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INTERACTIVE INC.
[Name of Registrant as Specified in Its Charter)
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INTERACTIVE INC.
204 North Main
Humboldt, SD 57035
(605) 363-5117
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on January 19, 2001
TO ALL SHAREHOLDERS OF INTERACTIVE INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of InterActive, Inc., a South Dakota corporation (the "Company"),
will be held at the offices of the Company, 204 North Main, Humboldt, SD 57035,
on January 19, 2001, at 2:00 p.m. local time. The purpose of the meeting is to
consider and take action on the proposals summarized below:
1. To change the domicile of the Company from the State of South Dakota
to the State of Delaware (the "Reincorporation") by merging the
Company with and into a newly to be formed and wholly owned
subsidiary, InterActive Inc., a Delaware corporation ("InterActive
Delaware"); and
2. Such other business as may properly come before the meeting,
or any adjournment or adjournments thereof.
The discussion of the proposals set forth above is intended only as a
summary. Information concerning the matters to be acted upon at the Meeting is
set forth in the accompanying Information Statement.
The close of business on December 15, 2000, has been fixed as the record
date for determining shareholders entitled to notice of and to vote at the
Meeting and any adjournments thereof. The holders of at least a majority of all
classes of the Company's outstanding voting securities have indicated that they
will vote in favor of the proposed Reincorporation. Therefore, approval of the
Reincorporation by the shareholders of the Company is assured, no additional
votes in favor of the Reincorporation are required, and none are being
solicited.
All shareholders are hereby notified that they have or may have rights to
dissent and obtain payment for their shares by complying with the terms of
Section 47-6 of the South Dakota Business Corporation Act. A copy of Sections
47-6-23 to 47-6-23.3, inclusive, and Sections 47-6-40 to 476-6-50, inclusive, of
the South Dakota Business Corporation Act is attached as Exhibit E to the
Information Statement which accompanies this Notice to Shareholders.
YOU ARE NOT BEING ASKED FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND A PROXY
Dated: December 22, 2000 By Order of the Board of Directors:
______________________,
Secretary
INTERACTIVE INC.
204 North Main
Humboldt, SD 57035
(605) 363-5117
INFORMATION STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
January 19, 2001
This Information Statement of InterActive Inc., a South Dakota corporation
(the "Company"), is being furnished to the shareholders of the Company in
connection with a Special Meeting of the Shareholders of the Company to be held
at the offices of the Company, 204 North Main, Humboldt, SD 57035, on January
19, 2001, at 2:00 p.m. local time (the "Meeting").
At the Meeting, the Company's shareholders will consider and take action on
the following Proposals:
1. To change the domicile of the Company from the State of South Dakota
to the State of Delaware (the "Reincorporation") by merging the
Company with and into a newly to be formed and wholly owned
subsidiary, InterActive Inc., a Delaware corporation ("InterActive
Delaware"); and
2. Such other business as may properly come before the meeting, or
any adjournment or adjournments thereof.
South Dakota law requires that the Reincorporation be approved by the
holders of shares of the Company's Common Stock and Series B Preferred Stock
entitled to cast at least a majority of the votes entitled to be cast at the
Meeting, voting together, by the holders of at least a majority of the Series A
Preferred Stock, voting separately as a class, and by the holders of at least a
majority of the B Preferred Stock, also voting separately as a class. The close
of business on December 15, 2000, has been fixed as the record date for
determining shareholders entitled to notice of and to vote at the Meeting and
any adjournments thereof (the "Record Date").
All of the directors and officers of the Company, who together possess,
directly or through one or more affiliates, the power to vote at least a
majority of all classes of the issued and outstanding voting securities of the
Company as of the Record Date, have indicated that they will vote, or cause to
be voted, all of the securities over which they have voting control in favor of
the approval of the Reincorporation. Therefore, approval of the Reincorporation
by the shareholders of the Company is assured, no additional votes in favor of
approval of the Reincorporation are required, and none are being solicited.
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
The date of this Information Statement is December 22, 2000.
2
VOTING SECURITIES AND RECORD DATE
Shareholders of record at the close of business on December 15, 2000 (the
"Record Date") are entitled to vote on each matter to be voted upon by the
shareholders of the Company at the Meeting. As of the Record Date, 5,162,138
shares of the Company's Common Stock, 113,901 shares of the Company's Series A
Preferred Stock, and 2,000,000 shares of the Company's Series B Preferred Stock
were issued and outstanding. Each share of the Company's Common Stock is
entitled to cast one vote on each matter to be presented to the shareholders of
the Company for their approval at the Meeting. The holder of the Company's
Series B Preferred Stock is entitled to cast 10 votes on each matter presented
to the shareholders of the Company for their approval for each share of the
Company's Series B Preferred Stock owned of record on the Record Date. Holders
of the Company's Series A Preferred Stock and Series B Preferred Stock, each
voting separately as a class, are entitled to vote on the proposal to approve
the Reincorporation. Approval of the Reincorporation will require the
affirmative vote of the holders of at least a majority of the votes entitled to
be cast by the holders of the Company's Common Stock and Series B Preferred
Stock, voting together, by the holders of at least a majority of the Company's
Series A Preferred Stock, voting separately as a class, and by the holders of at
least a majority of the Company's Series B Preferred Stock, also voting
separately as a class.
All of the directors and officers of the Company, who together possess,
directly or through one or more affiliates, the power to cast approximately
86.4% of the votes to be cast by the holders of the Company's Common Stock and
Series B Preferred Stock, approximately 53.4% of the votes to be cast of by the
holders of the Series A Preferred Stock, and 100% of the votes to be cast by the
holders of the Series B Preferred Stock, have indicated that they will vote, or
cause to be voted, all of the securities over which they have voting control in
favor of the approval of the Reincorporation. Accordingly, approval of the
Reincorporation is assured. Since no additional votes will be required for
approval of the Reincorporation, none will be solicited by the Company or its
Board of Directors.
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table sets forth certain information as of the Record Date
with respect to the beneficial ownership of the Company's Common Stock and
Preferred Stock by (i) each person or group known by the Company to be the
beneficial owner of shares of the Company's Common Stock and/or Preferred Stock
entitled to cast more than 5% of the total number of votes entitled to be cast
on all matters presented to the Company's shareholders for their approval, (ii)
each director of the Company, (iii) each executive officer of the Company named
in the Summary Compensation Table below, and (iv) all directors and executive
officers of the Company as a group. Unless otherwise indicated in the
footnotes, each person listed below has sole voting and investment power with
respect to the shares beneficially owned by such person, subject to applicable
community property laws, and the address of each such person is care of the
Company, 204 North Main, Humboldt, South Dakota 57035.
3
Shares Owned Beneficially (1)
-----------------------------------------------------------------------------------------
Common and Series B Preferred (2) Series A Preferred (3) Series B Preferred
--------------------------------- ---------------------- ------------------
NAME Number % of Total Number % of Total Number % of Total
- ---- ---------- ---------- ------ ---------- --------- ----------
Gerard L. Kappenman(4) 149,455 2.9 6,667 5.9 0 0
William J. Hanson(5) 21,941,142 83.8 45,001 39.5 2,000,000 100
Russell Pohl(6) 412,969 8.0 4,168 3.7 0 0
Robert Stahl/CSS Ltd.(7) 111,812 2.2 0 0 0 0
Old TPR, Inc.(8) 1,980,255 32.0 50,002 43.9 0 0
TPR Group, Inc.(9) 21,980,225 84.0 50,002 43.9 2,000,000 100
===========================================================================================================================
All directors and officers as a group 22,654,491 86.4 60,847 53.4 2,000,000 100
(four individuals) (4)(5)(6)(7)
===========================================================================================================================
(1) Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission, based on information
furnished by each person listed. Beneficial ownership includes shares that each
named shareholder has the right to acquire within sixty days of the Record Date.
In calculating percentage ownership of shares entitled to vote, all shares which
a named shareholder has the right to so acquire are deemed outstanding for the
purpose of computing the percentage ownership of that person, but are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person. Listed persons may disclaim beneficial ownership of certain shares.
(2) The holder of the Company's Series B Preferred Stock is entitled to
cast ten votes for each share of Series B Preferred Stock owned of record as of
the Record Date on each matter to be presented to the shareholders of the
Company for their approval at the Meeting, voting together with the holders of
the Company's Common Stock.
(3) Owners of the Company's Series A Preferred Stock, which otherwise
is non-voting, and Series B Preferred Stock, are entitled to vote, in each case
separately as a class, on the proposal to approve the Reincorporation.
(4) Includes 6,667 shares of Common Stock issuable upon conversion of
Series A Preferred Stock, 18,000 shares of Common Stock issuable upon exercise
of options.
(5) Includes 70,067 shares of Common Stock owned of record by Mr. Hanson,
8,334 shares of Common Stock issuable upon conversion of Series A Preferred
Stock owned of record by Mr. Hanson, and 18,000 shares of Common Stock issuable
to Mr. Hanson upon exercise of outstanding stock options, 853,075 shares of
Common Stock owned of record by Old TPR, Inc., a California corporation of which
Mr. Hanson is a director, executive officer and principal shareholder, and a
total of 1,036,667 shares of Common Stock issuable upon conversion of Series A
Preferred Stock and exercise of stock purchase warrants held of record by Old
TPR, Inc. Also includes the 2,000,000 shares of the Company's Series B
Preferred Stock owned of record by TPR Group, Inc., a Delaware corporation of
which Mr. Hanson is a director, executive officer and principal stockholder,
which entitle TPR Group, Inc. to cast an aggregate of 20,000,000 votes on all
matters to be presented to the shareholders of the Company for their approval.
Does not include an additional 6,000,000 shares of Common Stock which would be
issuable upon conversion of 600,000 shares of the Company's Series C Preferred
Stock which may be issued to TPR Group, Inc. at a future date pursuant to the
terms and conditions of the Term Sheet dated December 4, 1998. See "Certain
relationships and related party transactions."
(6) Includes 4,168 shares of Common Stock issuable upon conversion of
Series A Preferred Stock, and 21,000 shares of Common Stock issuable upon
exercise of options pursuant to the Company's 1992 Stock Option Plan.
(7) Includes 10,000 shares of Common Stock issuable upon exercise of
options pursuant to the Company's 1992 Stock Option Plan.
4
(8) Includes 853,075 shares of Common Stock owned of record by Old TPR,
Inc., 36,667 shares of Common Stock issuable upon conversion of Series A
Preferred Stock owned of record by Old TPR, Inc., and 1,000,000 shares of Common
Stock issuable upon exercise of stock purchase warrants held by Old TPR, Inc.
Also includes a total of 96,401 of Common Stock owned of record, or issuable
upon conversion of Series A Preferred Stock and exercise of stock options held
by, Mr. Hanson, who may be deemed to be an "affiliate" of Old TPR, Inc. Also
includes 23,366 shares of Common stock and 3,334 shares of Series A Preferred
stock owned of record by J. Randolph Sanders, and 15,747 shares of Common stock
and 4,168 shares of Series A Preferred stock owned of record by Richard Love,
each of whom is an officer, director and principal shareholder and may,
therefore, be deemed to be an "affiliate" of Old TPR.
(9) Includes 2,000,000 shares of the Company's Series B Preferred Stock
owned of record by TPR Group, Inc., which entitle TPR Group, Inc. to cast an
aggregate of 20,000,000 votes on all matters to be presented to the shareholders
of the Company for their approval. Also includes the total of 1,889,742 shares
of Common Stock beneficially owned by Old TPR, Inc., which is under common
control with TPR Group, Inc. as well as a total of 96,401 of Common Stock owned
of record, or issuable upon conversion of Series A Preferred Stock and exercise
of stock options held by, Mr. Hanson, who may be deemed to be an "affiliate" of
TPR Group, Inc. Also includes 23,366 shares of Common stock and 3,334 shares of
Series A Preferred stock owned of record by J. Randolph Sanders, and 15,747
shares of Common stock and 4,168 shares of Series A Preferred stock owned of
record by Richard Love, each of whom is an officer, director and principal
shareholder and may, therefore, be deemed to be an "affiliate" of TPR Group,
Inc.
