefor, a certificate or certificates for shares of Common Stock of
Showstar Washington representing the number of shares of stock to which such
holder is entitled as set forth above. Until the certificate exchange is
effected, certificates for shares in the Company will automatically represent an
equal number of shares in Showstar Washington upon completion of the
Reincorporation.
The discussion set forth below provides a summary of the significant aspects of
the proposed Reincorporation. You are urged to carefully review all of the
information contained in this Proxy Statement, the Agreement and Plan of Merger,
and the attached Exhibits. Also, for additional
Page 15
information regarding the Company, please refer to the annual report on Form
10-KSB, which is delivered to you together with this Proxy Statement.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
The Board of Directors has determined that the Reincorporation is in the best
interests of the Company and its shareholders. The Board believes that the
Washington Business Corporation Act will meet the business needs of the
Company, and that the Colorado Business Corporation Act does not offer
corporate law advantages sufficient to warrant continued incorporation in
Colorado. In 1989, the Washington Legislature adopted a comprehensive
revision of the Washington Business Corporation Act(1) ("WBCA"), which became
effective in 1990, and has been further amended since that time. In the
Company's opinion, Washington law now better addresses the Company's concerns
relating to limitations on director liability and indemnification of
directors and officers. The Board of Directors therefore believes that the
Reincorporation will enhance the Company's ability to attract and retain
qualified directors as well as to encourage directors to continue to make
independent decisions in good faith on behalf of the Company. While the
Company is not experiencing difficulty in retaining directors currently, the
Company believes that the favorable corporate environment of the State of
Washington will enable it to compete more effectively with other public
companies, many of which are incorporated in Washington, to attract new
directors and to retain current directors.
CERTAIN DIFFERENCES BETWEEN THE WASHINGTON AND COLORADO CHARTER DOCUMENTS AND
BETWEEN WASHINGTON AND COLORADO CORPORATION LAW
The Company's corporate affairs are governed at present by the corporate law of
the State of Colorado, the Company's state of incorporation, and by the Colorado
Articles and the Colorado Bylaws, which have been adopted pursuant to Colorado
law. The Colorado Articles and the Colorado Bylaws are available for inspection
during business hours at the administrative and technical operations office of
the Company. In addition, copies may be obtained by writing to the Company at
its administrative office at 90-10551 Shellbridge Way, Richmond, British
Columbia, Canada V6X 2W9, Attention: Shareholder Relations. If the
Reincorporation Proposal is adopted, the Company will merge into, and its
business will be continued by, Showstar Washington, whose name will be changed
to Showstar Online.com, Inc. Following the merger, issues of corporate
governance and control would be controlled by Washington law rather than
Colorado law. The Colorado Articles and the Colorado Bylaws will, in effect, be
replaced by the Articles of Incorporation of Showstar Washington (the
"Washington Articles") and the Bylaws of Showstar Washington (the "Washington
Bylaws"), copies of which are attached to this Proxy Statement as EXHIBIT D and
EXHIBIT E, respectively.
The Company's current Articles of Incorporation differ from the Washington
Articles primarily with respect to limitations on director liability,
indemnification of officers and directors, and calling special meetings of
shareholders.
LIMITATION ON DIRECTOR LIABILITY
The Colorado Business Corporation Act ("CBCA") and the WBCA both allow charter
documents to eliminate or limit the personal liability of directors; however,
the two statutes prescribe different limitations. In Washington, the Articles of
Incorporation may not eliminate or limit the liability of a director for: (i)
acts or omissions involving intentional misconduct or a knowing violation of
law;
- --------
(1) The Washington Business Corporation Act is codified at Title 23B of the
Revised Code of Washington.
Page 16
(ii) approval of certain distributions contrary to law; or (iii) any transaction
from which the director will personally receive a benefit in money, property, or
services to which the director is not legally entitled.
Under Colorado law, a corporation may not eliminate or limit the liability of a
director for: (i) breach of the director's duty of loyalty to the corporation or
its shareholders; (ii) acts or omissions not in good faith, or involving
intentional misconduct or a knowing violation of law; (iii) payment of unlawful
distributions or unlawful stock repurchases or redemptions; or (iv) any
transaction from which the director directly or indirectly derived an improper
personal benefit.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Washington Articles provide that the corporation shall indemnify its
directors and officers for expenses and liabilities incurred by them as a result
of their service as directors and officers, provided that no such
indemnification shall be allowed on account of: (i) acts or omissions of a
director finally adjudged to be intentional misconduct or a knowing violation of
the law; (ii) conduct of a director finally adjudged to be an unlawful
distribution; or (iii) any transaction with respect to which it was finally
adjudged that such director personally received a benefit in money, property or
services to which the director was not legally entitled. This comprehensive
language is intended to provide the broadest indemnification of directors and
officers not prohibited by Washington law.
The Board of Directors believes that the limitation of liability and
indemnification provisions for directors and officers is somewhat greater under
Washington law than under Colorado law, and therefore, the Reincorporation will
enhance the Company's ability to recruit and retain qualified directors. The
indemnification and limitation of liability provisions of Colorado law, and not
Washington law, however, will apply to actions of the directors and officers
made prior to the proposed Reincorporation. Nevertheless, the Board of Directors
has recognized in considering the Reincorporation Proposal that the individual
directors have a personal interest in obtaining the application of Washington
law to such indemnity and limitation of liability issues affecting them and the
Company in the event they arise from a potential future case, and that the
application of Washington law, to the extent that any director or officer is
actually indemnified in circumstances where indemnification would not be
available under Colorado law, would result in expense to the Company that the
Company would not incur if the Company were not reincorporated. Additionally,
shareholders should note that such differences in the corporation law of the two
states inure to the benefit of the directors, and the interest of the Board of
Directors in recommending the Reincorporation may therefore be in conflict with
the interests of the shareholders. The Board of Directors believes, however,
that the overall effect of reincorporating is to provide a corporate legal
environment that enhances the Company's ability to attract and retain high
quality outside directors and thus benefits the interests of the Company and its
shareholders.
CALLING OF SPECIAL MEETINGS OF SHAREHOLDERS
Under Colorado law, a special meeting of the shareholders may be called by the
Board of Directors, by a person authorized by the Board of Directors or the
Bylaws, or by shareholders holding shares representing at least ten percent
(10%) of all shares entitled to vote at such a meeting. The Colorado Bylaws
authorize the President or the Board of Directors to call a special meeting, and
the President is required to call a special meeting at the request of holders of
not less than ten percent (10%) of the outstanding shares entitled to vote at
the meeting.
Under Washington law, a special meeting of shareholders likewise may be called
by the Board of Directors or by any other person authorized to do so in the
Articles of Incorporation or in the
Page 17
Bylaws. In addition, a special meeting of the shareholders may be called for any
purpose at the request in writing of shareholders holding ten percent (10%) or
more of the outstanding stock of the Company entitled to vote. However, under
Washington law, the right of shareholders of a public company to call a special
meeting may be limited or denied to the extent provided in the Articles of
Incorporation. Under the Washington Articles, only the Board of Directors may
call special meetings of the shareholders so long as the corporation is a public
company. The effect of this limitation, in conjunction with the provisions on
staggered elections of directors, prevents shareholders from effecting a change
in control.
LOANS TO OFFICERS AND DIRECTORS
Colorado law provides that a corporation may not authorize any loan or guaranty
for the benefit of any director until at least ten days after providing written
notice of the proposed authorization to shareholders who would be entitled to
vote thereon if the issue of the loan or guaranty were submitted to a vote of
the shareholders.
Under Washington law, a corporation may make loans to, or guarantee the
obligations of, officers or other employees when in the judgment of the Board of
Directors, the loan or guaranty may reasonably be expected to benefit the
corporation.
CHANGES TO ARTICLES OF INCORPORATION
The WBCA authorizes a corporation's Board of Directors to adopt certain
amendments to the corporation's articles of incorporation without shareholder
approval, including change of the corporate name, change in the number of
outstanding shares in order to effectuate a stock split or stock dividend in the
corporation's own shares, and to change or eliminate provisions with respect to
par value of its shares.
Under the CBCA, amendments to a corporation's articles of incorporation require
the approval of shareholders holding a majority of the voting power of the
corporation unless a different proportion is specified in the articles of
incorporation.
POSSIBLE REVERSE STOCK SPLIT AND ISSUANCE OF SHARES
If the Reincorporation Proposal is approved by the shareholders of the Company,
the Company's corporate affairs will be governed by Washington law. Following
the Reincorporation, the Company may effect significant issuances of shares for
Strategic Transactions (see Proposal No. 3: Amendment of Articles of
Incorporation to Increase Authorized Shares) and/or reverse stock splits
pursuant to which issued and outstanding shares of the Company's Common Stock
would be converted into a lesser number of shares, thereby reducing the
number of issued and outstanding shares of the Company's Common Stock. Under
Washington law, such a reverse stock split may be effected without
shareholder action.
In addition, the Company may issue shares of its Common Stock as all or part
of the consideration required to effect a Strategic Transaction. Issuance of
such shares would not require further action by the shareholders of the
Company, and the issuance of additional shares would have a dilutive effect
on a shareholder's pro rata interest and voting power in the Company.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The Reincorporation provided for in the Merger Agreement is intended to be a
tax-free reorganization under the Internal Revenue Code of 1986, as amended (the
"IRC"). Assuming the Reincorporation qualifies as a reorganization, no gain or
loss will be recognized to the holders of capital stock of the Company as a
result of the consummation of the Reincorporation, and no gain or loss will be
recognized by the Company or by Showstar Washington. Each former holder of
capital stock of the Company will have the same basis in the capital stock of
Showstar Washington received by such holder pursuant to the Reincorporation as
such holder has in the capital stock of the Company held by such holder at the
time of consummation of the Reincorporation. Each shareholder's holding period
with respect to Showstar Washington's capital stock will include the period
during which such holder held the corresponding Company capital stock, providing
the latter was held by such holder as a capital asset at the time of
consummation of the Reincorporation. The Company has not obtained a ruling from
the Internal Revenue Service or any opinion of legal or tax counsel with respect
to the consequences of the Reincorporation.
The foregoing is only a summary of certain federal income tax consequences.
Shareholders should consult their own tax advisers regarding the specific tax
consequences to them of the merger, including the applicability of the laws of
any state or other jurisdiction.
Page 18
SUMMARY OF STATE TAX CONSEQUENCES OF THE REINCORPORATION
There will be expense directly associated with the Reincorporation in the form
of fees required for the filing of the Agreement and Plan of Merger in both
Colorado and Washington. Following the Reincorporation, the Directors do not
believe that the operation of the Company as a Washington corporation will
represent any substantially greater state tax obligation to the Company and its
shareholders than the tax obligations of operating the Company as a Colorado
corporation.
The foregoing discussion is an attempt to summarize the more important
differences in the corporation laws of Washington and Colorado and does not
purport to be an exhaustive discussion of all the differences. Such differences
can be determined in full by reference to the Colorado Corporations Code and to
the Washington Business Corporation Act. In addition, both Colorado and
Washington law provide that some of the statutory provisions as they affect
various rights of holders of shares may be modified by provisions in the charter
or bylaws of the corporation.
SHAREHOLDERS' DISSENTERS' RIGHTS
The proposed Reincorporation is a transaction giving rise to shareholder
dissenters' rights under Article 113, Section 102 of the Colorado Business
Corporation Act.(2) Shareholders may be entitled to assert dissenters' rights
thereunder.
Under Section 113-102, a shareholder is entitled to dissent and obtain payment
for the fair value of the shareholder's shares in the event of the consummation
of a plan of merger to which the corporation is a party, if the approval by the
shareholders of the corporation is required for the merger. In order to assert
dissenters' rights, a shareholder (i) must cause the Company to receive, before
the vote on the Reincorporation is taken at the Annual Meeting, written notice
of the shareholder's intention to demand payment for the shareholder's shares if
the proposed Reincorporation is effectuated; and (ii) must not vote his or her
shares in favor of the proposed Reincorporation. Colorado Corporation Code
Section 113-202.
Shareholders are directed to, and advised to review, the copies of the relevant
provisions of the Colorado Business Corporation Act, statutes of the Colorado
Corporation Code, attached as EXHIBIT F to this Proxy Statement.
- --------
(2) The Colorado Business Corporation Act is codified at Articles 101 to 117 of
the Colorado Corporation Code, Title 7 of the Colorado Revised Statutes, as
amended.
Page 19
VOTE REQUIRED FOR REINCORPORATION AND BOARD OF DIRECTORS' RECOMMENDATION
Under the Colorado Articles and Colorado Bylaws, the affirmative vote of at
least fifty percent (50%) of the outstanding shares of the Company's Common
Stock is required for approval of the Reincorporation. If approved by the
shareholders, it is anticipated that the Reincorporation will be completed as
soon thereafter as possible, with a proposed effective date of September 18,
2000. The Reincorporation may be abandoned or the Merger Agreement may be
amended (with certain exceptions), either before or after shareholder approval
has been obtained if, in the opinion of the Board of Directors, circumstances
arise that make such action advisable; provided, that any amendment that would
effect a material change from the charter provisions discussed in this Proxy
Statement would require further approval by the holders of at least fifty
percent (50%) of the outstanding shares of Common Stock.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR THE
REINCORPORATION PROPOSAL.
PROPOSAL NO. 5
APPROVAL OF THE COMPANY'S 2000 STOCK OPTION PLAN
DESCRIPTION OF THE COMPANY'S 2000 STOCK OPTION PLAN
The Board of Directors adopted the Company's 2000 Stock Option Plan (the "2000
Option Plan") in August 2000, subject to approval by the Company's shareholders.
A copy of the 2000 Stock Option Plan is attached to this Proxy Statement as
EXHIBIT G.
The Company may grant stock options under the 2000 Plan to qualified employees,
Directors or consultants in order to motivate them to maintain their commitment
to the Company. Options under this 2000 Plan may be either Incentive Stock
Options or Nonstatutory Stock Options and may be exercised no later than ten
years from the date of their grant. The 2000 Plan is administered by the Board
of Directors of the Company. The Board has directed the officers of the Company
to reserve 7,500,000 shares of Common Stock for issuance upon exercise of
options granted pursuant to the 2000 Plan.
Since each Director is eligible to receive options under the 2000 Plan, each
such Director has a personal interest in the adoption of the 2000 Plan.
TAX CONSEQUENCES TO THE COMPANY OF THE 2000 STOCK OPTION PLAN
The Company will be entitled to a deduction in connection with the exercise of a
Non-Qualified Stock Option under the 2000 Plan by an optionee, to the extent
that the optionee recognizes
Page 20
ordinary income. The Company will be entitled to a deduction in connection with
the disposition of Incentive Stock Option Shares only to the extent that the
optionee recognizes ordinary income on a disqualifying disposition of the
Incentive Stock Option Shares.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
COMPANY'S 2000 STOCK OPTION PLAN.