PROPOSAL TO REINCORPORATE IN DELAWARE
GENERAL
The Company's Board of Directors has unanimously approved and, for the
reasons described below, has recommended that the shareholders of the Company
approve a reorganization in which the Company's state of incorporation would be
changed from South Dakota to Delaware (the "Reincorporation"). The
Reincorporation would be accomplished by merging the Company into a wholly-owned
Delaware subsidiary ("InterActive Delaware") newly formed for this purpose. As a
consequence of the Reincorporation, all of the previously outstanding shares of
the Company's Common Stock will be automatically converted on a one-for-one
basis into shares of the Common Stock of InterActive Delaware, and each share of
the Company's Series A Preferred Stock will be converted automatically into one
share of the Common Stock of InterActive Delaware. In addition, all outstanding
options and warrants to purchase shares of the Company's Common Stock will be
converted into options or warrants, as the case may be, to purchase the same
number of shares of the Common Stock of InterActive Delaware, at the same price
per share and on the same terms and conditions. The Company's outstanding Series
B Preferred Stock also will be converted automatically as a consequence of the
reincorporation into an equal number of shares of the Series A Preferred Stock
of InterActive Delaware having the same rights, preferences, privileges and
restrictions as the Company's outstanding Series B Preferred stock currently
has. The proposed Reincorporation will be accomplished pursuant to the terms and
conditions of an Agreement and Plan of Reincorporation (the "Plan of
Reincorporation") to be entered into between the Company and InterActive
Delaware, a copy of which is attached hereto as Exhibit C.
At and after the effective time of the Reincorporation, each certificate
that previously represented shares of the Company's Common Stock or Series A
Preferred Stock will be deemed for all purposes to evidence the right to receive
the shares of Common Stock of InterActive Delaware into which those shares of
the Company's Common Stock have been converted.
5
IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF THE COMPANY TO HAVE THEIR
STOCK CERTIFICATES EXCHANGED FOR STOCK CERTIFICATES REPRESENTING SHARES OF
INTERACTIVE DELAWARE. The Company's Common Stock is traded in the
over-the-counter market and quoted on the OTC Bulletin Board under the symbol
"INAV" and, after the Reincorporation, InterActive Delaware's Common Stock will
continue to be traded in the over-the-counter market and quoted on the OTC
Bulletin Board under the same symbol. The Reincorporation will not result in any
change in the name, business, assets, liabilities or net worth of the Company.
However, InterActive Delaware will be governed by Delaware law and a new
certificate of incorporation and bylaws, which will result in certain changes in
the rights of shareholders. See "Comparison of Rights of Shareholders of the
Company to Rights of Stockholders of InterActive Delaware" below. Approval of
the Reincorporation will constitute (a) approval of the Certificate of
Incorporation and Bylaws of InterActive Delaware in substantially the forms
attached to this Information Statement as Exhibits A and B, respectively, (b)
approval of the Plan of Reincorporation attached hereto as Exhibit C, and (c)
approval of the 2000 Stock Option Plan of InterActive Delaware attached hereto
as Exhibit D.
Furthermore, as a consequence of the Reincorporation, the three individuals
currently comprising the Company's Board of Directors will be replaced by the
three individuals serving on the Board of Directors of InterActive Delaware, who
will continue to hold their offices until the next annual meeting of the
stockholders of InterActive Delaware and until their successors are duly elected
and qualified. In addition, the executive officers of the Company will be
replaced by the executive officers of InterActive Delaware. For information
concerning the directors and executive officers of InterActive Delaware, see
"Management of InterActive Delaware" below.
PRINCIPAL REASONS FOR THE REINCORPORATION.
The Company's Board of Directors believes the change of the Company's
domicile to be in the best interests of the Company and its shareholders for
several reasons. Principally, the Board of Directors believes that it is
essential to be able to draw upon well-established principles of corporate
governance in making legal and business decisions. The prominence and
predictability of Delaware corporate law provide a reliable foundation on which
the Company's governance decisions can be based, and the Company believes that
shareholders and the Company will benefit from the responsiveness of Delaware
corporate law and Delaware courts. For these reasons, it is believed that
Delaware offers a more favorable and "user-friendly" corporate environment for
the efficient operation of a business.
For many years, Delaware has followed a policy of encouraging
incorporation in that state and has been a leader in adopting, construing and
implementing comprehensive, flexible corporate laws responsive to the legal and
business needs of corporations organized under its laws. Many corporations have
chosen Delaware initially as a state of incorporation or have subsequently
changed corporate domicile to Delaware in a manner similar to the plan described
in this Information Statement. Because of Delaware's prominence as the state of
incorporation for many major corporations, both the legislature and courts in
6
Delaware have demonstrated an ability and a willingness to act quickly and
effectively to meet changing business needs. The Delaware courts have developed
considerable expertise in dealing with corporate issues and a substantial body
of case law has developed construing Delaware law and establishing public
policies with respect to corporate legal affairs. There is substantial judicial
precedent in Delaware regarding the legal principles applicable to measures that
may be taken by a corporation and regarding the conduct of the Board of
Directors under the business judgment rule.
The Company's Board of Directors also believes that brokers, potential
market makers and investors are more familiar with, and therefore may be more
comfortable with, making a market and investing in the stock of a Delaware
corporation as compared to a South Dakota corporation. The Board believes that,
due to the substantial number of corporations incorporated in Delaware, brokers,
other potential market makers and investors are familiar with Delaware
corporations generally. The Board believes that because there are relatively
few publicly traded South Dakota corporations, brokers, other potential market
makers and investors may be unfamiliar with South Dakota corporate law and
therefore may be hesitant to invest in, or perhaps even reject an investment in,
a South Dakota corporation. In addition, the Board believes that Delaware
corporate law is relatively well developed, which would lend predictability to
both Delaware InterActive and its stockholders in matters related to corporate
governance and management.
The interests of the Board of Directors and management of the Company in
recommending and voting for the Reincorporation proposal may not be the same as
those of unaffiliated shareholders. Delaware law does not afford minority
shareholders some of the rights and protections available under South Dakota
law. In addition, the charter documents that will govern the affairs of
InterActive Delaware contain provisions that will reduce or limit the monetary
liability of directors for breaches of fiduciary duty in certain circumstances.
See "Comparison of Rights of Shareholders of the Company to Rights of
Stockholders of InterActive Delaware."
The increasing frequency of claims and litigation directed against
directors and officers of publicly held companies has greatly expanded the risks
facing directors and officers of corporations in exercising their respective
duties. The amount of time and money required to respond to such claims and to
defend such litigation can be substantial. The Company desires to reduce these
risks to its directors and officers and to limit situations in which monetary
damages can be recovered against directors so that the Company may continue to
attract and retain qualified directors who otherwise might be unwilling to serve
because of the risks involved. Both South Dakota and Delaware law permit a
corporation to include a provision in its articles or certificate of
incorporation, as the case may be, that reduces or limits the monetary liability
of directors for breaches of fiduciary duty in certain circumstances. However,
as a South Dakota corporation, the Company's articles of incorporation do not
contain such a provision, and would need to be amended by the vote of a majority
of the outstanding shares entitled to vote if such a provision were to be
included. Since it is believed that, in general, Delaware law would provide
greater protection to directors than South Dakota law, and that Delaware case
law regarding a corporation's ability to limit director liability is more
7
developed and provides more guidance than South Dakota law, it has been
determined to obtain this protection by reincorporating in Delaware, rather than
through an amendment to the Company's existing Articles of Incorporation.
Approval of the Reincorporation by the shareholders of the Company will
constitute approval by the stockholders of InterActive Delaware of the inclusion
of these provisions in the Certificate of Incorporation of InterActive Delaware.
For a further discussion of the principal differences between South Dakota and
Delaware law, as they may affect shareholders of the Company, see "Comparison of
Rights of Shareholders of the Company to Right of Stockholders of InterActive
Delaware" below.
Although not currently proposed or included in the Certificate of
Incorporation or Bylaws of InterActive Delaware, Delaware law would allow the
future inclusion of certain other provisions not permitted under South Dakota
law. Such provisions, subject to shareholder approval if later proposed by the
Board of Directors, would provide for greater continuity, stability and
independence of the Board of Directors. The Company could also adopt share
purchase rights plans, sometimes referred to as "poison pills," which typically
take the form of an issuance of a dividend to shareholders of rights to acquire
shares of the Company or an acquiring corporation at less than half their fair
market value. The Company's adoption of such a share purchase rights plan would
not require shareholder approval. In addition, certain other provisions
designed to discourage non-negotiated takeover attempts, particularly those
involving unequal treatment of the Company's shareholders, could later be
adopted. The inclusion of such anti-takeover provisions in the InterActive
Delaware certificate of incorporation, many of which may be prohibited under
South Dakota law, is permitted under Delaware law.
The proposed reorganization and related proposals do not result from any
pending legal action against the officers, directors or employees of the
Company. Similarly, the Board of Directors has no present knowledge of any
proposed tender offer or other attempt to change the control of the Company.
Nonetheless, if such action were attempted in the future, the laws of Delaware
would be better suited to the defense of such action than the laws of South
Dakota.
MANAGEMENT OF INTERACTIVE DELAWARE
Directors
- ---------
The Certificate of Incorporation and Bylaws of InterActive Delaware provide
for a Board of Directors of InterActive Delaware comprised of three individuals,
with directors to be elected at each annual meeting of the stockholders of
InterActive Delaware and to hold office until their successors are duly elected
and qualified. The three individuals currently serving on the InterActive
Delaware Board of Directors, William J. Hanson, J. Randolph Sanders, and Paul
Schock, will continue as directors of InterActive Delaware following the
Reincorporation. The following table sets forth certain information concerning
each of the three directors of InterActive Delaware:
Name Position Age
---- -------- ---
William J. Hanson Director 52
J. Randolph Sanders Director 48
Paul Schock Director 43
8
Mr. Hanson has served as a director of InterActive since its founding in
October 1989. He was Chief Operating Officer of InterActive, Inc. from October
1992 to December 1993. Mr. Hanson is a founder of Old TPR, Inc. and TPR Group,
Inc. who are shareholders of InterActive Delaware. Mr. Hanson serves on the
Board of Directors of several privately held companies including: Old TPR,
Inc., TPR Group, Inc., Torrey Pines Research, Inc., a subsidiary of TPR Group,
Inc., AcuPrint, Inc., San Diego Magnetics, Inc., Eagle Manufacturing and
Technolgy, Inc., and Pronto, Inc. He is CEO of Torrey Pines Research and of San
Diego Magnetics. Mr. Hanson holds several patents related to laser printing
technology. Mr. Hanson's prior experience includes engineering and management
positions at Datagraphix (a General Dynamics subsidiary) and Xerox Corporation.
Mr. Hanson holds a BSME degree from the New Jersey Institute of Technology.
Mr. Sanders is the President of Torrey Pines Research, IncHe serves on the
Board of Directors of TPR Group, Inc., Old TPR, Inc., Torrey Pines Research a
subsidiary of TPR Group, Inc., and San Diego Magnetics, Inc. He is an expert in
non-impact printing technology and holds several patents in this field. Mr.
Sanders' prior experience includes engineering and management positions at
Datagraphix (a former General dynamics subsidiary) and Burroughs Corporation.
Mr. Sanders holds BSME and MSME degrees from the University of Florida.