PROPOSAL NO. 6
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Cordovano & Harvey, P.C., independent
accountants, to audit the financial statements of the Company for the fiscal
year ending April 30, 2001. Cordovano & Harvey have audited the Company's
financial statements for the fiscal year ended April 30, 2000. A representative
of Cordovano & Harvey is expected to be present at the Annual Meeting and will
have the opportunity to make a statement if desired, and is expected to be
available to respond to appropriate questions.
The Board of Directors has conditioned its appointment of the Company's
independent accountants upon the receipt of the affirmative vote of a majority
of the shares represented, in person or by proxy, and voting at the Annual
Meeting, which shares voting affirmatively also constitute at least a majority
of the required quorum. In the event that the shareholders do not approve the
selection of Cordovano & Harvey, the Board of Directors will reconsider the
appointment of the independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF CORDOVANO & HARVEY, AS INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING
APRIL 30, 2001.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be eligible for inclusion in the Company's
Proxy Statement and proxy card relating to the 2001 Annual Meeting of
shareholders of the Company must be submitted to the Company in accord with
Rule 14a-8 under the Securities and Exchange Act of 1934 not later than the
close of business on May 10, 2001, together with written notice of the
shareholder's intention to present a proposal for action at the 2001 Annual
Meeting of shareholders. The notice must be personally delivered to the Company
or sent by first class certified mail, return receipt requested, postage
prepaid, and must include the name and address of the shareholder, the number of
voting securities held by the shareholder of record, a statement that the
shareholder holds such shares beneficially and the text of the proposal to be
presented for vote at the meeting, and a statement in support of the proposal.
A shareholder proposal is a shareholder's recommendation or requirement that the
Company and/or its Board of Directors take action, which the shareholder intends
to present at the 2001 Annual Meeting of the Company's shareholders. The
proposal should state as clearly as possible the course of action that the
shareholder believes the Company should follow and should be accompanied by a
supporting statement. The proposal, including the accompanying supporting
statement, may not exceed 500 words. The Company reserves the right to reject,
rule out of order, or take other
Page 21
appropriate action with respect to any proposal that does not comply with these
and other applicable requirements.
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the person(s) named in the enclosed Proxy card to vote shares they
represent as the Company may recommend or in accordance with their best
judgment, pursuant to the discretionary authority granted by the Proxy.
It is important that your shares be represented at the Annual Meeting,
regardless of the number of shares that you hold. You are, therefore, urged to
execute and return, at your earliest convenience, the accompanying proxy card in
the envelope that has been enclosed.
By Order of the Board of Directors
/s/ John Punzo
JOHN PUNZO
President and Chief Executive Officer
Seattle, Washington
August 15, 2000
Page 22
EXHIBIT A
AMENDMENT TO BYLAWS
ARTICLE III, Section 2 of the Bylaws shall be amended to
read as follows:
ARTICLE III
DIRECTORS
Section 1. BOARD OF DIRECTORS; EXERCISE OF CORPORATE POWERS. [unchanged]
Section 2. NUMBER; ELECTION; CLASSIFICATION OF DIRECTORS; VACANCIES.
a. The number of authorized directors shall be fixed from time to time by
resolution of a majority of the Board of Directors, PROVIDED, HOWEVER, that the
number of directors shall not be less than three (3) or more than nine (9), and
shall not be increased by more than two (2) directors in any calendar year. The
number of directors constituting the initial Board of Directors shall be fixed
by the Articles of Incorporation.
b. In the case of a vacancy on the Board of Directors, including a vacancy
resulting from an increase in the number of directors: (a) the Board of
Directors by the affirmative vote of a majority of the directors, may fill the
vacancy, or (b) the shareholders may fill the vacancy at the next annual meeting
or at a special meeting called for that purpose. In the case of a vacancy in the
Board of Directors resulting from the resignation or removal of a director, the
person appointed or elected to fill such vacancy shall hold office for the
unexpired term of the director whose position is vacant, and until the election
and qualification of a successor. No decrease in the number of directors shall
have the effect of shortening the term of office of any incumbent director.
Unless a director dies, resigns, or is removed, he or she shall hold office for
the term for which he or she is elected and until such director's successor is
elected and qualified.
c. Directors need not be shareholders of the corporation or residents of
the State of Colorado.
d. The directors of the corporation shall be divided into three classes:
Class I, Class II, and Class III. Such classes must be as nearly equal in number
as possible. The term of the initial Class I directors will expire at the first
annual meeting of the shareholders following designation; the term of the
initial Class II directors will expire at the second annual meeting of
shareholders following designation; and the term of the initial Class III
directors will expire at the third annual meeting of the shareholders following
designation. Upon the expiration of the initial staggered terms, directors shall
be elected for a term of three (3) years to succeed those directors whose terms
expire. If the number of directors is increased or decreased in the manner
specified in these Bylaws, such change will be apportioned among
DIRECTORS' CONSENT
PAGE 7
the classes so that after the change, the classes will remain as nearly equal in
number as possible.
e. Any director may resign at any time by delivering written notice to the
Chairman of the Board, the Chief Executive Officer, the President, the Secretary
or the Board, or to the registered office of the corporation, or by giving oral
notice at any meeting of the directors or shareholders. Any such resignation
shall take effect at the time specified therein, or if the time is not
specified, upon delivery thereof and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
DIRECTORS' CONSENT
PAGE 8
f. By Board resolution, directors may be paid their expenses, if any, of
attendance at each Board meeting, or a fixed sum for attendance at each Board
meeting, or a stated salary as a director, or be granted shares of common stock
of the corporation or stock options, or any combination of the foregoing. No
such payment shall preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
[The remaining Sections of Article III to remain unchanged.]
DIRECTORS' CONSENT
PAGE 9
EXHIBIT B
AMENDMENT TO ARTICLES OF INCORPORATION
ARTICLE V of the Articles of Incorporation shall be amended to
read as follows:
ARTICLE V
CAPITAL STRUCTURE
Section 1. AUTHORIZED CAPITAL. The Corporation is authorized to issue two
classes of capital stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares of capital stock which this
Corporation is authorized to issue is Seventy-Five Million (75,000,000) shares
of Common Stock, no par value, and Twenty-Five Million (25,000,000) shares of
Preferred Stock, no par value.
Section 2. ISSUANCE OF PREFERRED STOCK IN SERIES. The Preferred Stock may
be issued from time to time in one or more series in any manner permitted by law
and the provisions of these Articles of Incorporation, as determined from time
to time by the Board of Directors of the Corporation and stated in the
resolution or resolutions providing for the issuance thereof, prior to the
issuance of any shares thereof. The Board of Directors shall have the authority
to fix and determine and to amend, subject to these provisions, the designation,
preferences, limitations and relative rights of the shares of any series that is
wholly unissued or to be established. Unless otherwise specifically provided in
the resolution establishing any series, the Board of Directors shall further
have the authority, after the issuance of shares of a series whose number it has
designated, to amend the resolution establishing such series to decrease the
number of shares of that series, but not below the number of shares of such
series then outstanding.
Section 3. CONSIDERATION FOR SHARES. The capital stock of the Corporation
shall be issued for such consideration as shall be fixed from time to time by
the Board of Directors. In the absence of fraud, the judgment of the Directors
as to the value of any property or services received in full or partial payment
for shares shall be conclusive. When shares are issued upon payment of the
consideration fixed by the Board of Directors, such shares shall be taken to be
fully paid and nonassessable.
Section 4. PRE-EMPTIVE RIGHTS. Holders of shares of stock of the
Corporation shall have no pre-emptive right to purchase, subscribe for, or
otherwise acquire shares of stock of the Corporation, rights, warrants or
options to purchase stock or securities of any kind convertible into stock of
the Corporation.
Section 5. DIVIDENDS. Dividends in cash, property or shares of the
Corporation may be paid, as and when declared by the Board of Directors, out of
funds of the Corporation to the extent and in the manner permitted by law.
DIRECTORS' CONSENT
PAGE 10
Section 6. DISTRIBUTION IN LIQUIDATION. Upon any liquidation, dissolution
or winding up of the Corporation, and after paying or adequately providing for
the payment of all its obligations, the remainder of the assets of the
Corporation shall be distributed, either in cash or in kind, pro rata to the
holders of the Common Stock, subject, however, to the preferences, if any,
granted to the holders of the Corporation's Preferred Stock.
DIRECTORS' CONSENT
PAGE 11
EXHIBIT C
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is made and
entered into as of this 14th day of August, 2000, by and between SHOWSTAR
ONLINE.COM, INC., a Colorado corporation ("Showstar") and SHOWSTAR ONLINE.COM
WASHINGTON, INC., a Washington corporation ("Showstar Washington" or the
"Surviving Corporation"), Showstar and Showstar Washington collectively, the
"Constituent Corporations."
RECITALS
WHEREAS, Showstar is a corporation organized and existing under the laws
of the State of Colorado, whose authorized capital stock consists of (a)
50,000,000 (75,000,000 if Showstar's shareholders approve amendment of
Showstar's Articles of Incorporation at its next Annual Meeting of
Shareholders) shares of Common Stock, no par value, of which 39,234,084
shares are issued and outstanding on the date hereof, and (b) 5,000,000
(25,000,000 if Showstar's shareholders approve amendment of Showstar's
Articles of Incorporation at its next Annual Meeting of Shareholders)
shares of Preferred Stock, no par value, none of which have been issued as of
the date hereof; and
WHEREAS, Showstar Washington is a corporation organized and existing under
the laws of the State of Washington, whose authorized capital stock consists of
(a) 75,000,000 shares of Common Stock, no par value, of which 100 shares are
issued and outstanding on the date hereof, and (b) 25,000,000 shares of
Preferred Stock, no par value, none of which have been issued as of the date
hereof; and
WHEREAS, the respective Boards of Directors of the Constituent Corporations
recommend and deem it advisable and to the advantage of the Constituent
Corporations that Showstar merge with and into Showstar Washington upon the
terms and conditions provided herein;
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Showstar shall
merge with and into Showstar Washington on the following terms, conditions and
other provisions:
AGREEMENT
1. TERMS AND CONDITIONS.
1.1 MERGER. Showstar shall be merged with and into Showstar Washington (the
"Merger"), and Showstar Washington shall be the Surviving Corporation.
1.2 EFFECTIVE DATE. The effective date of the Merger (the "Effective Date")
shall be the date upon which all of the following events shall have occurred:
(a) the shareholders of Showstar owning at least a majority of the issued and
outstanding shares entitled to vote thereon approve the Merger Agreement; (b)
Articles of Merger are filed with the Colorado
Secretary of State; and (c) Articles of Merger are filed with the Washington
Secretary of State.
1.3 NAME CHANGE. On the Effective Date, the name of the Surviving
Corporation shall be changed to "Showstar Online.com, Inc."
1.4 SUCCESSION. On the Effective Date, Showstar Washington shall continue
its separate corporate existence under the laws of the State of Washington, and
the separate existence and corporate organization of Showstar Online.com, Inc.
(the Colorado corporation), except insofar as it may be continued by operation
of law, shall be terminated and cease.
1.5 TRANSFER OF ASSETS AND LIABILITIES. On the Effective Date, the rights,
privileges and powers, both of a public and a private nature, of each of the
Constituent Corporations shall be vested in and possessed by the Surviving
Corporation, subject to all of the disabilities, duties and restrictions of or
upon each of the Constituent Corporations; and all rights, privileges and powers
of each of the Constituent Corporations, and all property, real, personal and
mixed, of each of the Constituent Corporations, and all debts due to each of the
Constituent Corporations on whatever account, and all things in action or
belonging to each of the Constituent Corporations shall be transferred to and
vested in the Surviving Corporation; and all property, rights, privileges and
powers, and every other interest thereafter shall be the property of the
Surviving Corporation as they were of the Constituent Corporations, and the
title to any real estate vested by deed or otherwise in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the Merger; provided, however, that the liabilities of the Constituent
Corporations and of their shareholders, directors and officers shall not be
affected, and all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and any claim
existing or action or proceeding pending by or against either of the Constituent
Corporations may be prosecuted to judgment as if the Merger had not been
consummated, except as they may be modified with the consent of such creditors,
and all debts, liabilities and duties of or upon each of the Constituent
Corporations shall attach to the Surviving Corporation, and may be enforced
against it to the same extent as if such debts, liabilities and duties had been
incurred or contracted by it.
1.6 COMMON STOCK OF SHOWSTAR AND SHOWSTAR WASHINGTON. On the Effective
Date, by virtue of the Merger and without any further action on the part of the
Constituent Corporations or their respective shareholders, (a) each share of
Common Stock of Showstar issued and outstanding immediately prior thereto shall
be combined, changed and converted into one (1) share of Common Stock of
Showstar Washington, in each case fully paid and nonassessable, and (b) each
share of Common Stock of Showstar Washington issued and outstanding immediately
prior thereto shall be canceled and returned to the status of authorized but
unissued shares.
1.7 STOCK CERTIFICATES. On and after the Effective Date, all of the
outstanding certificates that, prior to that time, represented shares of Common
Stock of Showstar shall be
AGREEMENT AND PLAN OF MERGER
PAGE 2
deemed for all purposes to evidence ownership of and to represent the shares of
Showstar Washington into which the shares of Showstar represented by such
certificates have been converted as herein provided and shall be so registered
on the books and records of the Surviving Corporation or its transfer agent. The
registered owner of any such certificate shall surrender the same to the
Surviving Corporation or its transfer agent, and upon receipt of such
certificate, the Surviving Corporation shall issue in exchange therefor, a
certificate for shares of Common Stock in Showstar Washington representing the
number of shares of stock to which such holder shall be entitled as set forth
above. Until such certificate shall have been surrendered for transfer or
conversion or otherwise accounted for to the Surviving Corporation or its
transfer agent, the registered owner of such certificate shall have and be
entitled to exercise any voting and other rights with respect to and to receive
any dividend and other distribution upon the shares of Showstar Washington
evidenced by such outstanding certificate as above provided.
1.8 OPTIONS. On the Effective Date, if any options or rights granted to
purchase shares of Common Stock of Showstar are outstanding, then the Surviving
Corporation will assume the outstanding and unexercised portions of such options
and such options shall be changed and converted into options to purchase Common
Stock of Showstar Washington, such that an option to purchase one (1) share of
Common Stock of Showstar shall be converted into an option to purchase one (1)
share of Common Stock of Showstar Washington. No other changes in the terms and
conditions of such options will occur.
1.9 PURCHASE RIGHTS. On the Effective Date, the Surviving Corporation will
assume the outstanding obligations of Showstar to issue Common Stock or other
capital stock pursuant to contractual purchase rights granted by Showstar, and
the outstanding and unexercised portions of all outstanding contractual rights
to purchase Common Stock or other capital stock of Showstar shall be changed and
converted into contractual rights to purchase Common Stock or other capital
stock, respectively, of Showstar Washington such that a contractual right to
purchase one share of Common Stock or other capital stock of Showstar shall be
converted into a contractual right to purchase one share of Common stock or
other capital stock, respectively, of Showstar Washington. No other changes in
the terms and conditions of such contractual purchase rights will occur.
1.10 EMPLOYEE BENEFIT PLANS. On the Effective Date, the Surviving
Corporation shall assume all obligations of Showstar under any and all employee
benefit plans in effect as of such date with respect to which employee rights or
accrued benefits are outstanding as of such date. On the Effective Date, the
Surviving Corporation shall adopt and continue in effect all such employee
benefit plans upon the same terms and conditions as were in effect immediately
prior to the Merger.
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION AND BYLAWS. The Articles of Incorporation
of Showstar Washington in effect on the Effective Date shall continue to be the
Articles of
AGREEMENT AND PLAN OF MERGER
PAGE 3
Incorporation of the Surviving Corporation without change or amendment until
further amended in accordance with the provisions thereof and applicable law.
The Bylaws of Showstar Washington in effect on the Effective Date shall continue
to be the Bylaws of the Surviving Corporation without change or amendment until
further amended in accordance with the provisions thereof and applicable law.
2.2 DIRECTORS. The directors of Showstar preceding the Effective Date shall
become the directors of the Surviving Corporation on and after the Effective
Date to serve until expiration of their terms and until their successors are
duly elected and qualified.
2.3 OFFICERS. The officers of Showstar preceding the Effective Date shall
become the officers of the Surviving Corporation on and after the Effective Date
to serve at the pleasure of its Board of Directors.
3. MISCELLANEOUS
3.1 FURTHER ASSURANCES. From time to time, and when required by the
Surviving Corporation or by its successors and assigns, the Surviving
Corporation shall execute and deliver, or cause to be executed and delivered,
such deeds and other instruments, and the Surviving Corporation shall take or
cause to be taken such further and other action as shall be appropriate or
necessary in order to vest or perfect or to conform of record or otherwise, in
the Surviving Corporation, the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority of Showstar and otherwise to carry out the purposes of this Merger
Agreement, and the officers and directors of the Surviving Corporation are
authorized fully in the name and on behalf of Showstar Washington or otherwise
to take any and all such action and to execute and deliver any and all such
deeds and other instruments.
3.2 AMENDMENT. At any time before or after approval by the shareholders of
Showstar, this Merger Agreement may be amended in any manner (except that, after
the approval of the Merger Agreement by the shareholders of Showstar, the
principal terms may not be amended without further approval of the shareholders
of Showstar) as may be determined in the judgment of the respective Boards of
Directors of Showstar and Showstar Washington to be necessary, desirable, or
expedient in order to clarify the intention of the parties hereto or to effect
or facilitate the purpose and intent of this Merger Agreement.
3.3 CONDITIONS TO MERGER. The obligation of the Constituent Corporations to
effect the transactions contemplated hereby is subject to satisfaction of the
following conditions (any or all of which may be waived by either of the
Constituent Corporations in its sole discretion to the extent permitted by law):
(a) This Merger Agreement shall have been submitted to the shareholders of
Showstar for their approval, and the Merger Agreement shall have been approved
by the
AGREEMENT AND PLAN OF MERGER
PAGE 4
shareholders of Showstar in accordance with applicable provisions of the
Colorado Business Corporation Act; and
(b) Any shareholder of Showstar who has the right to dissent from this
Merger as provided under Article 113, Section 102 of the Colorado Business
Corporation Act, and who so dissents in accordance with the requirements of
Colorado Revised Statutes Sections 7-113-102 et seq. (the "Dissenting
Shareholder(s)"), shall be entitled, upon surrender of the certificate(s)
representing said shareholder's shares, to receive payment of the fair value of
such shareholder's shares as provided pursuant to Colorado Revised Statutes
Section 7-113-206. Any issued and outstanding shares of the common capital stock
of Showstar held by such Dissenting Shareholder(s) shall not be converted as
described in Paragraph 1.7 above; PROVIDED, HOWEVER, that each share of the
common capital stock of Showstar outstanding at the Effective Date of the
Merger and held by a Dissenting Shareholder who shall, after the Effective
Date, withdraw his or her demand for payment or lose his or her right to
demand payment as provided under Colorado law, shall be deemed to be
converted, as of the Effective Date of the Merger, into one share of common
stock of the Surviving Corporation.
(c) Showstar, as sole shareholder of Showstar Washington, shall have
approved the Merger in accordance with the General Corporation Law of the State
of Washington; and
(d) Any and all consents, permits, authorizations, approvals, and orders
deemed in the sole discretion of Showstar to be material to consummation of the
Merger shall have been obtained.
3.4 ABANDONMENT OR DEFERRAL. Notwithstanding the approval of this Merger
Agreement by the shareholders of Showstar or Showstar Washington, at any time
before the Effective Date, (a) this Merger Agreement may be terminated and the
Merger may be abandoned by the Board of Directors of either Showstar or Showstar
Washington or both, or (b) the consummation of the Merger may be deferred for a
reasonable period of time if, in the opinion of the Boards of Directors of
Showstar and Showstar Washington, such action would be in the best interests of
such corporations. In the event of termination of this Merger Agreement, this
Merger Agreement shall become void and of no effect and there shall be no
liability on the part of either Constituent Corporation or their respective
Board of Directors or shareholders with respect thereto, except that Showstar
shall pay all expenses incurred in connection with the Merger or in respect to
this Merger Agreement or relating thereto.
3.5 COUNTERPARTS. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, and
all such counterparts, including those received by facsimile, shall be and
constitute an original instrument.
AGREEMENT AND PLAN OF MERGER
PAGE 5
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the Board of Directors of Showstar and Showstar Washington is hereby duly
executed on behalf of each such corporation by their respective, duly authorized
officers.
SHOWSTAR ONLINE.COM, INC.
A Colorado Corporation
/s/
- ------------------------------------------
By: John Punzo
Its: President and Chief Executive Officer
SHOWSTAR ONLINE.COM WASHINGTON, INC.
A Washington Corporation
/s/
- ------------------------------------------
By: John Punzo
Its: President and Secretary
AGREEMENT AND PLAN OF MERGER
PAGE 6
EXHIBIT D
ARTICLES OF INCORPORATION
OF
SHOWSTAR ONLINE.COM WASHINGTON, INC.
The undersigned, as incorporator of a corporation under the Washington
Business Corporation Act (RCW Title 23B), hereby adopts the following Articles
of Incorporation.
ARTICLE I
NAME
The name of this Corporation shall be SHOWSTAR ONLINE.COM WASHINGTON, INC.
ARTICLE II
DURATION
The duration of this Corporation shall be perpetual.
ARTICLE III
PURPOSES
The purposes for which the Corporation is organized are as follows:
To engage in any lawful business, trade or activity that may lawfully be
conducted by a corporation organized under the Washington Business Corporation
Act.
ARTICLE IV
SHARES
Section 1. AUTHORIZED CAPITAL. The Corporation is authorized to issue two
classes of capital stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares of capital stock which this
Corporation is authorized to issue is Seventy-Five Million (75,000,000) shares
of Common Stock, no par value, and Twenty-Five Million (25,000,000) shares of
Preferred Stock, no par value. The Common Stock is subject to the rights and
preferences of the Preferred Stock as set forth below.
Section 2. ISSUANCE OF PREFERRED STOCK BY CLASS AND IN SERIES. The
Preferred Stock may be issued from time to time in one or more classes and one
or more series within such classes in any manner permitted by law and the
provisions of these Articles of Incorporation, as determined from time to time
by the Board of Directors of the Corporation and stated in the resolution or
resolutions providing for the issuance thereof, prior to the issuance of any
shares thereof. The Board of Directors shall have the authority to fix and
determine and to amend, subject to these provisions, the designation,
preferences, limitations and relative rights of the shares (including, without
limitation, such matters as dividends, redemption, liquidation, conversion and
voting) of any class or series that is wholly unissued or to be established.
Unless otherwise specifically provided in the resolution establishing any class
or series, the Board of Directors shall further have the authority, after the
issuance of shares of a class or series whose number it has designated, to amend
the resolution establishing such class or series to decrease the number of
shares of that class or series, but not below the number of shares of such class
or series then outstanding.
ARTICLES OF INCORPORATION OF
SHOWSTAR ONLINE.COM WASHINGTON, INC. PAGE 1
Section 3. CONSIDERATION FOR SHARES. The capital stock of the Corporation
shall be issued for such consideration as shall be fixed from time to time by
the Board of Directors. In the absence of fraud, the judgment of the Directors
as to the value of any property or services received in full or partial payment
for shares shall be conclusive. When shares are issued upon payment of the
consideration fixed by the Board of Directors, such shares shall be taken to be
fully paid and nonassessable.
Section 4. DIVIDENDS. Dividends in cash, property or shares of the
Corporation may be paid, as and when declared by the Board of Directors, out of
funds of the Corporation to the extent and in the manner permitted by law.
ARTICLE V
PRE-EMPTIVE RIGHTS
No preemptive rights shall exist with respect to shares of stock or
securities convertible into shares of stock of this Corporation.
ARTICLE VI
CUMULATIVE VOTING
The shareholders of this Corporation shall not be entitled to cumulative
voting at the election of any Directors.
ARTICLE VII
DIRECTORS
Section 1. NUMBER OF DIRECTORS. The Board of Directors shall be composed of
not less than three (3) nor more than nine (9) Directors. Except with respect to
the initial Board of Directors, the specific number of Directors shall be set by
resolution of the Board of Directors or, if the Directors in office constitute
fewer than a quorum of the Board of Directors, by the affirmative vote of a
majority of all the Directors in office. The number of Directors of this
Corporation may be increased or decreased from time to time in the manner
provided herein, but no decrease in the number of Directors shall have the
effect of shortening the term of any incumbent Director.
Section 2. CLASSIFICATION OF DIRECTORS. The Directors shall be divided into
three classes: Class I, Class II and Class III, with each class to be as nearly
equal in number as possible. The term of office of Directors of the first class
shall expire at the first annual meeting of shareholders after their election.
The term of office of Directors of the second class shall expire at the second
annual meeting after their election. The term of office of Directors of the
third class shall expire at the third annual meeting after their election. At
each annual meeting after such classification, a number of Directors equal to
the number of the class whose term expires at the time of such meeting shall be
elected to hold office until the third succeeding annual meeting. Upon the
expiration of the initial staggered terms, Directors shall be elected for a term
of three (3) years to succeed those Directors whose terms expire. If the number
of Directors is increased or decreased by the Board as specified herein, such
change will be apportioned among the classes so that after the change, the
classes will remain as nearly equal in number as possible. Absent his or her
death, resignation or removal, a Director shall continue to serve despite the
expiration of the Director's term until his or her successor shall have been
duly elected and qualified.
ARTICLES OF INCORPORATION OF
SHOWSTAR ONLINE.COM WASHINGTON, INC. PAGE 2
Section 3. REMOVAL OF DIRECTORS. The shareholders may remove one or more
Directors with or without cause, but only at a special meeting called for the
purpose of removing the Director or Directors, and the meeting notice must state
that the purpose, or one of the purposes, of the meeting is removal of a
Director or Directors.
Section 4. VACANCIES ON BOARD OF DIRECTORS. If a vacancy occurs on the
Board of Directors, including a vacancy resulting from an increase in the number
of Directors, the Board of Directors may fill the vacancy, or, if the Directors
in office constitute fewer than a quorum of the Board of Directors, they may
fill the vacancy by the affirmative vote of a majority of all the Directors in
office. The shareholders may fill a vacancy only if there are no Directors in
office.
Section 5. INITIAL BOARD OF DIRECTORS. The initial Board of Directors shall
consist of five Directors. The names, addresses, and class designations of the
initial Directors of this corporation, who shall serve as Directors until their
respective successors are duly elected and qualified, are as follows:
CLASS I:
- --------
NAME ADDRESS
- ---- -------
William Peterson 2819 Glenn Lakes
Missouri City, TX 77459
CLASS II:
- ---------
NAME ADDRESS
- ---- -------
Louis Bianchi 5407 - 108th Avenue N.E.
Kirkland, WA 98033
Lloyd E. Dohner 14126 Sandfield Drive
Houston, TX 77077-1417
CLASS III:
- ----------
NAME ADDRESS
- ---- -------
John Punzo 12484 - 63A Avenue
Surrey, B.C. V3X 2C7
Barry Forward 930 Beaconsfield Road
North Vancouver, B.C. V7R 1S9
ARTICLES OF INCORPORATION OF
SHOWSTAR ONLINE.COM WASHINGTON, INC. PAGE 3
ARTICLE VIII
CONTRACTS IN WHICH DIRECTORS HAVE AN INTEREST
Any contract or other transaction between this Corporation and one or more
of its directors, or between this Corporation and any corporation, firm,
association, or other entity, of which one or more of this Corporation's
Directors are shareholders, members, directors, officers or employees or in
which they are interested, shall be valid for all purposes, notwithstanding the
presence of such Director or Directors at the meeting of the Board of Directors
which acts upon or in reference to such contract or transaction and
notwithstanding the participation of such Director or Directors in such actions,
by voting or otherwise, even though the presence or vote, or both, of such
Director or Directors might have been necessary to obligate this Corporation
upon such contract or transaction; provided, that the fact of such interest
shall be disclosed to or known by the Directors acting on such contract or
transaction.
ARTICLE IX
REGISTERED AGENT AND REGISTERED OFFICE
The registered agent and registered office of the Corporation shall be as
follows:
COLUMBIA CORPORATE SERVICES, INC.
701 Fifth Avenue, Suite 5701
Seattle, WA 98104
ARTICLE X
INDEMNIFICATION
Section 1. A Director of this Corporation shall not be personally liable to
the Corporation or its shareholders for monetary damages for conduct as a
Director, except for liability of the Director: (i) for acts or omissions that
involve intentional misconduct by the Director or a knowing violation of law by
the Director; (ii) for conduct violating RCW 23B.08.310 of the Washington
Business Corporation Act; or (iii) for any transaction from which the Director
will personally receive a benefit in money, property or services to which the
Director is not legally entitled. If the Washington Business Corporation Act is
amended in the future to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a Director
of this Corporation shall be eliminated or limited to the full extent permitted
by the Washington Business Corporation Act, as so amended, without any
requirement of further action by the shareholders.