Mr. Schock is a cofounder of Bluestem Capital Company, a South Dakota based
venture capital firm. He serves on the Board of Directors of several companies,
including: CoEv, Inc., Dakota Balance, Inc., and Fiksdal Motel. He was a
director of InterActive from April 1991 to December 1994, and CFO from March
1993 to October 1993. Mr. Schock was President of Schock Financial Services,
the pre-cursor of Bluestem Capital Company. He was CFO of American Western
Corporation, a public manufacturing company in Sioux Falls, South Dakota. He
also served as Vice President of First Bank Systems. Mr. Schock attended
Stanford University and graduated magna cum laude from Augustana College with a
degree in Business.
InterActive Delaware has no standing committees, other than the Audit
Committee. The principal duties of the Audit Committee are to advise the Board
on audit matters affecting the Company, including recommendations as to the
appointment of independent outside auditors, reviewing with such auditors the
scope of its audit engagement, meeting with the management of InterActive
Delaware and its independent outside auditors to discuss matters relating to
internal accounting controls and results of audits performed. The current
members of the Audit Committee are Messrs. Hanson, Sanders and Schock.
Non-employee directors of the InterActive Delaware receive a fee of $100
for each Board meeting attended and are reimbursed for travel expenses connected
with a Board meeting. No additional fees are paid to directors for serving on
committees. Directors who are not employees of InterActive Delaware are eligible
for the grant of non-statutory stock options under the InterActive Delaware
stock option plans. For a description of certain options granted by the Company
prior to the Reincorporation to the individuals who are directors of InterActive
Delaware, see "Stock Option Plans" below.
9
Executive Officer of InterActive Delaware.
- ----------------------------------------------
Robert Stahl, 48, is the President and Secretary of InterActive Delaware.
Mr. Stahl served as President, COO of the Company from November 1996. Mr. Stahl
was previously Vice President of Sales for the Company. Mr. Stahl is co-founder
and Vice President of CSS Ltd. (CSS) since its founding in 1989. He is also
owner and operator of a family farm. From 1990 to 1995, Mr. Stahl was in charge
of national sales for Medical Communications Software, a company involved in
providing computer software to nursing homes nationally.
Executive Compensation.
- ------------------------
Prior to its incorporation in December 2000, InterActive Delaware did not
have any executive officers and, consequently, has not paid any executive
compensation. The following summary compensation table sets forth all
compensation paid or accrued by the Company for services rendered in all
capacities during the three fiscal years ended September 30, 2000 by the
Company's Chief Executive Officer and the one other most highly compensated
executive officer of the Company. There were no executive officers of the
Company whose total salary and bonus exceeded $100,000 in the 1999 fiscal year.
Other Restricted
Name & Annual Stock All Other
Principal Compen- Awards Options/ LTIP Compen-
Position Year Salary ($) Bonus ($) Sation ($) ($) SAR (#) Payouts sation
- -------------- ------- ----------- ---------- ---------- -------- ------- ------- ------
Robert Stahl 2000 11,250
President, COO 1999 7,281 844
1998 23,337
Russell Pohl 2000 2,519 13,500
CEO 1999 938 131
Director 1998 5,202 360
10
Stock Option Plans
- --------------------
The Board of Directors and shareholders of the Company have adopted and
approved two stock option plans, the 1991 Stock Option Plan (the "1991 Plan")
and the 1992 Stock Option Plan (the "1992 Plan"), pursuant to which options to
purchase up to an aggregate of 133,333 shares of the Company's Common Stock
(33,333 shares and 100,000 shares, respectively) can be granted to officers,
directors and employees, and to consultants, vendors, customers and others
expected to provide significant services to the Company. If an option granted
under either the 1991 Plan or the 1992 Plan expires or terminates, the shares
subject to any unexercised portion of that option will again become available
for the issuance of further options under the applicable plan. Options may be
granted under either plan which are intended to qualify as "incentive stock
options" under Section 422A of the Code ("Incentive Stock Options") or,
alternatively, as stock options which will not so qualify ("Nonstatutory
Options"). The plans will terminate on June 17, 2001 and August 27, 2002,
respectively, and no more options may be granted under either plan once it has
been terminated.
The Board or a committee designated by the Board is empowered to determine
the terms and conditions of each option granted under either or both of the
plans. However, the exercise price of an Incentive Stock Option cannot be less
than the fair market value of the Common Stock on the date of grant (110% if
granted to an employee who owns 10% or more of the Common Stock), and the
exercise price of a Non-Statutory Option can not be less than 85% of the fair
market value of the Common Stock on the date of grant. No Incentive Stock
Option can have a term in excess of ten years (five years if granted to an
employee owning 10% or more of the Common Stock), and no Incentive Stock Option
can be granted to anyone other than a full-time employee of the Company. All of
the options granted under the 1991 Plan vest over a 48 month period of
continuous service to the Company from the date of grant, and all options
granted under the 1992 plan vest over a 36 month period of continuous service.
As of the date of this Information Statement, options to purchase 23,834
shares of Common Stock, at an exercise price of $0.25 to $0.32 per share had
been granted to a total of three participants and are outstanding under the 1991
Plan, and options to purchase 60,000 shares of Common Stock, at an exercise
price of $0.25 per share had been granted to a total of 5 participants and are
outstanding under the 1992 Plan.
Option Grants in Last Fiscal Year
- --------------------------------------
The Company did not grant stock options or stock appreciation rights in
fiscal 2000 to any of the executive officers of the Company named above.
11
Aggregated Option Exercises in Fiscal 2000 and Option Values as of September 30,
- --------------------------------------------------------------------------------
2000
- ----
No options were exercised in fiscal 2000 by any of the Company's executive
officers. The value of unexercised options at September 30, 2000, for each of
the executive officers of the Company IDENTIFIED IN THE EXECUTIVE COMPENSATION
TABLE ABOVE were as follows:
Number of Value of
Unexercised Unexercised
Options/SARs at In-the-Money
9/30/2000 (#) Options/SARs at
Shares 9/30/2000 ($)
Acquired on Value Exercisable (1)/ Exercisable (1)/
Name Exercise (#) Realized ($) Unexercisable (2) Unexercisable (2)
- --------------------------------------------------------------------------------
Robert Stahl 0 0 10,000/0 N/A
Russell Pohl 0 0 21,000/0 N/A
The value of unexercised in-the-money options is determined by using the
difference between the exercise price and the average bid price for a share of
the Company's Common Stock on September 30, 2000, as quoted on the OTC Counter
Bulletin Board, which was $0.125. Since the exercise price of each of the
options indicated in the table was greater than $0.125, no value has been
ascribed to any of them.
Certain Relationships and Related Party Transactions
- ---------------------------------------------------------
Mr. Pohl has served as CEO and director since November 1996. Mr. Pohl's
compensation as CEO is commissions on a sliding scale based on volume of sales.
In October 1998, the Board of Directors agreed to issue to Mr. Pohl 100,000
shares of the Company's restricted Common Stock each year for a period of two
years. During fiscal 2000, Mr. Pohl was paid $2,019 in commissions and was
issued 100,000 shares of Common Stock. Additionally, the Company accrued $500
of Director's fees for Mr. Pohl.
In November 1996, Mr. Stahl was appointed President, COO. In April 1997,
Mr. Stahl's compensation was revised to a sliding commission based on volume of
sales. During 2000, CSS Ltd. (a Company in which Mr. Stahl is a principal)
was paid $11,520 in commissions for Mr. Stahl's services.
The Company previously had a line of credit under which it owed $213,500 in
principal amount to a bank. In May 1998, Mr. Stahl purchased the promissory
note evidencing borrowings under the line of credit from the bank for $10,000.
This note, which was secured by a lien on all of the Company's assets, was
subsequently purchased from Mr. Stahl by TPR Group, Inc. for $10,000. As
discussed below, this debt, which then totaled $289,440, including $75,940 of
accrued interest, was subsequently surrendered for cancellation by TPR Group,
Inc. in exchange, along with other consideration, for the issuance of 2,000,000
shares of the Company's Series B Preferred Stock.
12
In December, 1998, the Company initiated an offer to its creditors,
pursuant to which the Company proposed to issue shares of its Common Stock to
settle accrued expenses, accounts payable, notes payable and long-term debt. In
June 1999, the Company announced a "successful" consummation of this "Debt
Restructuring," in that the holders of approximately $1,569,756 of the Company's
previously outstanding debt had agreed to accept shares of the Company's common
stock in exchange therefore. TPR Group, Inc. and its affiliated entities
received 296,298 shares of the Company's Common Stock in exchange for $296,298
of unsecured debt. Mr. Hanson is a director, executive officer and principal
shareholder of TPR Group, Inc. and each of its affiliated entities.
In addition, in connection with the Debt Restructuring, TPR Group,
Inc. acquired 2,000,000 shares of the Company's Series B Preferred Stock in
exchange for the surrender to the Company for cancellation of the $289,440 of
secured debt that had been acquired by TPR Group, Inc. from Mr. Stahl, and the
contribution to the capital of the Company of $35,324 in cash and a $4,000 note
due TPR Group, Inc. from the Company. For a further description of the
Company's Series B Preferred Stock, see " Description of Securities - The
Company."
In August 1995, a $500,000 note payable that originally was issued by the
Company to a bank was acquired by Old TPR, Inc. as a consequence of its
guarantee of the Company's obligations thereunder. This note, which is due on
demand, bears interest at a variable rate of interest (compounded at 13.6% as of
September 30, 2000), and is secured by substantially all of the assets of the
Company. In connection with the performance of this guarantee, Old TPR, Inc.
received a warrant to purchase up to 1,000,000 shares of the Company's Common
Stock at the price of $.50 per share. The warrant is exercisable for so long as
the note remains outstanding, and for one full year thereafter. As of September
30, 2000, approximately $912,094 of principal and accrued interest was due and
payable under this note. In connection with the Debt Restructuring, TPR Group,
Inc. agreed to exchange this secured debt for 600,000 shares of Series C
Preferred Stock at a later date, provided that at least 18 months has expired
since the Debt Restructuring, the Company has not become subject to certain
additional obligations or liabilities, the Company's common stock has been
publicly traded for at least the 180-day period immediately preceding the date
on which the indebtedness is to be contributed, and the Company has publicly
reported positive net income for at least two full quarters prior to the date on
which the indebtedness is to be contributed. See "Description of Securities -
The Company" for a further description of the Series C Preferred Stock.
The Company also had at September 30, 2000 an additional indebtedness to TPR in
the amount of $73,980 which was loaned to the Company to pay operating expenses.
In June of 1999, Robert Stahl purchased a debt from a contractor who held a
mechanics lien on the Company's building in the amount of $11,625 for the sum of
$5,000. This debt was subsequently purchased from Mr. Stahl by Mr. Hanson for
$5,000. Additionally, the Company accrued $500 for director's fees for Mr.
Hanson.
Since 1998, TPR Group, Inc. has engaged Mr. Kappenman to provide marketing
and other consultation services to TPR Group, Inc. and its affiliates, including
the Company, and has paid Mr. Kappenman consulting fees totaling approximately
$30,000. The Company has also accrued $500 for Director's fees for Mr.
Kappenman.
13
DESCRIPTION OF SECURITIES
The Company
- ------------
The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock, $.001 par value, and 5,000,000 shares of Preferred Stock, $.001
par value. As of the Record Date, 5,162,138 shares of the Company's Common
Stock were issued and outstanding, and owned of record by approximately 417
holders. In addition, 113,901 shares of the Company's Series A Preferred Stock
were issued and outstanding as of the Record Date and owned of record by
approximately 23 holders, and 2,000,000 shares of the Company's Series B
Preferred Stock were issued and outstanding as of the Record Date and owned by
TPR Group, Inc.