Section 2. The Corporation shall indemnify any individual made a party to a
proceeding because that individual is or was a Director of the Corporation and
shall advance or reimburse the reasonable expenses incurred by the individual in
advance of final disposition of the proceeding, without regard to the
limitations in RCW 23B.08.510 through 23B.08.550 of the Washington Business
Corporation Act, or any other limitation which may hereafter be enacted, to the
extent such limitation may be disregarded if authorized by the Articles of
Incorporation, to the full extent and under all circumstances permitted by
applicable law.
Section 3. Any repeal or modification of this Article by the shareholders
of this Corporation shall not adversely affect any right of any individual who
is or was a Director of the Corporation which existed at the time of such repeal
or modification.
ARTICLES OF INCORPORATION OF
SHOWSTAR ONLINE.COM WASHINGTON, INC. PAGE 4
ARTICLE XI
RIGHT TO AMEND ARTICLES OF INCORPORATION
This Corporation reserves the right to amend or repeal any of the
provisions contained in its Articles of Incorporation in any manner now or
hereafter permitted by law, and the rights of the shareholders of this
Corporation are granted subject to this reservation.
ARTICLE XII
BYLAWS
The Board of Directors shall have the power to adopt, amend, or repeal the
Bylaws of this Corporation, subject to the power of the shareholders to amend or
repeal such Bylaws. The shareholders shall also have the power to amend or
repeal the Bylaws of this Corporation and to adopt new Bylaws.
ARTICLE XIII
INCORPORATOR
The name and address of the incorporator is as follows:
Columbia Corporate Services, Inc.
701 Fifth Avenue, Suite 5701
Seattle, WA 98104
ARTICLE XIV
APPROVAL OF CERTAIN ACTIONS
Except to the extent that any of the following actions are permitted to be
taken solely upon approval of the Board of Directors of the Corporation without
shareholder action pursuant to these Articles of Incorporation or the Washington
Business Corporation Act, any amendment of the Articles of Incorporation or the
Bylaws of the Corporation, approval of a plan of merger or share exchange,
authorizing the sale, lease, exchange or other disposition of all or
substantially all of the Corporation's property, authorizing dissolution of the
Corporation or any increase in the authorized capital stock of the Corporation
(whether pursuant to Article IV or otherwise), any cancellation, redemption or
purchase by the Corporation of any of its shares, any change in the rights
attached to any class of its shares, and any other reorganization of the
Corporation of any nature, shall require approval by each voting group entitled
to vote thereon by a simple majority of all the votes entitled to be cast by
that voting group.
ARTICLE XV
SHAREHOLDER VOTING ON SIGNIFICANT CORPORATE ACTION
Any corporate action for which the Washington Business Corporation Act, as
then in effect, would otherwise require approval by either two-thirds vote of
the shareholders of the Corporation or by a two-thirds vote of one or more
voting groups shall be deemed approved by the shareholders or the voting
group(s) if it is approved by the affirmative vote of the
ARTICLES OF INCORPORATION OF
SHOWSTAR ONLINE.COM WASHINGTON, INC. PAGE 5
holders of a majority of shares entitled to vote or, if approval by voting
groups is required, by the holders of a majority of shares of each voting group
entitled to vote separately. Notwithstanding this Article XV, effect shall be
given to any other provision of these Articles of Incorporation that
specifically requires a greater vote for approval of any particular corporate
action.
ARTICLE XVI
SHAREHOLDER ACTION BY WRITTEN CONSENT
Action required or permitted to be taken at a shareholders' meeting may be
taken without a meeting or a vote if either:
(a) The action is taken by written consent of all shareholders entitled to vote
on the action; or
(b) So long as this Corporation is not a public company, the action is taken by
written consent of shareholders holding of record or otherwise entitled to
vote, in the aggregate not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all
shares entitled to vote on the action were present and voted.
To the extent that the Washington Business Corporation Act requires prior
notice of any such action to be given to non-consenting or non-voting
shareholders, written notice of such action shall be given at least five (5)
days prior to the effective date of such action, unless a greater period is
required by law.
ARTICLE XVII
SPECIAL MEETINGS OF SHAREHOLDERS
So long as this Corporation is a public company, special meetings of the
shareholders of the Corporation for any purpose may be called at any time by the
Board of Directors or, if the Directors in office constitute fewer than a quorum
of the Board of Directors, by the affirmative vote of a majority of all the
Directors in office, but such special meetings may not be called by any other
person or persons.
ARTICLE XVIII
QUORUM FOR MEETINGS OF SHAREHOLDERS
Except with respect to any greater requirement contained in these Articles
of Incorporation or the Washington Business Corporation Act, one-third of the
votes entitled to be cast on a matter by the holders of shares that, pursuant to
the Articles of Incorporation or the Washington Business Corporation Act, are
entitled to vote and be counted collectively upon such matter, represented in
person or by proxy, shall constitute a quorum of such shares at a meeting of
shareholders.
ARTICLES OF INCORPORATION OF
SHOWSTAR ONLINE.COM WASHINGTON, INC. PAGE 6
The undersigned, as incorporator of this Corporation under the Washington
Business Corporation Act as codified at RCW 23B, adopts these Articles of
Incorporation.
Dated this 11th day of August, 2000.
COLUMBIA CORPORATE SERVICES, INC.
/s/
----------------------------------------------
Nick Solandros, Secretary
Incorporator
ARTICLES OF INCORPORATION OF
SHOWSTAR ONLINE.COM WASHINGTON, INC. PAGE 7
CONSENT TO SERVE AS REGISTERED AGENT
Columbia Corporate Services, Inc. hereby consents to serve as Registered
Agent, in the State of Washington for SHOWSTAR ONLINE.COM WASHINGTON, INC.
Columbia Corporate Services, Inc. understands that as agent for said
corporation, it will be its responsibility to receive service of process in
the name of said corporation; to forward all mail and notices to said
corporation; and to immediately notify the office of the Secretary of State
of Washington in the event of its resignation, or of any changes in the
registered office address of SHOWSTAR ONLINE.COM WASHINGTON, INC.
Dated: August 11, 2000.
COLUMBIA CORPORATE SERVICES, INC.
/s/
----------------------------------------------
Nick Solandros, Secretary
Registered Address:
701 Fifth Avenue, Suite 5701
Seattle, WA 98104-7003
ARTICLES OF INCORPORATION OF
SHOWSTAR ONLINE.COM WASHINGTON, INC. PAGE 8
EXHIBIT E
BYLAWS OF
SHOWSTAR ONLINE.COM WASHINGTON, INC.
TABLE OF CONTENTS
SECTION 1 - OFFICES .....................................................................................1
SECTION 2 - SHAREHOLDERS ................................................................................1
2.1 Annual Meeting........................................................................1
2.2 Special Meetings......................................................................1
2.3 Meetings by Communications Equipment..................................................1
2.4 Date, Time and Place of Meeting.......................................................1
2.5 Notice of Meeting.....................................................................1
2.6 Waiver of Notice......................................................................2
2.7 Fixing of Record Date for Determining Shareholders....................................2
2.8 Voting Record.........................................................................2
2.9 Quorum................................................................................2
2.10 Manner of Acting......................................................................3
2.11 Proxies...............................................................................3
2.12 Voting Shares.........................................................................3
2.13 Voting for Directors..................................................................3
2.14 Action by Shareholders Without a Meeting..............................................3
SECTION 3 - BOARD OF DIRECTORS...........................................................................4
3.1 General Powers........................................................................4
3.2 Number, Classification and Tenure.....................................................4
3.3 Annual and Regular Meetings...........................................................4
3.4 Special Meetings......................................................................4
3.5 Meetings by Communications Equipment..................................................5
3.6 Notice of Special Meetings............................................................5
3.6.1 Personal Delivery...........................................................5
3.6.2 Delivery by Mail............................................................5
3.6.3 Delivery by Private Carrier.................................................5
3.6.4 Facsimile Notice............................................................5
3.6.5 Delivery by Telegraph.......................................................5
3.6.6 Oral Notice.................................................................6
3.7 Waiver of Notice......................................................................6
3.7.1 In Writing..................................................................6
3.7.2 By Attendance...............................................................6
3.8 Quorum
3.9 Manner of Acting......................................................................6
3.10 Presumption of Assent.................................................................7
3.11 Action by Board or Committees Without a Meeting.......................................7
i
3.12 Resignation...........................................................................7
3.13 Removal...............................................................................7
3.14 Vacancies.............................................................................7
3.15 Executive and Other Committees........................................................8
3.15.1 Creation of Committees......................................................8
3.15.2 Authority of Committees.....................................................8
3.15.3 Minutes of Meetings.........................................................8
3.15.4 Removal.....................................................................8
3.16 Compensation..........................................................................8
SECTION 4 - OFFICERS ....................................................................................9
4.1 Appointment and Term..................................................................9
4.2 Resignation...........................................................................9
4.3 Removal...............................................................................9
4.4 Contract Rights of Officers...........................................................9
4.5 Chairman of the Board.................................................................9
4.6 President............................................................................10
4.7 Vice President.......................................................................10
4.8 Secretary............................................................................10
4.9 Treasurer............................................................................10
4.10 Salaries ...........................................................................10
SECTION 5 - CONTRACTS, LOANS, CHECKS AND DEPOSITS ......................................................11
5.1 Contracts............................................................................11
5.2 Loans to the Corporation.............................................................11
5.3 Checks, Drafts, Etc..................................................................11
5.4 Deposits.............................................................................11
SECTION 6 - CERTIFICATES FOR SHARES AND THEIR TRANSFER .................................................11
6.1 Issuance of Shares...................................................................11
6.2 Certificates for Shares..............................................................11
6.3 Stock Records........................................................................12
6.4 Restriction on Transfer..............................................................12
6.5 Transfer of Shares...................................................................12
6.6 Lost or Destroyed Certificates.......................................................12
SECTION 7 - BOOKS AND RECORDS ..........................................................................13
SECTION 8 - ACCOUNTING YEAR ............................................................................13
SECTION 9 - SEAL........................................................................................14
SECTION 10 - INDEMNIFICATION............................................................................14
10.1 Right to Indemnification.............................................................14
10.2 Restrictions on Indemnification......................................................14
ii
10.3 Advancement of Expenses..............................................................15
10.4 Right of Indemnitee to Bring Suit....................................................15
10.5 Nonexclusivity of Rights.............................................................15
10.6 Insurance, Contracts and Funding.....................................................15
10.7 Indemnification of Employees and Agents of the Corporation...........................16
10.8 Persons Serving Other Entities.......................................................16
SECTION 11 - LIMITATION OF LIABILITY ...................................................................16
SECTION 12 - AMENDMENTS ................................................................................16
iii
SECTION 1. OFFICES
The principal office of the corporation shall be located at the principal
place of business or such other place as the Board of Directors ("Board") may
designate. The corporation may have such other offices as the Board may
designate or as the business of the corporation may require.
SECTION 2. SHAREHOLDERS
2.1 ANNUAL MEETING
The annual meeting of the shareholders to elect Directors and transact such
other business as may properly come before the meeting shall be held on a date
not more than 180 days after the end of the corporation's fiscal year, such date
and time to be determined by the Board.
2.2 SPECIAL MEETINGS
Special meetings of the shareholders of the corporation for any purpose may
be called at any time by the Board of Directors or, if the Directors in office
constitute fewer than a quorum of the Board of Directors, by the affirmative
vote of a majority of all the Directors in office, but such special meetings may
not be called by any other person or persons.
2.3 MEETINGS BY COMMUNICATIONS EQUIPMENT
Shareholders may participate in any meeting of the shareholders by any
means of communication by which all persons participating in the meeting can
hear each other during the meeting. Participation by such means shall constitute
presence in person at a meeting.
2.4 DATE, TIME AND PLACE OF MEETING
Except as otherwise provided in these Bylaws, all meetings of shareholders
shall be held on such date and at such time and place designated by or at the
direction of the Board.
2.5 NOTICE OF MEETING
Written notice stating the place, day and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting
is called, shall be given by or at the direction of the Board, the Chairman
of the Board, the President or the Secretary to each shareholder entitled to
notice of or to vote at the meeting not less than ten (10) nor more than
sixty (60) days before the meeting, except that notice of a meeting to act on
a plan of merger or share exchange, the sale, lease, exchange or other
disposition of all or substantially all of the corporation's assets other
than in the regular course of business or the dissolution of the corporation
shall be given not less than twenty (20) or more than sixty (60) days before
such meeting. If an annual or special shareholders' meeting is adjourned to a
different date, time or place, no notice of the new date, time or place is
required if they are announced at the meeting before adjournment. If a new
record date for the adjourned meeting is or must be fixed, notice of the
adjourned meeting must be given to shareholders entitled to notice of or to
vote as of the new record date.
Such notice may be transmitted by mail, private carrier, personal delivery,
telegraph, teletype or communications equipment that transmits a facsimile of
the notice. If those forms of written notice are impractical in the view of the
Board, the Chairman of the Board, the President or the Secretary, written notice
may be transmitted by an advertisement in a newspaper of general circulation in
the area of the corporation's principal office. If such notice is mailed, it
shall be deemed effective when deposited in the official government mail,
first-class postage prepaid, properly addressed to the shareholder at such
1
shareholder's address as it appears in the corporation's current record of
shareholders. Notice given in any other manner shall be deemed effective when
dispatched to the shareholder's address, telephone number or other number
appearing on the records of the corporation. Any notice given by publication as
herein provided shall be deemed effective five days after first publication.
2.6 WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder under the
provisions of these Bylaws, the Articles of Incorporation or the Washington
Business Corporation Act, a waiver of notice in writing, signed by the person or
persons entitled to such notice and delivered to the corporation, whether before
or after the date and time of the meeting or before or after the action to be
taken by consent is effective, shall be deemed equivalent to the giving of such
notice. Further, notice of the time, place and purpose of any meeting will be
deemed to be waived by any shareholder by attendance in person or by proxy,
unless such shareholder at the beginning of the meeting objects to holding the
meeting or transacting business at the meeting.
2.7 FIXING OF RECORD DATE FOR DETERMINING SHAREHOLDERS
For the purpose of determining shareholders entitled (a) to notice of or to
vote at any meeting of shareholders or any adjournment thereof, (b) to receive
payment of any dividend, or (c) in order to make a determination of shareholders
for any other purpose, the Board may fix a future date as the record date for
any such determination. Such record date shall be not more than 60 days, and, in
case of a meeting of shareholders, not less than 10 days, prior to the date on
which the particular action requiring such determination is to be taken. If no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting, the record date shall be the day immediately preceding
the date on which notice of the meeting is first given to shareholders. Such a
determination shall apply to any adjournment of the meeting unless the Board
fixes a new record date, which it shall do if the meeting is adjourned to a date
more than 120 days after the date fixed for the original meeting. If no record
date is set for the determination of shareholders entitled to receive payment of
any stock, dividend or distribution (other than one involving a purchase,
redemption or other acquisition of the corporation's shares), the record date
shall be the date the Board authorizes the stock dividend or distribution.
2.8 VOTING RECORD
At least ten (10) days before each meeting of shareholders, an alphabetical
list of the shareholders entitled to notice of such meeting shall be made,
arranged by voting group and by each class or series of shares, with the address
of and number of shares held by each shareholder. This record shall be kept at
the principal office of the corporation for 10 days prior to such meeting, and
shall be kept open at such meeting, for the inspection of any shareholder or any
shareholder's agent or attorney.
2.9 QUORUM
Except with respect to any greater requirement contained in the Articles
of Incorporation or the Washington Business Corporation Act, one-third of the
votes entitled to be cast on a matter by the holders of shares that, pursuant
to the Articles of Incorporation or the Washington Business Corporation Act,
are entitled to vote and be counted collectively upon such matter,
represented in person or by proxy, shall constitute a quorum of such shares
at a meeting of shareholders. If less than the required number of such votes
are represented at a meeting, a majority of the votes so represented may
adjourn the meeting from time to time. Any business may be transacted at a
reconvened meeting that might have been transacted at the meeting as
originally called, provided a quorum is present or represented at such
meeting. Once a share is represented for any purpose at a meeting other than
solely to object to holding the meeting or
2
transacting business, it is deemed present for quorum purposes for the
remainder of the meeting and any adjournment (unless a new record date is or
must be set for the adjourned meeting), notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
2.10 MANNER OF ACTING
If a quorum is present, action on a matter other than the election of
Directors shall be approved if the votes cast in favor of the action by the
shares entitled to vote and be counted collectively upon such matter exceed
the votes cast against such action by the shares entitled to vote and be
counted collectively thereon, unless the Articles of Incorporation or the
Washington Business Corporation Act requires a greater number of affirmative
votes. Whenever the Washington Business Corporation Act permits a
corporation's bylaws to specify that a lesser number of shares than would
otherwise be required shall suffice to approve an action by shareholders,
these Bylaws hereby specify that the number of shares required to approve
such an action shall be such lesser number.
2.11 PROXIES
A shareholder may vote by proxy executed in writing by the shareholder
or by his or her attorney-in-fact or agent. Such proxy shall be effective
when received by the Secretary or other officer or agent of the corporation
authorized to tabulate votes. A proxy shall become invalid eleven months
after the date of its execution, unless otherwise provided in the proxy. A
proxy with respect to a specified meeting shall entitle its holder to vote at
any reconvened meeting following adjournment of such meeting but shall not be
valid after the final adjournment.
2.12 VOTING SHARES
Except as provided in the Articles of Incorporation, each outstanding
share entitled to vote with respect to a matter submitted to a meeting of
shareholders shall be entitled to one vote upon such matter.
2.13 VOTING FOR DIRECTORS
Each shareholder entitled to vote in an election of Directors may vote,
in person or by proxy, the number of shares owned by such shareholder for as
many persons as there are Directors to be elected and for whose election such
shareholder has a right to vote. Shareholders shall not have the right to
cumulate their votes. Unless otherwise provided in the Articles of
Incorporation, the candidates elected shall be those receiving the largest
number of votes cast, up to the number of Directors to be elected.
2.14 ACTION BY SHAREHOLDERS WITHOUT A MEETING
Any action that may be or is required to be taken at a meeting of the
shareholders may be taken without a meeting if one or more written consents
describing the action taken shall be signed by shareholders holding of record
or otherwise entitled to vote in the aggregate not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote on the action were present and
voted. The Board may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board, and which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the Board. If not
otherwise fixed by the Board, the record date for determining shareholders
entitled to take action without a meeting is the date the first shareholder
consent is delivered to the corporation. A shareholder may withdraw a consent
only by delivering a written notice of withdrawal to the corporation prior to
the time that consents sufficient to authorize taking the action have been
delivered to the corporation. Every written consent shall bear the date of
signature of each shareholder who signs
3
the consent. A written consent is not effective to take the action referred
to in the consent unless, within 60 days of the earliest dated consent
delivered to the corporation, written consents signed by a sufficient number
of shareholders to take action are delivered to the corporation. Unless the
consent specifies a later effective date, actions taken by written consent of
the shareholders are effective when: (a) consents sufficient to authorize
taking the action are in possession of the corporation, and (b) the period of
advance notice required by the Articles of Incorporation to be given to any
non-consenting or non-voting shareholder has been satisfied. Any such consent
shall be inserted in the minute book as if it were the minutes of a meeting
of the shareholders.
SECTION 3. BOARD OF DIRECTORS
3.1 GENERAL POWERS
All corporate powers shall be exercised by or under the authority of, and
the business and affairs of the corporation shall be managed under the direction
of, the Board, except as may be otherwise provided in these Bylaws, the Articles
of Incorporation or the Washington Business Corporation Act.
3.2 NUMBER, CLASSIFICATION AND TENURE
The Board of Directors shall be composed of not less than three (3) nor
more than nine (9) Directors. The specific number of Directors shall be set by
resolution of the Board of Directors or, if the Directors in office constitute
fewer than a quorum of the Board of Directors, by the affirmative vote of a
majority of all the Directors in office. The number of Directors of this
corporation may be increased or decreased from time to time in the manner
provided by the Articles of Incorporation, but no decrease in the number of
Directors shall have the effect of shortening the term of any incumbent
Director. The Directors shall be divided into three classes: Class I, Class II
and Class III, with each class to be as nearly equal in number as possible, as
specified by resolution of the Board or, if the Directors in office constitute
fewer than a quorum of the Board, by the affirmative vote of a majority of all
the Directors in office. The term of office of Directors of the first class
shall expire at the first annual meeting of shareholders after their election.
The term of office of Directors of the second class shall expire at the second
annual meeting after their election. The term of office of Directors of the
third class shall expire at the third annual meeting after their election. At
each annual meeting after such classification, a number of Directors equal to
the number of the class whose term expires at the time of such meeting shall be
elected to hold office until the third succeeding annual meeting. Upon the
expiration of the initial staggered terms, Directors shall be elected for a term
of three (3) years to succeed those Directors whose terms expire. Absent his or
her death, resignation or removal, a Director shall continue to serve despite
the expiration of the Director's term until his or her successor shall have been
duly elected and qualified or until there is a decrease in the number of
Directors. Directors need not be shareholders of the corporation or residents of
the State of Washington, and need not meet any other qualifications.
3.3 ANNUAL AND REGULAR MEETINGS
An annual Board meeting shall be held without notice immediately after and
at the same place as the annual meeting of shareholders. By resolution, the
Board, or any committee designated by the Board, may specify the time and place
for holding regular meetings without notice other than such resolution.
3.4 SPECIAL MEETINGS
Special meetings of the Board or any committee designated by the Board may
be called
4
by or at the request of the Chairman of the Board, the President, the Secretary
or, in the case of special Board meetings, any one-third or more of the
Directors in office and, in the case of any special meeting of any committee
designated by the Board, by its Chairman. The person or persons authorized to
call special meetings may fix any place for holding any special Board or
committee meeting called by them.
3.5 MEETINGS BY COMMUNICATIONS EQUIPMENT
Members of the Board or any committee designated by the Board may
participate in a meeting of such Board or committee by, or conduct the meeting
through the use of, any means of communication by which all Directors
participating in the meeting can hear each other during the meeting.
Participation by such means shall constitute presence in person at a meeting.
3.6 NOTICE OF SPECIAL MEETINGS
Notice of a special Board or committee meeting stating the place, day and
hour of the meeting shall be given to a Director in writing or orally. Neither
the business to be transacted at nor the purpose of any special meeting need be
specified in the notice of such meeting.
3.6.1 PERSONAL DELIVERY
If notice is given by personal delivery, the notice shall be delivered to a
Director at least two (2) days before the meeting.
3.6.2 DELIVERY BY MAIL
If notice is delivered by mail, the notice shall be deposited in the
official government mail at least five (5) days before the meeting, properly
addressed to a Director at his or her address shown on the records of the
corporation, with postage thereon prepaid.
3.6.3 DELIVERY BY PRIVATE CARRIER
If notice is given by private carrier, the notice shall be dispatched to a
Director at his or her address shown on the records of the corporation at least
three (3) days before the meeting.
3.6.4 FACSIMILE NOTICE
If a notice is delivered by wire or wireless equipment that transmits a
facsimile of the notice, the notice shall be dispatched at least two (2) days
before the meeting to a Director at his or her telephone number or other number
appearing on the records of the corporation.
3.6.5 DELIVERY BY TELEGRAPH
If notice is delivered by telegraph, the notice shall be delivered to the
telegraph company
5
for delivery to a Director at his or her address shown on the records of the
corporation at least three (3) days before the meeting.
3.6.6 ORAL NOTICE
If notice is delivered orally, by telephone or in person, the notice shall
be personally given to the Director at least two (2) days before the meeting.
3.7 WAIVER OF NOTICE
3.7.1 IN WRITING
Whenever any notice is required to be given to any Director under the
provisions of these Bylaws, the Articles of Incorporation or the Washington
Business Corporation Act, a waiver thereof in writing, signed by the person or
persons entitled to such notice and delivered to the corporation, whether before
or after the date and time of the meeting, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of any regular or special meeting of the Board or any committee designated by
the Board need be specified in the waiver of notice of such meeting.
3.7.2 BY ATTENDANCE
A Director's attendance at or participation in a Board or committee meeting
shall constitute a waiver of notice of such meeting, unless the Director at the
beginning of the meeting, or promptly upon his or her arrival, objects to
holding the meeting or transacting business at such meeting and does not
thereafter vote for or assent to action taken at the meeting.
3.8 QUORUM
A majority of the number of Directors fixed by or in the manner provided in
these Bylaws shall constitute a quorum for the transaction of business at any
Board meeting but, if less than a majority are present at a meeting, a majority
of the Directors present may adjourn the meeting from time to time without
further notice. A majority of the number of Directors composing any committee of
the Board, as established and fixed by resolution of the Board, shall constitute
a quorum for the transaction of business at any meeting of such committee but,
if less than a majority are present at a meeting, a majority of such Directors
present may adjourn the committee meeting from time to time without further
notice.
3.9 MANNER OF ACTING
If a quorum is present when the vote is taken, the act of the majority of
the Directors present at a Board or committee meeting shall be the act of the
Board or such committee, unless the vote of a greater number is required by
these Bylaws, the Articles of Incorporation or the Washington Business
Corporation Act.
6
3.10 PRESUMPTION OF ASSENT
A Director of the corporation who is present at a Board or committee
meeting at which any action is taken shall be deemed to have assented to the
action taken unless: (a) the Director objects at the beginning of the meeting,
or promptly upon the Director's arrival, to holding the meeting or transacting
any business at such meeting, (b) the Director's dissent or abstention from the
action taken is entered in the minutes of the meeting, or (c) the Director
delivers written notice of the Director's dissent or abstention to the presiding
officer of the meeting before its adjournment or to the corporation within a
reasonable time after adjournment of the meeting. The right of dissent or
abstention is not available to a Director who votes in favor of the action
taken.
3.11 ACTION BY BOARD OR COMMITTEES WITHOUT A MEETING
Any action that could be taken at a meeting of the Board or of any
committee created by the Board may be taken without a meeting if one or more
written consents setting forth the action so taken are signed by each of the
Directors or by each committee member either before or after the action is taken
and delivered to the corporation. Action taken by written consent of Directors
without a meeting is effective when the last Director signs the consent, unless
the consent specifies a later effective date. Any such written consent shall be
inserted in the minute book as if it were the minutes of a Board or a committee
meeting.
3.12 RESIGNATION
Any Director may resign from the Board or any committee of the Board at any
time by delivering either oral tender of resignation at any meeting of the Board
or any committee, or written notice to the Chairman of the Board, the President,
the Secretary or the Board. Any such resignation is effective upon delivery
thereof unless the notice of resignation specifies a later effective date and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
3.13 REMOVAL
At a meeting of shareholders called expressly for that purpose, one or more
members of the Board, including the entire Board, may be removed with or without
cause (unless the Articles of Incorporation permit removal for cause only) by
the holders of the shares entitled to elect the Director or Directors whose
removal is sought if the number of votes cast to remove the Director exceeds the
number of votes cast not to remove the Director.
3.14 VACANCIES
If a vacancy occurs on the Board, including a vacancy resulting from an
increase in the number of Directors, the Board may fill the vacancy, or, if the
Directors in office constitute fewer than a quorum of the Board, they may fill
the vacancy by the affirmative vote of a
7
majority of all the Directors in office. The shareholders may fill a vacancy
only if there are no Directors in office. A Director elected to fill a vacancy
shall serve only until the next election of Directors by the shareholders.
3.15 EXECUTIVE AND OTHER COMMITTEES
3.15.1 CREATION OF COMMITTEES
The Board, by resolution adopted by the greater of a majority of the
Directors then in office or the number of Directors required to take action in
accordance with these Bylaws, may create standing or temporary committees,
including an Executive Committee and an Audit and Compensation Committee, and
appoint members from its own number and invest such committees with such powers
as it may see fit, subject to such conditions as may be prescribed by the Board,
the Articles of Incorporation, these Bylaws and applicable law. Each committee
must have two or more members, and the Board may designate one or more Directors
as alternate members who may replace any absent or disqualified member at any
committee meeting, with all such members and alternate members to serve at the
pleasure of the Board.
3.15.2 AUTHORITY OF COMMITTEES
Each Committee shall have and may exercise all the authority of the Board
to the extent provided in the resolution of the Board creating the committee and
any subsequent resolutions adopted in like manner, except that no such committee
shall have the authority to: (i) approve or adopt, or recommend to the
shareholders, any action or matter expressly required by the Articles of
Incorporation or the Washington Business Corporation Act to be submitted to
shareholders for approval, or (ii) adopt, amend or repeal any Bylaws of the
corporation.
3.15.3 MINUTES OF MEETINGS
All committees shall keep regular minutes of their meetings and shall cause
them to be recorded in books kept for that purpose.
3.15.4 REMOVAL
The Board may remove any member of any committee elected or appointed by it
but only by the affirmative vote of the greater of a majority of Directors then
in office or the number of Directors required to take action in accordance with
these Bylaws.