Common Stock. Holders of the Company's Common Stock are entitled to one
vote on all matters to be voted upon by the shareholders and, pursuant to South
Dakota law, the Company's shareholders may cumulatively vote their shares for
the election of directors. Subject to preferences that may be applicable to any
outstanding Preferred Stock, holders of the Company's Common Stock are entitled
to receive ratably such dividends, if any, as may be declared by the Company's
Board of Directors out of funds legally available therefor. Upon the
liquidation, dissolution, or winding up of the Company, the holders of the
Company's Common Stock, together with the holders of Preferred Stock, are
entitled to share ratably in all assets of the Company which are legally
available for distribution, after payment of all debts and other liabilities and
the liquidation preference of any outstanding Preferred Stock. Holders of the
Company's Common Stock have statutory preemptive rights to subscribe for certain
issuances of equity securities, but have no redemption or conversion rights. The
outstanding shares of the Company's Common Stock are fully paid and
nonassessable under the laws of the State of South Dakota.
Preferred Stock. The Company's Board of Directors is authorized, subject
to any limitations prescribed by the laws of the State of South Dakota, but
without further action by the Company's shareholders, to provide for the
issuance of Preferred Stock in one or more series, to establish from time to
time the number of shares to be included in each such series, to fix the
designations, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof, and to increase or
decrease the number of shares of any such series (but not below the number of
shares of such series then outstanding) without any further vote or action by
the shareholders.
In 1990 and 1991, 133,349 shares of Preferred Stock designated as "Series A
Preferred Stock" were authorized and issued. As of the record date, 113,901
shares of the Series A Preferred Stock are outstanding. Of these shares, 73,228
shares are entitled to a liquidation preference of $1.35 per share, and 40,673
shares are entitled to a liquidation preference of $1.80 per share, before any
payment is made to the holders of the Common Stock if the Company is dissolved
or liquidated, and all are convertible into Common Stock on a share for share
basis, subject to adjustment if Common Stock were issued at less than $1.35 and
$1.80 per share, respectively. None of these shares has any dividend or
redemption rights, nor are the shares entitled to vote except as expressly may
be provided by South Dakota law.
14
In 1999, the Company's Board of Directors authorized the creation and
issuance of an additional series of Preferred Stock, designated as "Series B
Preferred Stock." At that time, 2,000,000 shares of Series B Preferred Stock
were issued and sold to TPR Group, Inc., and 600,000 shares of Series C
Preferred Stock were reserved for issuance to Old TPR, Inc. at a later date.
The Series B Preferred Stock has a liquidation preference of $.15 per
share, is convertible into shares of the Company's Common Stock at the rate of
10 shares of Common Stock for each share of Series B Preferred Stock, and
entitles the holder thereof to elect a majority of the directors of the Company,
and to vote along with the holders of the Company's Common Stock holders on all
other matters, with the right to cast one vote for each share of the Company's
Common Stock into which the Series B Preferred Stock is then convertible.
The Series C Preferred Stock, when issued, will have an initial liquidation
preference of $1.00 per share and will be convertible at the option of the
holder at the rate of 10 shares of the Company's common stock for each share of
Series C Preferred Stock. The Series C Preferred Stock would be redeemable by
the Company, in whole or in part, at a price of $1.00 per share upon request of
the holder given at any time after expiration of one full year from the date the
Series C Preferred Stock is issued.
Stock Options and Warrants. As of the Record Date, an aggregate of
1,083,834 shares of the Company's Common Stock were issuable upon exercise of
stock options and stock purchase warrants then outstanding. Of these shares,
83,834 are issuable upon exercise of options granted under the Company's stock
option plans, at prices that range between $0.25 and $0.32 per share. See
"Management of InterActive Delaware - Stock Option Plans." An additional
1,000,000 shares were issuable upon the exercise of stock purchase warrants at
$0.50 per share. The exercise price and number of shares issuable upon exercise
of these warrants, which expire one year following satisfaction of the $500,000
note to Old TPR, Inc. are subject to proportional adjustment in the event
of stock splits, stock dividends and similar events.
Convertible Note. The Company has an outstanding promissory note in the
amount of $20,000, which was convertible into shares of the Company's Common
Stock at the price of $2.00 per share. The Note, which bears interest at the
rate of 15% per annum, was due November 30, 1995, and is collateralized by
substantially all the asset of the Company. At September 30, 2000, the holder
of the note was owed an aggregate of $51,381, including accrued interest.
InterActive Delaware
- ---------------------
The authorized capital stock of InterActive Delaware consists of 50,000,000
shares of Common Stock, $.001 par value, and 10,000,000 shares of Preferred
Stock, $.001 par value. As of the date of this Information Statement, 1,000
shares of InterActive Delaware's Common Stock were outstanding and owned by the
Company, and no shares of InterActive Delaware's Preferred Stock were
outstanding. As a consequence of the Reincorporation, InterActive Delaware
expects to issue 5,276,039 shares of Common Stock, including 5,162,138 shares to
15
be issued to the holders of the Company's Common Stock and 113,901 shares to be
issued to the holders of the Company's Series A Preferred Stock. In addition,
2,000,000 shares of the Series A Preferred Stock of InterActive Delaware, and
warrants and options to purchase up to an additional 1,083,834 shares of
InterActive Delaware's Common Stock, will be issued as a consequence of the
Reincorporation.
Common Stock. Holders of InterActive Delaware's Common Stock are
entitled to receive ratably dividends out of funds legally available for that
purpose if, as and when declared by the Board of Directors of InterActive
Delaware. The Company has never paid cash dividends on its Common Stock and the
Board of Directors of InterActive Delaware does not anticipate that InterActive
Delaware will pay cash dividends of its Common Stock in the foreseeable future.
The future payment of dividends, if any, on InterActive Delaware's Common Stock
is within the discretion of InterActive Delaware's Board of Directors and will
depend upon earnings, capital requirements, financial condition and other
relevant factors. The dividend rights of InterActive Delaware's Common Stock
also are subject to the rights of any Preferred Stock which may be issued. Each
holder of InterActive Delaware's Common Stock is entitled to one vote for each
share held on each matter presented for stockholder action, and there is no
cumulative voting in the election of directors. Holders of InterActive
Delaware's Common Stock have no preemptive, subscription, redemption or
conversion rights. In the case of any liquidation, dissolution or winding up of
the affairs of InterActive Delaware, holders of InterActive Delaware's Common
Stock would be entitled to receive, pro rata, any assets distributable to common
stockholders in respect of the number of shares held by them. The liquidation
rights of InterActive Delaware's Common Stock would be subject to the rights of
holders of any Preferred Stock outstanding at the time of such liquidation.
All outstanding shares of InterActive Delaware's Common Stock are, and shares to
be issued as a consequence of the Reincorporation will be, when issued, fully
paid and nonassessable under the laws of the State of Delaware.
Preferred Stock. InterActive Delaware is authorized to issue, subject to
any limitations prescribed by the laws of the State of Delaware but without
further action by the InterActive Delaware stockholders, up to 10,000,000 shares
of Preferred Stock from time to time in one or more series with such
designations, powers, preferences and relative voting, distribution, dividend,
liquidation, transfer, redemption, conversion and other rights, preferences,
qualifications, limitations or restrictions as may be provided for the issue of
such series by resolution adopted by InterActive Delaware's Board of Directors.
Such Preferred Stock could have priority over InterActive Delaware's Common
Stock as to dividends and as to the distribution of InterActive Delaware's
assets upon any liquidation, dissolution or winding up of InterActive Delaware.
In addition, the InterActive Delaware Board of Directors may authorize and issue
Preferred Stock with voting or conversion rights that could adversely affect the
voting power or other rights of the holders of InterActive Delaware's Common
Stock. The issuance of such Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of InterActive Delaware.
16
The Board of Directors of InterActive Delaware has authorized the creation
of two series of Preferred Stock to be designated as "Series A Preferred Stock"
and "Series B Preferred Stock. As a part of the Reincorporation, 2,000,000
shares of Series A Preferred Stock will be issued to TPR Group, Inc. in exchange
for the 2,000,000 shares of the Series B Preferred Stock of the Company
currently outstanding and held by TPR Group, Inc., and 600,000 shares of Series
B Preferred Stock have been authorized for issuance to TPR Group, Inc. in
replacement for the 600,000 shares of the Series C Preferred Stock of the
Company which TPR Group, Inc. is entitled to receive at a future date. The
rights, preferences, privileges and limitations of the Series A Preferred Stock
of InterActive Delaware are identical to those of the currently outstanding
Series B Preferred Stock of the Company, and the rights, preferences, privileges
and limitations of the Series B Preferred Stock of InterActive Delaware are
identical to those of the Series C Preferred Stock of the Company which has been
authorized for issuance by the Company's Board of Directors.
Stock Options and Warrants. As a consequence of the Reincorporation,
options and warrants to purchase an aggregate of 1,083,834 shares of InterActive
Delaware's Common Stock will be issued in exchange for options and warrants to
purchase shares of the Company's Common Stock that currently are outstanding.
The exercise price and other terms and conditions of each of these options and
warrants will be the same as those applicable to the options and warrants for
which they are exchanged.
2000 Stock Option Plan. In addition to the stock options previously
granted by the Company which will be replaced with identical InterActive
Delaware stock options, the Board of Directors of InterActive Delaware has
adopted a 2000 Stock Option Plan pursuant to which options to purchase up to
3,000,000 of the Common Stock of InterActive Delaware may be granted. Approval
of the Reincorporation by the shareholders of the Company will also constitute
approval of the 2000 Stock Option Plan by the stockholders of InterActive
Delaware.
Subject to typical antidilution provisions for stock splits, stock
dividends and the like, the 2000 Plan authorizes the grant of options to
purchase an aggregate of up to 3,000,000 shares of the Common Stock of
InterActive Delaware over a period of up to ten years. If an option granted
under the 2000 Plan expires or terminates, the shares subject to any unexercised
portion of that option will again become available for the issuance of further
options under the 2000 Plan. Options may be granted under the 2000 Plan which
are intended to qualify as incentive stock options ("ISO's") under Section 422A
of the Internal Revenue Code of 1986, as amended (the "Code"), or,
alternatively, as stock options which will not so qualify ("Nonstatutory Stock
Options"). The 2000 Plan terminates on September 30, 2010, and no options would
be granted under the 2000 Plan thereafter.
The 2000 Plan permits administration either by the Board of Directors or by
a committee thereof consisting of two or more members of the Board who are
non-employee directors and who have been appointed by the Board (the
"Committee"). The Board of Directors or the Committee has the authority to
select the persons to receive options granted under the 2000 Plan, the extent of
their participation, and the terms and conditions of each stock option, subject
to certain limitations set forth in the 2000 Plan. Full time officers and
employees of the Company or its subsidiaries are eligible to be granted ISO's
under the 2000 Plan. Directors are only eligible to receive ISO's if they are
also full time employees of the Company. In addition, full and part time
employees, officers, non-employee directors, consultants, major vendors and
others expected to provide significant services to InterActive Delaware may be
granted Nonstatutory Stock Options under the 2000 Plan.
17
Options granted under the 2000 Plan become exercisable in accordance with
the terms of the grant made by the Board of Directors or the Committee, as set
forth in a written stock option agreement to be entered into by all participates
receiving options granted under the 2000 Plan. The Board of Directors or the
Committee has discretionary authority to select plan participants among eligible
persons and to determine at the time an option is granted whether it is intended
to be an ISO or a Nonstatutory Stock Option, and when and in what increments
shares covered by the option may be purchased. Options may be granted on terms
providing that they will be exercisable either in whole or in part at any time
or times during their respective terms, or only in specified percentages at
stated time periods or intervals during the term of the option. While the 2000
Plan does not limit the number of shares as to which options may be granted to
any one participant (including officers and directors of InterActive Delaware),
it does provide that no employee may be granted ISOs which first become
exercisable in any calendar year to purchase shares of Common Stock having a
fair market value (determined at the time of the grant of the option) in excess
of $100,000, reduced by the fair market value (similarly determined) of any
shares subject to ISO's granted under any other plan of InterActive Delaware
which also become exercisable in such calendar year.
For employees holding more than ten percent of the total combined voting
power of all classes of outstanding stock, the purchase price of each option
granted under the 2000 Plan cannot be less than 110% of the fair market value
per share of InterActive Delaware's Common Stock subject thereto on the date of
the grant. For all other participants, the option exercise price may not be less
than the fair market value per share of InterActive Delaware's Common Stock
subject thereto on the date of the grant in the case of an ISO, nor less than
85% of the fair market value per share of InterActive Delaware's Common Stock on
the date of the grant in the case of Nonstatutory Stock Options. Upon exercise
of an option, the exercise price shall be payable in full to InterActive
Delaware.
The 2000 Plan provides for payment of the exercise price of any option
granted under the 2000 Plan in full (i) in cash, (ii) by the surrender of shares
of InterActive Delaware's Common Stock in good form for transfer, owned by the
person exercising the option and having a fair market value on the date of
exercise equal to the exercise price, (iii) in any combination of cash and
shares of InterActive Delaware's Common Stock, as long as the sum of the cash so
paid and the fair market value of the shares so surrendered equal the exercise
price, or (iv) in such other consideration as the Board of Directors or the
Committee may from time to time in the exercise of its discretion deem
acceptable in a particular instance.
If an optionee's employment is terminated other than for cause, the
employee will have the right to exercise his or her option to the extent then
exercisable, but, in the case of an ISO, it must be exercised within a three
month period thereafter. If an optionee dies while still employed, or within the
period of time after his or her voluntary retirement specified in the applicable
stock option agreement, the option may be exercised at any time within twelve
18
months thereafter by his or her estate or by the person or persons to whom
rights under the option passed by will or the laws of descent or distribution,
but only to the extent such option was exercisable by him or her on that date.
The Board of Directors or the Committee may accelerate the time at which options
may be exercised. Options granted under the 2000 Plan are not transferable
except by will and the laws of descent and distribution. During the life of the
person to whom an option is granted, that person alone may exercise such option.
Within the limits of the 2000 Plan, the Board of Directors or the Committee
may also modify, extend or renew outstanding options or accept the cancellation
of outstanding options (to the extent not previously exercised) for the granting
of new stock options in substitution therefor. However, no modification of an
option which alters or impairs any rights or obligations under any option
previously granted may be made without the consent of the optionee.
The Board of Directors or the Committee may, without affecting any
outstanding options, from time to time revise or amend the 2000 Plan, and may
suspend or discontinue it at any time. However, no such revision or amendment
may either increase the number of shares subject to the 2000 Plan (with the
exception of adjustments resulting from changes in capitalization) or change the
class of participants eligible to receive options granted under the 2000 Plan
without stockholder approval.
In general, neither the grant nor the exercise of ISO's under the 2000 Plan
will result in the recognition of taxable income to the optionee nor the
recognition of a federal income tax deduction to InterActive Delaware. In
addition, the subsequent sale of the option shares by the optionee will not
result in a federal income tax deduction to the Company, but gains recognized by
the optionee upon such sale will be deemed ordinary income or capital gains
depending on the length of time involved. In general, the grant of a
Nonstatutory Stock Option will not result in either the recognition of taxable
income nor a federal income tax deduction to the optionee and InterActive
Delaware, respectively. Upon exercise, the optionee generally will recognize
ordinary income for federal income tax purposes equal to the excess of the fair
market value of InterActive Delaware's Common Stock as of the date of exercise
over the exercise price paid for such option shares, and the Company will be
entitled to a federal income tax deduction equal to the amount of ordinary
income recognized by the optionee. In general, further gain or loss realized by
such optionee on the subsequent disposition of such option shares will be long
term or short term capital gain or loss, depending on the length of time the
option shares are held after the option is exercised.
19
COMPARISON OF RIGHTS OF SHAREHOLDERS OF THE COMPANY TO
RIGHTS OF STOCKHOLDERS OF INTERACTIVE DELAWARE
If the Reincorporation is consummated, the Company would be merged with and
into Interactive Delaware and the Company's shareholders would become
stockholders of Interactive Delaware. The Company currently is governed by the
laws of South Dakota, and its Amended Articles of Incorporation and Bylaws.
Interactive Delaware is incorporated under and is governed by the laws of
Delaware, its Certificate of Incorporation and its Bylaws.
While the rights and privileges of shareholders of a South Dakota
corporation are, in many instances, comparable to those of stockholders of a
Delaware corporation, there are differences. The following is a summary of
certain significant differences between the provisions of the Amended Articles
of Incorporation of the Company and the Certificate of Incorporation of
Interactive Delaware, as well as differences between the corporation laws of
South Dakota and Delaware.
Amendments to Governing Documents
- ------------------------------------
South Dakota. With certain exceptions, an amendment to the articles of
incorporation of a South Dakota corporation must first be adopted by a
resolution of its board of directors. The directors' resolution must set forth
the proposed amendment and direct that it be submitted to a vote of the
shareholders at either an annual or a special meeting of shareholders. The
amendment is adopted upon receiving the affirmative vote of a majority of the
shares entitled to vote, unless the articles of incorporation specify a higher
percentage, or unless any class of shares is entitled to vote as a class on the
amendment, in which case the amendment is adopted upon receiving the affirmative
vote of the holders of a majority of shares of each class entitled to vote as a
class and of the total number of shares entitled to vote.
The South Dakota Business Corporations Act (the "SDBCA") provides that
shares of one class are entitled to vote as a class if the amendment would do
any of the following: (i) increase or decrease the aggregate number of
authorized shares of such class; (ii) increase or decrease the par value of the
shares of such class; (iii) effect an exchange, reclassification or cancellation
of all or parts of the shares of such class; (iv) effect an exchange, or create
a right of exchange, of all or any part of the shares of another class into the
shares of such class; (v) change the designations, preferences, limitations or
relative rights of the shares of such class; (vi) change the shares of such
class, whether with or without par value, into the same or a different number of
shares, either with or without par value, of the same class or another class or
classes; (vii) create a new class of shares having rights and preferences prior
and superior to the shares of such class, or increase the rights and preferences
of any class having rights and preferences prior or superior to the shares of
such class; (viii) in the case of a preferred or special class of shares, divide
the unissued shares of such class into series and fix and determine the
designation of such series and the variations in the relative rights and
preferences between the shares of such series or authorize the board of
directors to do so; (ix) limit or deny the existing preemptive rights of the
shares of such class; or (x) cancel or otherwise affect dividends on the shares
of such class which have accrued but have not been declared.
20
Under the SDBCA, a corporation's bylaws may be amended or repealed by the
board of directors, unless the/ corporation's articles of incorporation reserve
that power to the shareholders of the corporation. The Bylaws of the Company
provide that they may be altered or repealed at any regular or special meeting
of the shareholders subject to certain notice requirements, or at any regular or
special meeting of the board of directors.
Delaware. For a Delaware corporation to amend its certificate of
incorporation, its board of directors must first adopt a resolution declaring
the advisability of the proposed amendment and submitting the proposed amendment
to the stockholders at either an annual or special meeting of stockholders. The
amendment is adopted upon the affirmative vote of a majority of the outstanding
stock entitled to vote, and a majority of each class entitled to vote as a class
on the amendment, unless a higher vote is required by the corporation's
certificate of incorporation. If an amendment would increase or decrease the
aggregate number of authorized shares of a class of stock or change the par
value for shares of a class, such shares are entitled to vote as a class on the
amendment. Furthermore, if an amendment would alter the powers, preferences or
special rights of a particular class or series of stock so as to affect them
adversely, that class or series has the power to vote as a class,
notwithstanding the absence of any specifically enumerated power in the
certificate of incorporation. The Delaware General Corporation Law (the
"Delaware Law") also states that the stockholders have the power to adopt, amend
or repeal the bylaws of a corporation, provided that the certificate of
incorporation also may confer such power on the board of directors. Even if the
board has the power to amend the bylaws, however, this does not divest the
stockholders of that power. Interactive Delaware's Certificate of Incorporation
provides that the board of directors may amend the Bylaws of Interactive
Delaware.
Vote Required for Extraordinary Transactions
- ------------------------------------------------
South Dakota. The SDBCA requires that the principal terms of a merger first
be approved by the board of directors of each corporation that is a party to the
merger. Thereafter, the shareholders of each corporation, after receiving a
specified notice at least 20 days in advance of a special or annual meeting of
shareholders, must approve the merger. The merger is approved by the
shareholders of a corporation upon the affirmative vote of a majority of the
shares entitled to vote thereon, unless any class of shares is entitled to vote
as a class on the merger, in which case, as to that corporation, the merger is
approved upon receiving the affirmative vote of the holders of a majority of the
shares of each class entitled to vote as a class and of the total number of
shares entitled to vote on the merger. A class of shares is generally entitled
to vote as a class on a merger if the plan of merger contains any provision that
would entitle that class to vote as a class if it was contained in a proposed
amendment to the articles of incorporation, as described above. No vote of
shareholders of either corporation involved in a merger is required where one
corporation that is a party to the merger owns at least 90 percent of the
outstanding shares of the other corporation involved in the merger and the
corporation owning 90 percent or more of the outstanding shares will be the
surviving corporation in the merger.
21
Delaware. Under the Delaware Law, a plan of merger must also first be
approved by the board of directors of each corporation that is a party to the
merger and then submitted for a vote of the stockholders of the affected
corporations. Stockholders must receive notice of the meeting at least 20 days
prior to the meeting. A plan of merger is approved upon the majority vote of
the outstanding shares of each corporation entitled to vote on the merger.
Unlike the SDBCA, the Delaware Law provides that the stockholders of a
corporation are not required to approve a merger if (i) the plan of merger does
not amend the corporation's certificate of incorporation in any respect, (ii)
each share of stock of that corporation immediately outstanding will continue as
one identical share of stock of the surviving corporation after the merger and
(iii) either (A) no shares of common stock (or securities convertible into such
shares) of the surviving corporation are to be issued or delivered under the
plan of merger or (B) the authorized unissued shares or the treasury shares of
common stock of the surviving corporation to be issued or delivered under the
plan of merger, plus those initially issuable upon conversion of any other
shares, securities or obligations to be issued or delivered under the plan, do
not exceed 20 percent of the shares of common stock of such constituent
corporation outstanding immediately prior to the effective date of the merger.
Both the SDBCA and the Delaware Law contain similar vote requirements
applicable to proposed sales of all or substantially all of a corporation's
assets and property outside the ordinary course of business.
Statutory Provisions Affecting Control
- -----------------------------------------
South Dakota. Certain provisions of the SDBCA affect the control of a
publicly owned corporation such as the Company, which may have an anti-takeover
impact and may make tender offers, proxy contests and certain mergers more
difficult to consummate.
Sections 47-33-17 through 47-33-19 of the SDBCA (the "Fair Price Act"),
provide that a South Dakota "public corporation" (such as the Company) may not
engage in a "business combination" with an interested shareholder" unless
certain conditions are met. An "interested shareholder" is one that (i)
directly or indirectly beneficially owns 10 percent or more of the outstanding
voting shares of the corporation or (ii) is an affiliate or associate of the
corporation and at any time within the last four years was the beneficial owner,
directly or indirectly, of 10 percent or more of the corporation's voting stock.
In general, if a "business combination" (as defined in the Fair Price Act)
occurs with an "interested shareholder," all other shareholders of the
corporation would be entitled to receive for their shares, as a consequence
thereof, consideration, in cash, at least equal to the higher of (1) the highest
per share price paid for any common shares of the same class acquired by the
interested shareholder within the three-year period immediately prior to the
announcement of the business combination, or within the three-year period
immediately prior to, or in, the transaction in which the interested shareholder
became, an interested shareholder, whichever is higher; and (2) ) the market
value per common share on the announcement date of the business combination or
on the interested shareholder's share acquisition date. In addition, the other
shareholders would also be entitled to receive interest compounded annually from
the earliest date on which the highest per-share acquisition price was paid
22
through the consummation date at the rate for one-year United States Treasury
obligations from time to time in effect, less the aggregate amount of any cash
dividends paid. Certain business combinations are excluded from the Fair Price
Act, including a business combination or purchase of shares by an interested
shareholder that was approved by the corporation's board of directors prior to
the interested shareholder's share acquisition date, or by the holders of a
majority of the outstanding voting shares, not including any voting shares
beneficially owned by the interested shareholder, in specified circumstances.