3.16 COMPENSATION
By Board resolution, Directors and committee members may be paid either
expenses, if any, of attendance at each Board or committee meeting, or a fixed
sum for attendance at each Board or committee meeting, or a stated salary as
Director or a committee member, or a combination of the foregoing. No such
payment shall preclude any Director or committee
8
member from serving the corporation in any other capacity and receiving
compensation therefor.
SECTION 4. OFFICERS
4.1 APPOINTMENT AND TERM
The officers of the corporation shall be those officers appointed from time
to time by the Board or by any other officer empowered to do so. The Board shall
have sole power and authority to appoint executive officers. As used herein, the
term "EXECUTIVE OFFICER" shall mean the President, the Chief Executive Officer,
the Chief Financial Officer and any other officer designated by the Board as an
executive officer. The Board or the President may appoint such other officers to
hold office for such period, have such authority and perform such duties as may
be prescribed. The Board may delegate to any other officer the power to appoint
any subordinate officers and to prescribe their respective terms of office,
authority and duties. Any two or more offices may be held by the same person.
Unless an officer dies, resigns or is removed from office, he or she shall hold
office until his or her successor is appointed.
4.2 RESIGNATION
Any officer may resign at any time by delivering written notice to the
corporation. Any such resignation is effective upon delivery, unless the notice
of resignation specifies a later effective date, and, unless otherwise
specified, the acceptance of such resignation shall not be necessary to make it
effective.
4.3 REMOVAL
Any officer may be removed by the Board at any time, with or without cause.
An officer or assistant officer, if appointed by another officer, may be removed
at any time, with or without cause, by any officer authorized to appoint such
officer or assistant officer.
4.4 CONTRACT RIGHTS OF OFFICERS
The appointment of an officer does not itself create contract rights.
4.5 CHAIRMAN OF THE BOARD
If appointed, the Chairman of the Board shall perform such duties as shall
be assigned to him or her by the Board from time to time, and shall preside over
meetings of the Board and shareholders unless another officer is appointed or
designated by the Board or Chairman of such meetings.
9
4.6 PRESIDENT
If appointed, the President shall be the chief executive officer of the
corporation (unless some other officer is so designated by the Board), and shall
preside over meetings of the Board and shareholders in the absence of a Chairman
of the Board, and, subject to the Board's control, shall supervise and control
all the assets, business and affairs of the corporation. In general, the
President shall perform all duties incident to the office of President and such
other duties as are prescribed by the Board from time to time. If no Secretary
has been appointed, the President shall have responsibility for the preparation
of minutes of meetings of the Board and shareholders and for authentication of
the records of the corporation.
4.7 VICE PRESIDENT
In the event of the death of the President or his or her inability to act,
the Vice President (or if there is more than one Vice President, the Vice
President who was designated by the Board as the successor to the President, or
if no Vice President is so designated, the Vice President first elected to such
office) shall perform the duties of the President, except as may be limited by
resolution of the Board, with all the powers of and subject to all the
restrictions upon the President. Vice Presidents shall perform such other duties
as from time to time may be assigned to them by the President or by or at the
direction of the Board.
4.8 SECRETARY
If appointed, the Secretary shall be responsible for preparation of minutes
of the meetings of the Board and shareholders, maintenance of the corporation
records and stock registers, and authentication of the corporation's records,
and shall in general perform all duties incident to the office of Secretary and
such other duties as from time to time may be assigned to him or her by the
President or by or at the direction of the Board. In the absence of the
Secretary, an Assistant Secretary may perform the duties of the Secretary.
4.9 TREASURER
If appointed, the Treasurer shall have charge and custody of and be
responsible for all funds and securities of the corporation, receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in banks,
trust companies or other depositories selected in accordance with the provisions
of these Bylaws, and in general perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him or
her by the President or by or at the direction of the Board. In the absence of
the Treasurer, an Assistant Treasurer may perform the duties of the Treasurer.
4.10 SALARIES
The salaries of the officers shall be fixed from time to time by the Board
or by any person or persons to whom the Board has delegated such authority. No
officer shall be prevented
10
from receiving such salary by reason of the fact that he or she is also a
Director of the corporation.
SECTION 5. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.1 CONTRACTS
The Board may authorize any officer or officers, or agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation. Such authority may be general or confined to
specific instances.
5.2 LOANS TO THE CORPORATION
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the Board. Such authority may be general or confined to specific instances.
5.3 CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, or agent or agents, of the corporation and in such
manner as is from time to time determined by resolution of the Board.
5.4 DEPOSITS
All funds of the corporation not otherwise employed shall be deposited from
time to time to the credit of the corporation in such banks, trust companies or
other depositories as the Board may authorize.
SECTION 6. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 ISSUANCE OF SHARES
No shares of the corporation shall be issued unless authorized by the
Board, or by a committee designated by the Board to the extent such committee is
empowered to do so.
6.2 CERTIFICATES FOR SHARES
Certificates representing shares of the corporation shall be signed, either
manually or in facsimile, by the President or any Vice President and by the
Treasurer or any Assistant Treasurer or the Secretary or any Assistant
Secretary, and shall include on their face written notice of any restrictions
that may be imposed on the transferability of such shares. All certificates
shall be consecutively numbered or otherwise identified.
11
6.3 STOCK RECORDS
The stock transfer books shall be kept at the principal office at the
corporation or at the office of the corporation's transfer agent or registrar.
The name and address of each person to whom certificates for shares are issued,
together with the class and number of shares represented by each such
certificate and the date of issue thereof, shall be entered on the stock
transfer books of the corporation. The person in whose name shares stand on the
books of the corporation shall be deemed by the corporation to be the owner
thereof for all purposes.
6.4 RESTRICTION ON TRANSFER
Except to the extent that the corporation has obtained an opinion of
counsel acceptable to the corporation that transfer restrictions are not
required under applicable securities laws, or has otherwise satisfied itself
that such transfer restrictions are not required, all certificates representing
shares of the corporation shall bear a legend on the face of the certificate, or
on the reverse of the certificate if a reference to the legend is contained on
the face, which reads substantially as follows:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE
SECURITIES LAWS, AND NO INTEREST MAY BE SOLD, DISTRIBUTED, ASSIGNED,
OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES, (B) THIS
CORPORATION RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF THESE
SECURITIES SATISFACTORY TO THIS CORPORATION STATING THAT SUCH TRANSACTION
IS EXEMPT FROM REGISTRATION, OR (C) THIS CORPORATION OTHERWISE SATISFIES
ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.
6.5 TRANSFER OF SHARES
The transfer of shares of the corporation shall be made only on the stock
transfer books of the corporation pursuant to authorization or document of
transfer made by the holder of record thereof or by his or her legal
representative, who shall furnish proper evidence of authority to transfer, or
by his or her attorney-in-fact authorized by power of attorney duly executed and
filed with the Secretary of the corporation. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificates for a like number of shares shall have been
surrendered and canceled.
6.6 LOST OR DESTROYED CERTIFICATES
In the case of a lost, destroyed or damaged certificate, a new certificate
may be issued in
12
its place upon such terms and indemnity to the corporation as the Board may
prescribe.
SECTION 7. BOOKS AND RECORDS
The corporation shall:
(a) Keep as permanent records minutes of all meetings of its shareholders
and the Board, a record of all actions taken by the shareholders or the Board
without a meeting, and a record of all actions taken by a committee of the Board
exercising the authority of the Board on behalf of the corporation.
(b) Maintain appropriate accounting records.
(c) Maintain a record of its shareholders, in a form that permits
preparation of a list of the names and addresses of all shareholders, in
alphabetical order by class of shares showing the number and class of shares
held by each; provided, however, such record may be maintained by an agent of
the corporation.
(d) Maintain its records in written form or in another form capable of
conversion into written form within a reasonable time.
(e) Keep a copy of the following records at its principal office:
1. The Articles of Incorporation and all amendments thereto as
currently in effect;
2. These Bylaws and all amendments thereto as currently in effect;
3. The minutes of all meetings of shareholders and records of all
action taken by shareholders without a meeting, for the past three years;
4. The corporation's financial statements for the past three years;
5. All written communications to shareholders generally within the
past three years;
6. A list of the names and business addresses of the current Directors
and officers; and
7. The most recent annual report delivered to the Washington Secretary
of State.
SECTION 8. ACCOUNTING YEAR
The accounting year of the corporation shall be the calendar year, provided
that if a different accounting year is at any time selected by the Board for
purposes of federal income taxes, or any other purpose, the accounting year
shall be the year so selected.
13
SECTION 9. SEAL
The Board may provide for a corporate seal that shall consist of the name
of the corporation, the state of its incorporation, and the year of its
incorporation.
SECTION 10. INDEMNIFICATION
10.1 RIGHT TO INDEMNIFICATION
Each person who was, is or is threatened to be made a party to or is
otherwise involved (including, without limitation, as a witness) in any
threatened, pending or completed action, suit, claim or proceeding, whether
civil, criminal, administrative or investigative and whether formal or informal
(hereinafter "PROCEEDINGS"), by reason of the fact that he or she is or was a
Director or officer of the corporation or, that being or having been such a
Director or officer of the corporation, he or she is or was serving at the
request of the corporation as a Director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise (hereafter an "INDEMNITEE"), whether the basis
of a proceeding is alleged action in an official capacity or in any other
capacity while serving as such a Director, officer, partner, trustee, employee
or agent, shall be indemnified and held harmless by the corporation against all
losses, claims, damages (compensatory, exemplary, punitive or otherwise),
liabilities and expenses (including attorneys' fees, costs, judgments, fines,
ERISA excise taxes or penalties, amounts to be paid in settlement and any other
expenses) actually and reasonably incurred or suffered by such indemnitee in
connection therewith, and such indemnification shall continue as to an
indemnitee who has ceased to be a Director or officer of the Company or a
Director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators. Except as provided in subsection 10.4 of this Section with
respect to proceedings seeking to enforce rights to indemnification, the
corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if a proceeding (or part
thereof) was authorized or ratified by the Board. The right to indemnification
conferred in this Section shall be a contract right.
10.2 RESTRICTIONS ON INDEMNIFICATION
No indemnification shall be provided to any such indemnitee for acts or
omissions of the indemnitee (a) if the indemnitee did not (i) act in good faith
and in a manner the indemnitee reasonably believed to be in or not opposed to
the best interests of the corporation, and (ii) with respect to any criminal
action or proceeding, have reasonable cause to believe the indemnitee's conduct
was unlawful; or (b) if the corporation is otherwise prohibited by applicable
law from paying such indemnification. Notwithstanding the foregoing, if RCW
23B.08.500 through 23B.08.590 or any successor provisions of the Washington
Business Corporations Act are hereafter amended, the restrictions on
indemnification set forth in this subsection 10.2 shall be as set forth in such
amended statutory provisions.
14
10.3 ADVANCEMENT OF EXPENSES
The right to indemnification conferred in this Section shall include the
right to be paid by the corporation the expenses reasonably incurred in
defending any proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"). An advancement of expenses shall be made upon
delivery to the corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be indemnified.
10.4 RIGHT OF INDEMNITEE TO BRING SUIT
If a claim under subsection 10.1 or 10.3 of this Section is not paid in
full by the corporation within 60 days after a written claim has been received
by the corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be 20 days, the indemnitee
may at any time thereafter bring suit against the corporation to recover the
unpaid amount of the claim. If successful in whole or in part, in any such suit
or in a suit brought by the corporation to recover an advancement of expenses
pursuant to the terms of the undertaking, the indemnitee shall be entitled to be
paid also the expense of litigating such suit. The indemnitee shall be presumed
to be entitled to indemnification under this Section upon submission of a
written claim (and, in an action brought to enforce a claim for an advancement
of expenses, when the required undertaking has been tendered to the
corporation), and thereafter the corporation shall have the burden of proof to
overcome the presumption that the indemnitee is so entitled.
10.5 NONEXCLUSIVITY OF RIGHTS
The right to indemnification and the advancement of expenses conferred in
this Section shall not be exclusive of any other right that any person may have
or hereafter acquire under any statute, provision of the Articles of
Incorporation or Bylaws of the corporation, general or specific action of the
Board or shareholders, contract or otherwise.
10.6 INSURANCE, CONTRACTS AND FUNDING
The corporation may maintain insurance, at its expense, to protect itself
and any Director, officer, partner, trustee, employee or agent of the
corporation or another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any expense, liability or loss, whether
or not the corporation would have the authority or right to indemnify such
person against such expense, liability or loss under the Washington Business
Corporation Act or other law. The corporation may enter into contracts with any
Director, officer, partner, trustee, employee or agent of the corporation in
furtherance of the provisions of this Section and may create a trust fund, grant
a security interest, or use other means (including, without limitation, a letter
of credit) to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this Section.
15
10.7 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION
In addition to the rights of indemnification set forth in subsection 10.1,
the corporation may, by action of the Board, grant rights to indemnification and
advancement of expenses to employees and agents or any class or group of
employees and agents of the corporation: (a) with the same scope and effect as
the provisions of this Section with respect to indemnification and the
advancement of expenses of Directors and officers of the corporation; (b)
pursuant to rights granted or provided by the Washington Business Corporation
Act; or (c) as are otherwise consistent with law.
10.8 PERSONS SERVING OTHER ENTITIES
Any person who, while a Director or officer of the corporation, is or was
serving (a) as a Director, officer, employee or agent of another corporation of
which a majority of the shares entitled to vote in the election of its directors
is held by the corporation, or (b) as a partner, trustee or otherwise in an
executive or management capacity in a partnership, joint venture, trust,
employee benefit plan or other enterprise of which the corporation or a
majority-owned subsidiary of the corporation is a general partner or has a
majority ownership, shall conclusively be deemed to be so serving at the request
of the corporation and entitled to indemnification and the advancement of
expenses under subsections 10.1 and 10.3 of this Section.
SECTION 11. LIMITATION OF LIABILITY
To the fullest extent that the Washington Business Corporation Act, as it
exists on the date hereof or as it may hereafter be amended, permits the
limitation or elimination of the liability of any person who would be considered
an indemnitee under subsection 10.1 of Section 10, an indemnitee of the
corporation shall not be liable to the corporation or its shareholders for
monetary damages for conduct in the capacity based upon which such person is
considered an indemnitee. Any amendments to or repeal of this Section 11 shall
not adversely affect any right or protection of any indemnitee of the
corporation for or with respect to any acts or omissions of such indemnitee
occurring prior to such amendment or repeal.
SECTION 12. AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board, except that the Board may not repeal or amend any Bylaw
that the shareholders have expressly provided, in amending or repealing such
Bylaw, may not be amended or repealed by the Board. The shareholders may also
alter, amend and repeal these Bylaws or adopt new Bylaws. All Bylaws made by the
Board may be amended, repealed, altered or modified by the shareholders.