Under Sections 47-33-8 through 47-33-16 of the SDBCA (the "Control Share
Act"), the shares of stock acquired by an acquiring person in a "control share
acquisition" that exceed certain thresholds of voting power do not have voting
rights unless the holders of the other voting shares vote to grant voting rights
to the acquiring person's shares. Subject to a number of exceptions, a "control
share acquisition" is an acquisition, directly or indirectly, by an acquiring
person of beneficial ownership of shares of a South Dakota "public corporation"
(such as the Company) that would, when added to all other shares beneficially
owned by the acquiring person, entitle the acquiring person to acquire voting
power of 20% or more, or increase the acquiring person's voting power above 20%
and up to 50%, in the election of directors.
Delaware. Under Section 203 of the Delaware General Corporation Law
("Section 203"), certain "business combinations" by Delaware corporations with
"interested stockholders" are subject to a three-year moratorium unless
specified conditions are met. With certain exceptions, an interested stockholder
is a person or group who or which owns 15% or more of the corporation's
outstanding voting stock (including any rights to acquire stock pursuant to an
option, warrant, agreement, arrangement or understanding, or upon the exercise
of conversion or exchange rights, and stock with respect to which the person has
voting rights only), or is an affiliate or associate of the corporation and was
the owner of 15% or more of such voting stock at any time within the previous
three years.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder, sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation or a
subsidiary equal to ten percent or more of the aggregate market value of the
corporation's consolidated assets or its outstanding stock; the issuance or
transfer by the corporation or a subsidiary of stock of the corporation or such
subsidiary to the interested stockholder (except for transfers in a conversion
or exchange or a pro rata distribution or certain other transactions, none of
which increase the interested stockholder's proportionate ownership of any class
or series of the corporation's or such subsidiary's stock); or receipt by the
interested stockholder (except proportionately as a stockholder), directly or
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on business combinations by Section 203
does not apply if: (i) prior to the date on which such stockholder becomes an
interested stockholder the board of directors approves either the business
combination or the transaction which resulted in the person becoming an
interested stockholder; (ii) the interested stockholder owns 85% of the
corporation's voting stock upon consummation of the transaction which made him
or her an interested stockholder (excluding from the 85% calculation shares
owned by directors who are also officers of the target corporation and shares
held by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer); or (iii) on or
after the date such person becomes an interested stockholder, the board approves
the business combination and it has also approved at a stockholder meeting by
sixty-six and two-thirds percent (66 2/3 %) of the voting stock not owned by the
interested stockholder.
23
Section 203 only applies to Delaware corporations which have a class of
voting stock that is (i) listed on a national securities exchange, (ii)
authorized for quotation on the NASDAQ Stock Market, or (iii) held of record by
more than 2,000 stockholders. Accordingly, Section 203 will not be immediately
applicable to InterActive Delaware after the Reincorporation. A Delaware
corporation may elect not to be governed by Section 203 by a provision in its
original certificate of incorporation or an amendment thereto or to the bylaws,
which amendment must be approved by majority stockholder vote and may not be
further amended by the board of directors. InterActive Delaware has not opted
out of coverage by Section 203 in its original Certificate of Incorporation and
management of InterActive Delaware does not plan to opt out of coverage in the
near future.
Dissenters' and Appraisal Rights
- -----------------------------------
Under both the SDBCA and the Delaware Law, a stockholder of a corporation
participating in certain major corporate transactions such as mergers may, under
varying circumstances, be entitled to dissenters' or appraisal rights pursuant
to which the stockholder may receive cash in the amount of the fair value of the
stockholder's shares in lieu of the consideration the stockholder would
otherwise receive in the transaction.
Delaware. Under the Delaware Law, appraisal rights are not available with
respect to the sale, lease or exchange of all or substantially all of the assets
of a corporation. With respect to mergers and consolidations, appraisal rights
also are not available under the Delaware Law as to shares that are either
listed on a national securities exchange or designated as a national market
system security on The Nasdaq Stock Market or that are held of record by more
than 2,000 holders if, in either case, the stockholders receive only shares of
the surviving corporation or shares of any other corporation which are either
listed on a national securities exchange or designated as a national market
system security on The Nasdaq Stock Market or held of record by more than 2,000
holders, plus cash in lieu of fractional shares.
In addition, appraisal rights are not available under the Delaware Law to
the stockholders of a corporation surviving a merger if no vote of the
stockholders of the surviving corporation is required to approve the merger,
such as where the plan of merger does not amend the existing certificate of
incorporation, each share of the surviving corporation outstanding prior to the
merger is an identical share after the merger, and the number of shares to be
issued in the merger does not exceed 20 percent of the shares of the surviving
corporation outstanding immediately prior to the merger and if certain other
conditions are met.
24
South Dakota. The limitations on the availability of dissenters' rights
under the SDBCA are different from those under the Delaware Law. Shareholders
of a South Dakota corporation (such as the Company) have the right to dissent
from, and to receive payment for their shares in the event of certain
transactions to which the corporation is a party, including mergers, sales of
all or substantially all of the corporation's assets outside the ordinary course
of business and certain amendments to the corporation's articles of
incorporation that adversely affect the rights of the shareholders' shares. The
right to dissent does not apply to the shareholders of a corporation surviving a
merger if the vote of the shareholders of the surviving corporation was not
required to approve the merger. As discussed above, shareholders of each South
Dakota corporation involved in a merger generally must approve the merger,
except where one of the corporations owns at least 90 percent of the outstanding
stock of the other corporation involved in the merger and the corporation owning
such stock will be the surviving corporation. Unlike the Delaware Law, the
SDBCA does not provide other exceptions from the right to dissent from certain
transactions.
Size of the Board of Directors
- -----------------------------------
Delaware. The Delaware Law permits the board of directors of a Delaware
corporation to change the authorized number of directors by amendment to the
corporation's bylaws or in the manner provided in the bylaws. However, if the
number of directors is set in the corporation's certificate of incorporation,
the number of directors may be changed only by amending the certificate of
incorporation. Interactive Delaware's Certificate does not fix the number of
directors, except to say that the number of directors shall be as fixed by a
resolution of the Board of Directors. Interactive Delaware's Bylaws provide
that the number of directors shall not be less than three and shall be
determined from time to time by resolution of the Board of Directors. As a
result, the Board of Directors of Interactive Delaware may change the authorized
number of directors without stockholder approval by resolution. As discussed
below, the SDBCA requires that the board of directors consist of at least nine
members before the board can classify itself into different classes. The
Delaware Law does not contain such a requirement.
South Dakota. Under the SDBCA, the articles of incorporation or bylaws of a
corporation may fix the number of directors. However, the corporation's articles
of incorporation must establish the number of directors on the corporation's
initial board of directors. If the bylaws fix the number of directors, the
number of directors may thereafter be increased or decreased from time to time
by amendment to the bylaws. However, if the bylaws do not set the number of
directors, then the original designation in the articles of incorporation
controls.
Cumulative Voting
- ------------------
In an election of directors under cumulative voting, each share of stock
normally having one vote is entitled to a number of votes equal to the number of
directors to be elected. A stockholder may cast all such votes for a single
nominee or may allocate the votes among as many nominees as the stockholder may
choose. Without cumulative voting, the holders of a majority of shares present
at an annual or special meeting held to elect directors would have the power to
elect all of the directors to be elected at that meeting and no nominee could be
elected without the support of a majority of the shares voting at the meeting.
25
Delaware. Under the Delaware Law, cumulative voting in the election of
directors is not mandatory. While Delaware corporations may include in their
certificate of incorporation a provision allowing for such cumulative voting
rights, Interactive Delaware's Certificate of Incorporation does not permit
cumulative voting.
South Dakota. Under the South Dakota Constitution and the SDBCA, cumulative
voting is a right for the shareholders of all corporations. South Dakota
corporations cannot eliminate cumulative voting in the election of directors
through their articles of incorporation, bylaws or otherwise. As such,
shareholders of the Company currently are able to elect directors by cumulative
voting. As a result of the Reincorporation, the right of cumulative voting for
the election of directors will be eliminated.
Classified Board of Directors
- --------------------------------
A classified board is one for which a certain number, but not all, of the
directors are elected on a rotating basis each year. A classified board makes
changes in the composition of the board of directors more difficult and thus a
potential change in control of a corporation more difficult.
Delaware. The Delaware Law permits, but does not require, a classified
board of directors, divided into as many as three classes. The Certificate of
Incorporation of InterActive Delaware does not provide for a classified board of
directors.
South Dakota. The SDBCA also permits a corporation with a board of
directors consisting of at least nine persons to divide its board of directors
into as many as three classes. The Company's Articles of Incorporation do not
provide for a classified board of directors.
Removal of Directors
- ----------------------
Delaware. Under the Delaware Law, a director of a corporation generally may
be removed, with or without cause, by the holders of a majority of the shares
entitled to vote at an election of directors. However, unless the corporation's
certificate of incorporation provides otherwise, if the corporation's board of
directors is classified, directors may be removed only for cause. Also, in the
case of a corporation having cumulative voting, if less than the entire board is
to be removed, no director may be removed without cause if the votes cast
against the director's removal would be sufficient to elect the director if then
cumulatively voted at an election of the entire board of directors, or, if there
are classes of directors, at any election of the class of directors of which the
director is a part. Interactive Delaware's Certificate of Incorporation provides
that directors may be removed only for cause. Interactive Delaware's Certificate
does not provide for cumulative voting.
South Dakota. The SDBCA does not specifically provide for the removal of
directors. Under the Amended Articles of Incorporation of the Company, subject
to the rights of any class of stock then outstanding, any director may be
removed from office, but only for cause and only by shareholder action.
Generally, the vote for removal must be by a majority of shares entitled to vote
26
on the election of directors. However, if less than the entire Board is to be
removed, no single director may be removed if the votes cast against his removal
would be sufficient to elect the director if then cumulatively voted at an
election of the class of directors of which the director is a part.
Filling Vacancies on the Board of Directors
- -------------------------------------------------
Delaware. Under the Delaware Law, vacancies may be filled by a majority of
the directors then in office (even though less than a quorum) unless otherwise
provided in the corporation's certificate of incorporation or bylaws. As
permitted by the Delaware Law, the Interactive Delaware Certificate of
Incorporation provides that vacancies shall be filled by a majority of the
directors then in office, subject to the rights of the holders of any class or
series of preferred stock then outstanding.
The Delaware Law also provides that if, at the time of filling any vacancy,
the directors then in office constitute less than a majority of the board (as
constituted immediately prior to any increase), the Delaware Court of Chancery
may, upon application of any holder or holders of at least 10 percent of the
total number of the shares at the time outstanding having the right to vote for
directors, summarily order a special election to be held to fill any such
vacancy or to replace directors chosen by the board to fill such vacancies.
South Dakota. Under the SDBCA, any vacancy on the board of directors may
be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum. Each director elected to fill a vacancy is elected
for the unexpired part of the term of the person's predecessor.
Interested Director Transactions
- ----------------------------------
Delaware. Under Delaware law, contracts or transactions between a
corporation and one or more of its directors, or between a corporation and any
other entity in which one or more of its directors have a financial interest or
are directors, are not void or voidable simply because of such interest or
because the director is present at a meeting of the board which authorizes or
approves the contract or transaction, provided that either: (i) the material
facts as to the director's interest are disclosed to or known by the board (or
committee) and the board (or committee) in good faith authorizes the transaction
by a majority vote of "disinterested" directors; (ii) the stockholders approve
the contract or transaction in good faith after full disclosure of the material
facts relating to the director's interest; or (iii) the contract or transaction
was "fair" to the corporation at the time it was approved.
South Dakota. The SDBCA does not contain a similar provision.
27
Derivative Suits
- -----------------
Delaware. In Delaware, a stockholder may bring a derivative action if the
person was a stockholder at the time of the transaction in question. A
stockholder may not bring a derivative action unless the stockholder first makes
a demand on the corporation that it bring suit and the corporation refuses,
unless the demand would have been "futile."
South Dakota. Under the SDBCA, a shareholder-plaintiff in a derivative
action must allege in the complaint that the person was a shareholder at the
time of the transaction or that the person's shares devolved on the person
thereafter by operation of law. The complaint also must set forth the efforts,
if any, that the shareholder made to obtain the action the shareholder desires
from the directors and, if necessary, from the shareholders, and the
shareholder's reasons for the shareholder's failure to obtain that action or not
making the effort.
Power to Call Special Stockholders' Meeting
- ------------------------------------------------
Delaware. Under the Delaware Law, a special meeting of stockholders may be
called by the board of directors or by any other person authorized to do so in
the certificate of incorporation or the bylaws. The Interactive Delaware Bylaws
provide that special meetings may be called by an executive officer of
Interactive Delaware whenever directed by the Board of Directors.
South Dakota. Under the SDBCA, a special meeting of shareholders may be
called by the president, the board of directors, the holders of shares of not
less than 10 percent of the shares entitled to vote at such meeting or such
additional persons as are authorized by the articles of incorporation. The
Amended Articles of Incorporation of the Company authorize any executive officer
of the Company to call a special meeting whenever directed by the Board of
Directors.
Preemptive Rights.
- -------------------
Delaware. Under the Delaware Law, stockholders do not have preemptive
rights to subscribe for issuances of equity securities unless the certificate of
incorporation of the Delaware corporation otherwise provides. The Certificate
of Incorporation of InterActive Delaware does not provide preemptive rights for
the holders of InterActive Delaware's Common Stock
South Dakota. The SDBCA provides that shareholders of a South Dakota
corporation have preemptive rights to subscribe for certain issuances of equity
securities unless the articles of Incorporation of the South Dakota corporation
otherwise provide. The Company's Articles of Incorporation do not expressly
eliminate these preemptive rights. However, the Company's Board of Directors
has been advised that statutory preemptive rights are no longer applicable to a
South Dakota corporation once the corporation, such as the Company, has
conducted an initial public offering.
28
Increase of Indebtedness
- --------------------------
Delaware. The Delaware Law does not contain provisions that specifically
limit the ability of a Delaware corporation to incur indebtedness.
South Dakota. Under the South Dakota Constitution and the SDBCA, a
Corporation may not increase its indebtedness without first obtaining approval
of the shareholders at a meeting held after not less than 60 days' notice.
Loans to Non-employee Directors
- ----------------------------------
Delaware. The Delaware Law does not specifically prohibit a Delaware
corporation from lending money to a non-employee director.
South Dakota. Under the SDBCA, a corporation may not lend money or use its
credit to assist a director who is not also an employee of the corporation
without shareholder approval.
Limitation of Liability
- -------------------------
The SDBCA and the Delaware law permit corporations to adopt a provision in
their articles or certificate of incorporation eliminating, with certain
exceptions, the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of the director's fiduciary duty as
a director.
Delaware. Under the Delaware Law, a corporation may not eliminate or limit
director monetary liability for (i) breaches of the director's duty of loyalty
to the corporation or its stockholders, (ii) acts or omissions not in good faith
or involving intentional misconduct or a knowing violation of law, (iii)
unlawful dividends, stock repurchases or redemptions, or (iv) transactions from
which the director received an improper personal benefit. This provision also
may not limit a director's liability for violation of, or otherwise relieve a
corporation or its directors from the necessity of complying with, federal or
state securities laws, or affect the availability of non-monetary remedies such
as injunctive relief or rescission. Interactive Delaware's Certificate of
Incorporation contains a provision stating that directors shall not be
personally liable for monetary damage to the corporation, except to the extent
required by the Delaware Law.
South Dakota. The SDBCA does not permit the elimination of monetary
liability where such liability is based on: (i) a breach of the director's duty
of loyalty to the corporation or its shareholders for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (ii) improper dividends or distributions, unauthorized purchases of shares,
improper loans or commencing business before the corporation obtains its minimum
capital; or (iii) any transaction from which the director derived an improper
personal benefit. The Articles of Incorporation of the Company currently do not
include the necessary provisions to eliminate or limit the liability of the
Company's directors.
29
Indemnification
- ---------------
Delaware. The Delaware Law generally permits indemnification of expenses
incurred in the defense or settlement of a derivative or third-party action,
provided that there is a determination by a majority vote of disinterested
directors (even though less than a quorum) or, if there are no such directors,
or if such directors so direct, by independent legal counsel in a written
opinion or by the stockholders, that the person seeking indemnification acted in
good faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to a criminal
proceeding, which the person had no reasonable cause to believe the person's
conduct was unlawful. Without court approval, however, no indemnification may be
made in respect of any derivative action in which the person is adjudged liable
to the corporation. The Delaware Law requires indemnification of expenses when
the individual being indemnified has successfully defended the action on the
merits or otherwise. Interactive Delaware's Certificate of Incorporation
provides that directors and executive officers shall be indemnified to the full
extent provided by the Delaware Law. As to other persons who are not directors
or executive officers but who may be eligible for indemnification, the
Certificate of Incorporation provides that such persons may be indemnified by
Interactive Delaware to the extent permissible by law and the Certificate and
authorized by the Board of Directors. The Certificate further provides that
Interactive Delaware may purchase and maintain insurance to cover such expenses,
whether or not indemnification would be permissible under the Delaware Law in
the absence of insurance.
South Dakota. Like the Delaware Law, the SDBCA permits indemnification of
expenses incurred in derivative or third-party actions, except that with respect
to derivative actions, no indemnification may be made when a person is adjudged
liable to the corporation for negligence or misconduct in the performance of
that person's duty to the corporation, unless a court determines that the person
is entitled to indemnity for expenses in view of all the circumstances, and then
indemnification may be made only to the extent that the court determines.
Indemnification is permitted by the SDBCA only for acts that the person
seeking indemnification in good faith believed to be in the best interests of
the corporation and its shareholders, and with respect to a criminal proceeding,
that the person had no reasonable cause to believe the person's conduct was
unlawful, as determined by a majority vote of a quorum of disinterested
directors, independent legal counsel in a written opinion (whether or not a
quorum of disinterested directors is obtainable) or by the shareholders.
Indemnification of expenses is required when the individual has successfully
defended the action on the merits. The Articles of Incorporation of the Company
currently do not contain provisions comparable to those set forth in the
Certificate of Incorporation of InterActive Delaware regarding enhanced
indemnification of directors and executive officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
and Interactive Delaware pursuant to the foregoing provisions, or otherwise, the
Company and Interactive Delaware have been advised in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
30
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The Reincorporation is intended to be a tax-free reorganization under the
Internal Revenue Code of 1986, as amended. 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 consummation of the
Reincorporation, and no gain or loss will be recognized by the Company or
InterActive Delaware. Each former holder of capital stock of the Company will
have the same basis in the capital stock of InterActive Delaware 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 InterActive
Delaware's capital stock will include the period during which such holder held
the corresponding Company capital stock, provided 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 an
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 PROPOSED REINCORPORATION, INCLUDING THE
APPLICABILITY OF THE LAWS OF ANY STATE OR OTHER JURISDICTION.
DISSENTERS' RIGHTS OF APPRAISAL
Under the provisions of Section 47-6-23 of the SDBCA, any shareholder of
the Company may dissent from the proposed Reincorporation and be paid the "fair
value" of that person's shares of the Company's Common Stock, Series A Preferred
Stock and/or Series B Preferred Stock, as the case may be, by complying with the
procedures set forth in Sections 47-6-23 through 47-6-50 of the SDBCA. Any
shareholder who delivers written notice of dissent to the Company at or before
the Meeting and who does not vote for approval of the Reincorporation at the
Meeting has the right to receive the fair value of the person's shares if the
Reincorporation is approved and the proposed Reincorporation is consummated. A
shareholder may not dissent as to less than all of the shares beneficially owned
by him or her.
A shareholder who wishes to dissent must follow certain required
procedures. To claim dissenters' rights, a shareholder initially must:
(i) refrain from voting in favor of the Reincorporation (there is no
requirement that a shareholder vote against approval of the Reincorporation);
and
(ii) deliver to the Company, before the vote is taken on the
Reincorporation at the Meeting, a written notice of dissent (voting against
approval of the Reincorporation will not satisfy this requirement). The notice
must state that the shareholder intends to demand payment for the person's
shares if the Reincorporation is approved and consummated.
31
After the Reincorporation is approved, the Company must thereafter give
notice of such approval to each shareholder that properly demanded the right to
receive the fair value of the person's shares. Within 30 days of the date the
notice is delivered, the shareholder must file with the Company a written demand
for payment (in the form contained in the notice), including a certification as
to the date that the shareholder acquired beneficial ownership of the shares and
deposit with the Company the certificate or certificates evidencing such shares
in accordance with the terms of the notice. A shareholder who properly demands
payment and deposits the applicable stock certificates retains all other rights
of a shareholder until those rights are canceled or modified by the taking of
the actions contemplated by the Plan of Reincorporation. A shareholder who does
not demand payment or deposit the applicable stock certificates as required in
the notice loses his or her dissenters' rights.
If the Reincorporation does not occur, a court determines that the
shareholder is not entitled to payment, or the shareholder otherwise loses
dissenters' rights, the shareholder will not be entitled to receive the payment
demanded for the person's shares. If the Reincorporation does not occur, a
dissenting shareholder will be reinstated to the person's rights as a
shareholder.
Immediately upon consummation of the Reincorporation, the Company must send
to the dissenting shareholder the amount that the Company estimates to be the
fair value of the person's shares, plus accrued interest, if any. The payment
must be accompanied by (i) the Company's balance sheet and statement of income
for a fiscal year ended not more than 16 months before the date of payment,
together with the latest available interim financial statements, (ii) a
statement of the Company's estimate of the fair value of the shares and (iii) a
notice of the dissenter's right to demand payment based on the dissenting
shareholder's estimate of the fair value of the person's shares, accompanied by
a copy of Sections 47-6-23 through 47-6-50 of the SDBCA.
Within 30 days after the Company has made payment for the shares, the
shareholder may notify the Company in writing of the person's own estimate of
the fair value of the shares and the amount of interest due, and demand payment
of that estimate, less any payment already forwarded to him or her. The
shareholder's right to pursue further a differing amount for the person's shares
terminates if the shareholder fails to act within that 30-day period.
If the shareholder demands an amount for the person's shares different than
that paid by the Company, then, within 60 days after receiving the shareholder's
demand for payment of a different amount, the Company may file an action in an
appropriate court to determine the fair value of the shareholder's shares and
accrued interest. If the Company does not file the action within the 60-day
period, the Company will be required to pay the dissenting shareholder the
amount the shareholder has demanded. This summary discussion of Sections 47-6-23
through 47-6-50 is not intended to be a complete description of the provisions
of those sections and is qualified in its entirety by reference to Sections
47-6-23 through 47-6-50 of the SDBCA, a copy of which is attached as Exhibit E
to this Information Statement and incorporated by reference herein.