16
The foregoing Bylaws were adopted by the Board of Directors of the
corporation on August _____ , 2000.
----------------------------------------
By: , Secretary
-------------------------
17
Colorado Revised Statutes i
EXHIBIT F
COLORADO REVISED STATUTES
ARTICLE 113
DISSENTERS' RIGHTS
PART 1
RIGHT OF DISSENT -
PAYMENT FOR SHARES
7-113-101. Definitions.
7-113-102. Right to dissent.
7-113-103. Dissent by nominees and beneficial owners.
PART 2
PROCEDURE FOR EXERCISE
OF DISSENTERS' RIGHTS
7-113-201. Notice of dissenters' rights.
7-113-202. Notice of intent to demand payment.
7-113-203. Dissenters' notice.
7-113-204. Procedure to demand payment.
7-113-205. Uncertificated shares.
7-113-206. Payment.
7-113-207. Failure to take action.
7-113-208. Special provisions relating to shares acquired after announcement
of proposed corporate action.
7-113-209. Procedure if dissenter is dissatisfied with payment or offer.
PART 3
JUDICIAL APPRAISAL OF SHARES
7-113-301. Court action.
7-113-302. Court costs and counsel fees.
Colorado Revised Statutes 1
7-113-101. DEFINITIONS. For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held in a
voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under section 7-113-102 and who exercises that right at the time and
in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion
would be inequitable.
(5) "Interest" means interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares that are
registered in the name of a nominee to the extent such owner is recognized
by the corporation as the shareholder as provided in section 7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102. RIGHT TO DISSENT.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in the event
of any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party
if:
(I) Approval by the shareholders of that corporation is required for
the merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation; or
(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102 (1); and
(d) Consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote upon
the consent of the corporation to the disposition pursuant to section
7-112-102 (2).
Colorado Revised Statutes 2
(1.3) A shareholder is not entitled to dissent and obtain payment, under
subsection (1) of this section, of the fair value of the shares of any class
or series of shares which either were listed on a national securities
exchange registered under the federal "Securities Exchange Act of 1934", as
amended, or on the national market system of the national association of
securities dealers automated quotation system, or were held of record by more
than two thousand shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders' meeting at which
the corporate action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate action; or
(c) The effective date of the corporate action if the corporate action is
authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section shall not
apply if the shareholder will receive for the shareholder's shares, pursuant
to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan of
merger or share exchange;
(b) Shares of any other corporation which at the effective date of the
plan of merger or share exchange either will be listed on a national
securities exchange registered under the federal "Securities Exchange Act of
1934", as amended, or on the national market system of the national
association of securities dealers automated quotation system, or will be held
of record by more than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu of
fractional shares,
(2) (Deleted by amendment, L. 96, p. 1321, Section 30, effective June 1,
1996.)
(2.5) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in the event
of a reverse split that reduces the number of shares owned by the shareholder
to a fraction of a share or to scrip if the fractional share or scrip so
created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair value
of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate
action creating such entitlement unless the action is unlawful or fraudulent
with respect to the shareholder or the corporation.
Colorado Revised Statutes 3
7-113-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and causes the corporation to receive written notice which states such
dissent and the name, address, and federal taxpayer identification number,
if any, of each person on whose behalf the record shareholder asserts
dissenters' rights. The rights of a record shareholder under this
subsection (1) are determined as if the shares as to which the record
shareholder dissents and the other shares of the record shareholder were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents with
respect to the shares held by any one or more beneficial shareholders, each
such beneficial shareholder must certify to the corporation that the
beneficial shareholder and the record shareholder or record shareholders of
all shares owned beneficially by the beneficial shareholder have asserted, or
will timely assert, dissenters' rights as to all such shares as to which
there is no limitation on the ability to exercise dissenters' rights. Any
such requirement shall be stated in the dissenters' notice given pursuant to
section 7-113-203.
7-113-201. NOTICE OF DISSENTERS' RIGHTS.
(1) If a proposed corporate action creating dissenters' rights under section
7-113-102 is submitted to a vote at a shareholders' meeting, the notice of
the meeting shall be given to all shareholders, whether or not entitled to
vote. The notice shall state that shareholders are or may be entitled to
assert dissenters' rights under this article and shall be accompanied by a
copy of this article and the materials, if any, that, under articles 101 to
117 of this title, are required to be given to shareholders entitled to vote
on the proposed action at the meeting. Failure to give notice as provided by
this subsection (1) shall not affect any action taken at the shareholders'
meeting for which the notice was to have been given, but any shareholder who
was entitled to dissent but who was not given such notice shall not be
precluded from demanding payment for the shareholder's shares under this
article by reason of the shareholder's failure to comply with the provisions
of section 7-113-202 (1).
(2) If a proposed corporate action creating dissenters' rights under section
7-113-102 is authorized without a meeting of shareholders pursuant to section
7-107-104, any written or oral solicitation of a shareholder to execute a
writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or
may be entitled to assert dissenters' rights under this article, by a copy of
this article, and by the materials, if any, that, under articles 101 to 117
of this title, would have been required to be given to shareholders entitled
to vote on the proposed action if the proposed action were submitted to a
vote at a shareholders' meeting. Failure to give notice as provided by this
subsection (2) shall not affect any action taken pursuant to section
7-107-104 for which the notice was to have been given, but any shareholder
who was entitled to dissent but who was not given such notice shall not be
precluded from demanding payment for the shareholder's shares under this
article by reason of the shareholder's failure to comply with the provisions
of section 7-113-202 (2).
Colorado Revised Statutes 4
7-113-202. NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If a proposed corporate action creating dissenters' rights under section
7-113-102 is submitted to a vote at a shareholders' meeting and if notice of
dissenters' rights has been given to such shareholder in connection with the
action pursuant to section 7-113-201 (1), a shareholder who wishes to assert
dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken, written
notice of the shareholder's intention to demand payment for the shareholder's
shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under section
7-113-102 is authorized without a meeting of shareholders pursuant to section
7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201 (2),
a shareholder who wishes to assert dissenters' rights shall not execute a
writing consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection (1) or
(2) of this section is not entitled to demand payment for the shareholder's
shares under this article.
7-113-203. DISSENTERS' NOTICE. (1) If a proposed corporate action creating
dissenters' rights under section 7-113-102 is authorized, the corporation
shall give a written dissenters' notice to all shareholders who are entitled
to demand payment for their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section shall
be given no later than ten days after the effective date of the corporate
action creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated shares
must be deposited:
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment demand
and certificates for certificated shares, which date shall not be less than
thirty days after the date the notice required by subsection (1) of this
section is given;
(f) State the requirement contemplated in section 7-113-103 (3), if such
requirement is imposed; and
(g) Be accompanied by a copy of this article.
Colorado Revised Statutes 5
7-113-204. PROCEDURE TO DEMAND PAYMENT.
(1) A shareholder who is given a dissenters' notice pursuant to section
7-113-203 and who wishes to assert dissenters' rights shall, in accordance
with the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in section 7-113-203 (2) (d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of
this section retains all rights of a shareholder, except the right to
transfer the shares, until the effective date of the proposed corporate
action giving rise to the shareholder's exercise of dissenters' rights and
has only the right to receive payment for the shares after the effective date
of such corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209 (1) (b), the demand
for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the shareholder's
share certificates as required by the date or dates set in the dissenters'
notice is not entitled to payment for the shares under this article.
7-113-206. PAYMENT.
(1) Except as provided in section 7-113-208, upon the effective date of the
corporate action creating dissenters' rights under section 7-113-102 or upon
receipt of a payment demand pursuant to section 7-113-204, whichever is
later, the corporation shall pay each dissenter who complied with section
7-113-204, at the address stated in the payment demand, or if no such address
is stated in the payment demand, at the address shown on the corporation's
current record of shareholders for the record shareholder holding the
dissenter's shares, the amount the corporation estimates to be the fair value
of the dissenter's shares, plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet as
of the end of a fiscal year ending not more than sixteen months before the
date of payment, an income statement for that year, and, if the corporation
customarily provides such statements to shareholders, a statement of changes
in shareholders' equity for that year and a statement of cash flow for that
year, which balance sheet and statements shall have been audited if the
corporation customarily provides audited financial statements to
shareholders, as well as the latest available financial statements, if any,
for the interim or full-year period, which financial statements need not be
audited;
Colorado Revised Statutes 6
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under section
7-113-209; and
(e) A copy of this article.
7-113-207. FAILURE TO TAKE ACTION.
(1) If the effective date of the corporate action creating dissenters' rights
under section 7-113-102 does not occur within sixty days after the date set
by the corporation by which the corporation must receive the payment demand
as provided in section 7-113-203, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares,
(2) If the effective date of the corporate action creating dissenters' rights
under Section 7-113-102 occurs more than sixty days after the date set by the
corporation by which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall send a new
dissenters' notice, as provided in section 7-113-203, and the provisions of
sections 7-113-204 to 7-113-209 shall again be applicable.
7-113-208. SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT
OF PROPOSED CORPORATE ACTION.
(1) The corporation may, in or with the dissenters' notice given pursuant to
section 7-113-203, state the date of the first announcement to news media or
to shareholders of the terms of the proposed corporate action creating
dissenters' rights under section 7-113-102 and state that the dissenter shall
certify in writing, in or with the dissenter's payment demand under section
7-113-204, whether or not the dissenter (or the person on whose behalf
dissenters' rights are asserted) acquired beneficial ownership of the shares
before that date. With respect to any dissenter who does not so certify in
writing, in or with the payment demand, that the dissenter or the person on
whose behalf the dissenter asserts dissenters' rights acquired beneficial
ownership of the shares before such date, the corporation may, in lieu of
making the payment provided in section 7-113-206, offer to make such payment
if the dissenter agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section
7-113-206 (2).
Colorado Revised Statutes 7
7-113-209. PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any
payment made under section 7-113-206, or reject the corporation's offer under
section 7-113-208 and demand payment of the fair value of the shares and
interest due, if:
(a) The dissenter believes that the amount paid under section 7-113-206
or offered under section 7-113-208 is less than the fair value of the shares
or that the interest due was incorrectly calculated;
(b) The corporation falls to make payment under section 7-113-206 within
sixty days after the date set by the corporation by which the corporation
must receive the payment demand; or
(c) The corporation does not return the deposited certificates or release
the transfer restrictions imposed on uncertificated shares as required by
section 7-113-207 (1).
(2) A dissenter waives the right to demand payment under this section unless
the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made
or offered payment for the dissenter's shares.
7-113-301. COURT ACTION.
(1) If a demand for payment under section 7-113-209 remains unresolved, the
corporation may, within sixty days after receiving the payment demand,
commence a proceeding and petition the court to determine the fair value of
the shares and accrued interest. If the corporation does not commence the
proceeding within the sixty-day period, it shall pay to each dissenter whose
demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in subsection (1)
of this section in the district court of the county in this state where the
corporation's principal office is located or, if the corporation has no
principal office in this state, in the district court of the county in which
its registered office is located. If the corporation is a foreign corporation
without a registered office, it shall commence the proceeding in the county
where the registered office of the domestic corporation merged into, or whose
shares were acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unresolved parties to the proceeding
commenced under subsection (2) of this section as in an action against their
shares, and all parties shall be served with a copy of the petition. Service
on each dissenter shall be by registered or certified mail, to the address
stated in such dissenter's payment demand, or if no such address is stated in
the payment demand, at the address shown on the corporation's current record
of shareholders for the record shareholder holding the dissenter's shares, or
as provided by law.
Colorado Revised Statutes 8
(4) The jurisdiction of the court in which the proceeding is commenced under
subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers
described in the order appointing them, or in any amendment to such order.
The parties to the proceeding are entitled to the same discovery rights as
parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount,
if any, by which the court finds the fair value of the dissenter's shares,
plus interest, exceeds the amount paid by the corporation, or for the fair
value, plus interest, of the dissenter's shares for which the corporation
elected to withhold payment under section 7-113-208.
7-113-302. COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under section 7-113-301
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation; except that the court may
assess costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment under
section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the court
finds the corporation did not substantially comply with the requirements of
part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in favor of
any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court
may award to said counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefitted.
EXHIBIT G
SHOWSTAR ONLINE.COM, INC.
2000 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants, and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as
shall be administering the Plan in accordance with Section 4 hereof.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted, and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the
Board in accordance with Section 4 hereof.
(f) "COMMON STOCK" means the common stock of the Company.
(g) "COMPANY" means SHOWSTAR ONLINE.COM, INC., a Colorado
corporation.
(h) "CONSULTANT" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services to such
entity.
(i) "DIRECTOR" means a member of the Board.
(j) "EMPLOYEE" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of: (i) any leave
of absence approved by the Company, or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed 90 days,
unless re-employment upon expiration of such leave is guaranteed by statute or
contract. If re-employment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave, any Incentive
Stock Option held by the Optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director's fee by the
Company shall be sufficient to constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the NASDAQ
National Market or the NASDAQ Small Cap Market of the NASDAQ Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
THE WALL STREET JOURNAL or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "OPTION" means a stock option granted pursuant to the Plan.
(p) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(q) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.
(r) "OPTIONED STOCK" means the Common Stock subject to an Option
or a Stock Purchase Right.
SHOWSTAR ONLINE.COM, INC. PAGE 2
2OOO STOCK OPTION PLAN
(s) "OPTIONEE" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(t) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(u) "PLAN" means this 2000 Stock Option Plan.
(v) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 10 below.
(w) "SERVICE PROVIDER" means an Employee, Director or Consultant.
(x) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(y) "STOCK PURCHASE RIGHT" means a right to purchase Common Stock
pursuant to Section 10 below.
(z) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is Seven Million Five Hundred Thousand (7,500,000)
Shares. The Shares may be authorized but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan, upon
exercise of either an Option or Stock Purchase Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Board or a Committee
appointed by the Board, which Committee shall be constituted to comply with
Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:
SHOWSTAR ONLINE.COM, INC. PAGE 3
2OOO STOCK OPTION PLAN
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by
each such award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions of any Option or
Stock Purchase Right granted hereunder. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Options or Stock
Purchase Rights may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock Purchase Right of the
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by Optionees
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.
SHOWSTAR ONLINE.COM, INC. PAGE 4
2OOO STOCK OPTION PLAN
5. ELIGIBILITY.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
(b) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate such
relationship at any time, with or without cause.
6. TERM OF PLAN. Subject to Section 18 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of 10 years unless sooner terminated under Section 14 of the Plan.
7. TERM OF OPTION. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than 10 years from
the date of grant thereof. In the case of an Incentive Stock Option granted to
an Optionee who, at the time the Option is granted, owns stock representing more
than 10% of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Option shall be 5 years from the date of
grant or such shorter term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of
such Option, owns stock representing more than 10% of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the exercise price
shall be no less than 110% of the Fair Market Value per Share on the date of
grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
SHOWSTAR ONLINE.COM, INC. PAGE 5
2OOO STOCK OPTION PLAN
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of: (i) cash,
(ii) check, (iii) promissory note, (iv) other Shares which (A) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six months on the date of surrender, and (B) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which such Option shall be exercised, (v) consideration received by the
Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (vi) any combination of the foregoing methods of
payment. In making its determination as to the type of consideration to accept,
the Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence. An
Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
SHOWSTAR ONLINE.COM, INC. PAGE 6
2000 STOCK OPTION PLAN
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an
Optionee ceases to be a Service Provider, such Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement (of at
least 30 days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service
Provider as a result of the Optionee's total and permanent disability, as
defined in Section 22(e)(3) of the Code, the Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement to the
extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for 12 months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for 12 months following the Optionee's termination. If,
at the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
SHOWSTAR ONLINE.COM, INC. PAGE 7
2000 STOCK OPTION PLAN
10. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid, and the time within
which such person must accept such offer. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine.
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
11. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, Options and Stock Purchase Rights may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or
SHOWSTAR ONLINE.COM, INC. PAGE 8
2000 STOCK OPTION PLAN
expiration of an Option or Stock Purchase Right, as well as the price per share
of Common Stock covered by each such outstanding Option or Stock Purchase Right,
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. The 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 Stock
Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until 15 days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully exercisable for a period of 15
days from the date of such notice, and the Option or Stock Purchase Right shall
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets is
SHOWSTAR ONLINE.COM, INC. PAGE 9
2000 STOCK OPTION PLAN
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
13. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the
date on which the Administrator makes the determination granting such Option
or Stock Purchase Right, or such other date as is determined by the
Administrator. Notice of the determination shall be given to each Service
Provider to whom an Option or Stock Purchase Right is so granted within a
reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Board shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
15. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of
an Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased 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.
16. INABILITY TO OBTAIN AUTHORITY. The 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 Shares hereunder, shall relieve the
SHOWSTAR ONLINE.COM, INC. PAGE 10
2000 STOCK OPTION PLAN
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. RESERVATION OF SHARES. The Company, during the term of this Plan, shall
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
SHOWSTAR ONLINE.COM, INC. PAGE 11
2000 STOCK OPTION PLAN
SHOWSTAR ONLINE.COM, INC.
2000 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the 2000 Stock Option
Plan shall have the same defined meanings in this Stock Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
_____________________________
_____________________________
_____________________________
The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
Grant Number ____________________________________________
Date of Grant ____________________________________________
Vesting Commencement Date ____________________________________________
Exercise Price per Share $___________________________________________
Total Number of Shares Granted ___________________________________________
Total Exercise Price $___________________________________________
Type of Option: [___] Incentive Stock Option
[___] Nonstatutory Stock Option
Term/Expiration Date: ____________________________________________
VESTING SCHEDULE:
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
SHOWSTAR ONLINE.COM, INC. PAGE 12
2000 STOCK OPTION PLAN
TERMINATION PERIOD:
This Option shall be exercisable for three months after Optionee ceases
to be a Service Provider. Upon Optionee's death or Disability, this Option may
be exercised for one year after Optionee ceases to be a Service Provider. In
no event may Optionee exercise this Option after the Term/Expiration Date as
provided above.
II. AGREEMENT
1. GRANT OF OPTION. The Plan Administrator of the Company hereby grants to
the Optionee named in the Notice of Grant (the "OPTIONEE"), an option (the
"OPTION") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "EXERCISE
PRICE"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"),
this Option is intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Code. Nevertheless, to the extent that it exceeds the
$100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.
(b) METHOD OF EXERCISE. This Option shall be exercisable by delivery
of an exercise notice in the form attached as EXHIBIT A (the "Exercise Notice")
which shall state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and such other representations
and agreements as may be required by the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by the aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as EXHIBIT
B.
SHOWSTAR ONLINE.COM, INC. PAGE 13
2000 STOCK OPTION PLAN
4. LOCK-UP PERIOD. Optionee hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "MANAGING UNDERWRITER")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "MARKET STANDOFF PERIOD") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
5. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by Optionee. The terms of the
Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
8. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
9. TAX CONSEQUENCES. Set forth below is a brief summary as of the date of
this Option of some of the federal tax consequences of exercise of this Option
and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
SHOWSTAR ONLINE.COM, INC. PAGE 14
2000 STOCK OPTION PLAN
(a) EXERCISE OF NSO. There may be a regular federal income tax
liability upon the exercise of an NSO. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. If Optionee is an Employee or a former Employee, the
Company will be required to withhold from Optionee's compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
(b) EXERCISE OF ISO. If this Option qualifies as an ISO, there will be
no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(c) DISPOSITION OF SHARES. In the case of an NSO, if Shares are held
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes. In the case
of an ISO, if Shares transferred pursuant to the Option are held for at least
one year after exercise and at least two years after the Date of Grant, any gain
realized on disposition of the Shares will also be treated as long-term capital
gain for federal income tax purposes. If Shares purchased under an ISO are
disposed of within one year after exercise or two years after the Date of Grant,
any gain realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the difference between the
Exercise Price and the lesser of (1) the Fair Market Value of the Shares on the
date of exercise, or (2) the sale price of the Shares. Any additional gain will
be taxed as capital gain, short-term or long-term depending on the period that
the ISO Shares were held.
(d) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two (2) years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
10. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the laws of the State of Washington.
11. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE
SHOWSTAR ONLINE.COM, INC. PAGE 15
2000 STOCK OPTION PLAN
HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE
COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S
RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME,
WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.
OPTIONEE SHOWSTAR ONLINE.COM, INC.
- ---------------------------------- -------------------------------------
Signature By
- ---------------------------------- -------------------------------------
Print Name Title
- ----------------------------------
- ----------------------------------
Residence Address
SHOWSTAR ONLINE.COM, INC. PAGE 16
2000 STOCK OPTION PLAN
EXHIBIT A
2000 STOCK OPTION PLAN
EXERCISE NOTICE
Showstar Online.com, Inc.
90-10551 Shellbridge Way
Richmond, British Columbia
Canada V6X 2W9
Attention: Secretary
1. EXERCISE OF OPTION. Effective as of today, __________________, 20___,
the undersigned ("OPTIONEE") hereby elects to exercise Optionee's option to
purchase __________ shares of the Common Stock (the "SHARES") of Showstar
Online.com, Inc. (the "COMPANY") under and pursuant to the 2000 Stock Option
Plan (the "PLAN") and the Stock Option Agreement dated _____________, 20___ (the
"OPTION AGREEMENT").
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the full
purchase price of the Shares, as set forth in the Option Agreement.
3. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance of the Shares (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.
5. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by Optionee or
any transferee (either being sometimes referred to herein as the "HOLDER") may
be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"RIGHT OF FIRST REFUSAL").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "NOTICE") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("PROPOSED TRANSFEREE"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder
proposes to transfer the Shares (the "OFFERED PRICE"), and the Holder shall
offer the Shares at the Offered Price to the Company or its assignee(s).
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within 30 days
after receipt of the Notice, the Company and/or its assignee(s) may, by giving
written notice to the Holder, elect to purchase all, but not less than all, of
the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(f) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"IMMEDIATE FAMILY" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First Refusal
shall terminate as to any Shares upon the first sale of Common Stock of the
Company to the general
SHOWSTAR ONLINE.COM, INC. PAGE 2-
EXERCISE NOTICE
public pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended.
6. TAX CONSULTATION. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.
7. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT
BE SOLD OR OFFERED FOR SALE OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT AND ANY STATE SECURITIES
LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
(b) STOP-TRANSFER NOTICES. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Exercise Notice, or (ii) to treat as
owner of such Shares or to accord the right to
SHOWSTAR ONLINE.COM, INC. PAGE 3-
EXERCISE NOTICE
vote or pay dividends to any purchaser or other transferee to whom such Shares
shall have been so transferred.
8. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under
this Exercise Notice to single or multiple assignees, and this Exercise Notice
shall inure to the benefit of the successors and assigns of the Company. Subject
to the restrictions on transfer herein set forth, this Exercise Notice shall be
binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.
9. INTERPRETATION. Any dispute regarding the interpretation of this
Exercise Notice shall be submitted by Optionee or by the Company forthwith to
the Administrator which shall review such dispute at its next regular meeting.
The resolution of such a dispute by the Administrator shall be final and binding
on all parties.
10. GOVERNING LAW; SEVERABILITY. This Exercise Notice is governed by the
laws of the State of Washington.
11. ENTIRE AGREEMENT. The Plan and Option Agreement are incorporated herein
by reference. This Exercise Notice, the Plan, the Option Agreement and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
Submitted by: Accepted by:
OPTIONEE SHOWSTAR ONLINE.COM, INC.
- ---------------------------------- -------------------------------------
Signature By:
- ---------------------------------- -------------------------------------
Print Name Title
ADDRESS: ADDRESS:
- ---------------------------------- -------------------------------------
- ---------------------------------- -------------------------------------
-------------------------------------
Date Received
SHOWSTAR ONLINE.COM, INC. PAGE 4-
EXERCISE NOTICE
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE: __________________
COMPANY: SHOWSTAR ONLINE.COM, INC.
SECURITY: COMMON STOCK
AMOUNT: $_________________________
DATE: __________________
In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "SECURITIES
ACT").
(b) Optionee acknowledges and understands that the Securities constitute
"RESTRICTED SECURITIES" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection, Optionee understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the Securities. Optionee
understands that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company, and any other legend required under applicable
state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly from the
issuer thereof, in a non-public
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of the grant of the
Option to the Optionee, the exercise will be exempt from registration under the
Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, 90 days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934, as amended); and, in
the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of Securities being sold during any
three-month period not exceeding the limitations specified in Rule 144(e), and
(4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
sections (1), (2), (3) and (4) of the paragraph immediately above.
(c) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
Signature of Optionee:
________________________________________
Date: _________________________, 20_____
SHOWSTAR ONLINE.COM, INC. PAGE 2
INVESTMENT REPRESENTATION STATEMENT
PROXY
SHOWSTAR ONLINE.COM INC.
PROXY FOR 2000 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of SHOWSTAR ONLINE.COM INC., a Colorado corporation
(the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated August 15, 2000, and revoking all
prior proxies, hereby appoints JOHN PUNZO or RUSS COSTIN, and each of them, as
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned to represent the undersigned at the
2000 Annual Meeting of Shareholders of SHOWSTAR ONLINE.COM INC., to be held on
September 15, 2000, at 10:00 a.m. local time, at The Hotel International, 5621 -
196th S.W., Lynnwood, Washington, and at any adjournment or adjournments
thereof, and to vote and act upon the following matters proposed by the Company
in respect of all shares of stock of the Company which the undersigned may be
entitled to vote or act upon with all the powers the undersigned would possess
if personally present.
A majority of such attorneys or substitutes as shall be present and shall act at
said Annual Meeting or any adjournment or adjournments thereof (or if only one
shall represent and act, then that one) shall have and may exercise all of the
powers of said attorneys-in-fact hereunder.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF ALL NOMINATED DIRECTORS, FOR THE AMENDMENT TO
THE COMPANY'S BYLAWS, FOR THE AMENDMENT OF THE COMPANY'S ARTICLES OF
INCORPORATION, FOR THE PROPOSAL TO CHANGE THE STATE OF INCORPORATION OF THE
COMPANY, FOR THE ADOPTION OF THE COMPANY'S 2000 STOCK OPTION PLAN, FOR THE
RATIFICATION OF THE APPOINTMENT OF CORDORVANO & HARVEY, P.C. AS INDEPENDENT
ACCOUNTANTS OF THE COMPANY, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
[x] Please mark your votes as in this example.
1. To approve an amendment to the Company's Bylaws to increase the number of
authorized directors and to provide for staggered terms for the Board by
providing that the Directors be divided into three equal classes whose terms of
office shall respectively expire at different times, but no such term to
continue longer than three years.
[ ] For [ ] Against [ ] Abstain
2. To elect the following nominees for Director (except as marked below):
NOMINEES: John Punzo, Barry Forward, Louis Bianchi, Lloyd E. Dohner and
William E. Peterson
[ ] For All Nominees [ ] Withhold All
[ ] For All Except
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To withhold authority to vote for any individual nominee, mark "For All Except"
and write that nominee's name in the space provided below.
----------------------------------
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3. To approve an amendment to the Company's Articles of Incorporation to
increase the authorized capital stock of the Company from 50,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock to 75,000,000 shares of
Common Stock and 25,000,000 shares of Preferred Stock, and to provide authority
to the Board of Directors to designate the rights and preferences of Preferred
Stock.
[ ] For [ ] Against [ ] Abstain
4. To approve the proposal to change the state of incorporation of the Company
from Colorado to Washington.
[ ] For [ ] Against [ ] Abstain
5. To approve the adoption of the Company's 2000 Stock Option Plan and to
reserve 7,500,000 shares of the Company's Common Stock for issuance thereunder.
[ ] For [ ] Against [ ] Abstain
6. To ratify the appointment of Cordovano & Harvey, P.C. as the Company's
independent public accountants for the current year.
[ ] For [ ] Against [ ] Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO OTHER INDICATION IS MADE, THE PROXIES
SHALL VOTE "FOR" EACH OF THE DIRECTOR NOMINEES AND "FOR" EACH OF PROPOSALS 1, 3,
4, 5 and 6.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE,
DATE AND SIGN THIS PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE.
A VOTE "FOR" EACH OF THE DIRECTOR NOMINEES AND A VOTE "FOR" EACH OF PROPOSALS 1,
3, 4, 5 AND 6 ARE RECOMMENDED BY THE BOARD OF DIRECTORS.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT THEREOF.
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MARK HERE FOR ADDRESS CHANGE AND NOTE CHANGE BELOW [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
Please sign exactly as your name appears hereon. When shares are held by joint
tenants, both owners should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the President or other
authorized officer, giving full title. If a partnership, please sign in
partnership name by authorized person, giving full title.
PRINT NAME(S) EXACTLY AS SHOWN ON STOCK CERTIFICATE:____________________________
SIGNATURE:_____________________________________ DATE:_________________________
SIGNATURE:_____________________________________ DATE:_________________________
NEW ADDRESS:___________________________________
___________________________________
___________________________________
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