32
THE COMPANY IS NOT OBLIGATED TO CONSUMMATE THE REINCORPORATION IF
DISSENTERS' RIGHTS ARE ASSERTED WITH RESPECT TO MORE THAN TWO PERCENT OF THE
SHARES OF THE COMPANY"S COMMON STOCK AND/OR SERIES A PREFERRED STOCK CURRENTLY
OUTSTANDING. THE COMPANY WILL REQUIRE STRICT COMPLIANCE WITH SECTIONS 47-6-23
THROUGH 47-6-50 OF THE SDBCA BY ANY SHAREHOLDER SEEKING TO ASSERT DISSENTERS'
RIGHTS.
THE ABOVE DISCUSSION OF RIGHTS OF DISSENTING SHAREHOLDERS DOES NOT
CONSTITUTE LEGAL ADVICE. SHAREHOLDERS SEEKING TO EXERCISE AND PERFECT
DISSENTERS' RIGHTS SHOULD SEEK LEGAL COUNSEL.
AVAILABLE INFORMATION
The Company reports the information requirements of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information filed with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, NW, Washington, DC
20549 or at the Regional Offices of the Commission which are located as follows:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can also be obtained from the Commission at
prescribed rates. Written requests for such material should be addressed to the
Public Reference Section, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549. The Commission maintains a Web site that contains
reports, proxy statements and other information filed electronically by the
Company with the Commission which can be accessed over the internet at
http://www.sec.gov.
FORWARD-LOOKING STATEMENTS
This Information Statement, as well as documents, reports and other
information filed with the Commission, may contain certain "forward-looking"
statements as such term is defined in the Private Securities Litigation Reform
Act of 1995 or by the Commission in its rules, regulations and releases, which
represent the Company's expectations or beliefs, including but not limited to,
statements concerning the Company's operations, economic performance, financial
condition, growth and acquisition strategies, investments, and future
operational plans. For this purpose, any statements contained herein that are
not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words such as
"may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate,"
"might," or "continue" or the negative or other variations thereof or comparable
terminology are intended to identify forward-looking statements. These
statements, by their nature, involve substantial risks and uncertainties,
certain of which are beyond the company's control, and actual results may differ
materially depending on a variety of important factors, including uncertainty
related to acquisitions, governmental regulation, managing and maintaining
growth, volatility of stock prices and any other factors discussed in this and
other Company filings with the Commission.
33
OTHER MATTERS
Management of the Company knows of no other matter that may come before the
Meeting.
INDEPENDENT AUDITORS
Selection of the independent auditors is made by the Company's Board of
Directors upon consultation with the Audit Committee. The Company's independent
auditors for the fiscal years ended September 30, 1999 and 2000 were McGladrey &
Pullen LLP. The Board of Directors of InterActive Delaware will select the
auditors for the fiscal year of InterActive Delaware ending September 30, 2001
at a future meeting. Representatives of McGladrey & Pullen LLP are expected to
attend the Meeting, will have an opportunity to make a statement if they so
desire, and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals to be presented by stockholders of InterActive Delaware at the
2001 Annual Meeting must be received by the Company at its principal executive
office not less than 30 days nor more than 60 days prior to the scheduled date
of the meeting (or, if less than 40 days' notice or prior public disclosure of
the date of the meeting is given, the 10th day following the earlier of (i) the
day such notice was mailed or (ii) the day such public disclosure was made) to
be considered for inclusion in the proxy statement and form of proxy relating to
the 2001 Annual Meeting of Stockholders.
Under Rule 14a-8 adopted by the Commission under the Exchange Act,
proposals of shareholders must conform to certain requirements as to form and
may be omitted from the proxy statement and proxy under certain circumstances.
In order to avoid unnecessary expenditures of time and money by stockholders,
stockholders are urged to review this rule and, if questions arise, to consult
legal counsel prior to submitting a proposal.
ANNUAL REPORT
The Company's 1999 Annual Report to Shareholders is being mailed to all of
the Company's shareholders with this Information Statement. The Annual Report to
Shareholders includes the Company's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1999. Except to the extent otherwise specifically
provided herein, these documents are not incorporated into this Proxy Statement
and are not considered proxy-soliciting material. Copies of the Company's Annual
Report to Shareholders are also available without charge to any shareholder
entitled to notice of and to vote at the Meeting, by contacting the Company at
(605) 363-5117.
34
EXHIBITS
A. Certificate of Incorporation of InterActive Delaware.
B. Bylaws of InterActive Delaware
C. Agreement and Plan of Reincorporation.
D. 2000 Stock Option Plan of InterActive Delaware
E. Sections 47-6-23 through 47-6-23.3, inclusive, and Sections
47-6-40 through 47-6-50, inclusive, of the South Dakota
Business Corporation Act.
35
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
INTERACTIVE INC.
FIRST: The name of the corporation is "InterActive Inc."
SECOND: The address of the corporation's registered office in the State
of Delaware is 15 E. North Street, Dover, Delaware 19901. The name of its
registered agent at such address is Paracorp Incorporated.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares which the corporation shall have
authority to issue is 60,000,000, of which 50,000,000 shares shall be common
stock, $.001 par value ("Common Stock"), and 10,000,000 shares shall be
preferred stock, $.001 par value ("Preferred Stock"). The Board of Directors is
authorized, subject to the limitations prescribed by law and the provisions of
this Article FOURTH, to provide for the issuance of the Preferred Stock in
series, and by filing a certificate pursuant to the applicable laws of the State
of Delaware, to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, preferences and rights
of the shares of each such series and the qualifications, limitations or
restrictions thereof. The authority of the Board of Directors with respect to
each such series shall include, but not be limited to, the determination of the
following:
(a) The number of shares constituting that series and the
distinctive designation of that series; (b) The dividend rate, if any, on the
shares of that series, whether dividends shall be cumulative, and, if so, from
which date or dates, and the relative priority, if any, of payment of dividends
on shares of that series; (c) Whether that series shall have voting rights, in
addition to the voting rights expressly required by law, and, if so, the terms
of such voting rights; (d) Whether that series shall have conversion privileges,
and, if so, the terms and conditions of such conversion, including provisions
for adjustment of the conversion rate in such events as the Board of Directors
shall determine; (e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and the amount
per share payable in the case of redemption, which amount may vary under
different conditions and at different redemption dates; (f) Whether that series
shall have a sinking fund for the redemption or purchase of shares of that
series, and, if so, the terms and amount of such sinking fund; (g) The rights of
the shares of that series in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the corporation, and the relative
rights of priority, if any, of payment of shares of that series; and (h) Any
other relative rights, preferences and limitations of that series.
FIFTH: The name and mailing address of the incorporator of the
corporation is James M. Phillips, Jr., 6359 Paseo Del Lago, Carlsbad,
California 92009.
SIXTH: The Board of Directors of the corporation is expressly
authorized to make, alter or repeal the Bylaws of the corporation, but the
stockholders may make additional Bylaws and may alter or repeal any bylaw
whether adopted by them or otherwise.
SEVENTH: Elections of directors need not be by written ballot except to
the extent provided in the Bylaws of the corporation.
EIGHTH: A director of the corporation shall not be liable to the
corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent such exemption from liability
or limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any repeal or
modification of the foregoing paragraph by the stockholders of the corporation
shall not adversely affect any right or protection of a director of the
corporation in respect of any act or omission occurring prior to the time of
such repeal or modification.
NINTH: The corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation in the manner now or hereafter prescribed by law,
and all rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to this
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the right reserved in this Article NINTH.
IN WITNESS WHEREOF, the undersigned incorporator hereby acknowledges that
the foregoing Certificate of Incorporation is his act and deed and that the
facts stated therein are true, this 15th day of December, 2000.
---------------------------
James M. Phillips, Jr.
-2-
EXHIBIT B
BYLAWS OF
INTERACTIVE INC.
ARTICLE I
Stockholders
Section 1.1. Annual Meetings. An annual meeting of stockholders
----------------
shall be held for the election of directors at such date, time and place, either
within or without the State of Delaware, as may be designated by resolution of
the Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of stockholders
-----------------
for any purpose or purposes may be called at any time by the Board of Directors,
or by a committee of the Board of Directors which has been duly designated by
the Board of Directors, and whose powers and authority, as expressly provided in
a resolution of the Board of Directors, include the power to call such meetings,
but such special meetings may not be called by any other person or persons.
Section 1.3. Notice of Meetings. Whenever stockholders are
--------------------
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the written
notice of any meeting shall be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the corporation.
Section 1.4. Adjournments. Any meeting of stockholders, annual or
------------
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of stockholders, except
------
where otherwise provided by law or the certificate of incorporation or these
bylaws, the holders of shares representing a majority of the votes entitled to
be cast by the holders of the outstanding shares of stock entitled to vote at
the meeting, present in person or by proxy, shall constitute a quorum. In the
absence of a quorum, the stockholders so present may, by majority vote, adjourn
the meeting from time to time in the manner provided in Section 1.4 of these
bylaws until a quorum shall attend. Shares of its own stock belonging to the
corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the corporation, shall neither be entitled to vote nor be counted
for quorum purposes; provided, however, that the foregoing shall not limit the
right of the corporation to vote stock, including but not limited to its own
stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be
------------
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
his absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 1.7. Voting; Proxies. Except as otherwise provided in the
---------------
certificate of incorporation or any amendment thereto, each stockholder entitled
to vote at any meeting of stockholders shall be entitled to one vote for each
share of stock held by him which has voting power upon the matter in question.
Each stockholder entitled to vote at a meeting of stockholders may authorize
another person or persons to act for him by proxy, but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date with the Secretary of the corporation.
Voting at meetings of stockholders need not be by written ballot and need not be
conducted by inspectors unless the holders of shares representing a majority of
the votes entitled to be cast by the holders of the outstanding shares of all
classes of stock entitled to vote thereon present in person or by proxy at such
meeting shall so determine. At all meetings of stockholders for the election of
directors a plurality of the votes cast shall be sufficient to elect. All other
elections and questions shall, unless otherwise provided by law or by the
certificate of incorporation or these bylaws, be decided by the vote of shares
representing a majority of the votes entitled to be cast by the holders of the
outstanding shares of stock entitled to vote thereon present in person or by
proxy at the meeting.
Section 1.8. Fixing Date for Determination of Stockholders of
----------------------------------------------------
Record. In order that the corporation may determine the stockholders entitled
- ------
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days prior to any other action. If no
record date is fixed: (1) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held; and (2) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
2
Section 1.9. List of Stockholders Entitled to Vote. The Secretary
-------------------------------------
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. Upon the
willful neglect or refusal of the directors to produce such a list at any
meeting for the election of directors, they shall be ineligible for election to
any office at such meeting. The stock ledger shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list of
stockholders or the books of the corporation, or to vote in person or by proxy
at any meeting of stockholders.
Section 1.10. Action by Consent of Stockholders. Unless otherwise
---------------------------------
restricted by the Certificate of Incorporation, any action required or permitted
to be taken at any annual or special meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having 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 thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE II
Board of Directors
Section 2.1. Number; Qualifications. The Board of Directors shall
----------------------
consist of one or more members, the number thereof to be determined from time to
time by resolution of the Board of Directors. Directors need not be
stockholders.
Section 2.2. Election; Resignation; Removal; Vacancies. The Board
-----------------------------------------
of Directors shall initially consist of the persons named as Directors by the
Incorporator, and each Director so elected shall hold office until the first
annual meeting of stockholders or until his successor is elected and qualified.
At the first annual meeting of stockholders and at each annual meeting
thereafter, the stockholders shall elect Directors each of whom shall hold
office for a term of one year or until his successor is elected and qualified.
Any Director may resign at any time upon written notice to the corporation. Any
vacancy occurring in the Board of Directors for any cause may be filled by a
majority of the remaining members of the Board of Directors, although such
majority is less than a quorum, or by a plurality of the votes cast at a meeting
of stockholders, and each Director so elected shall hold office until the
expiration of the term of office of the Director whom he has replaced or until
his successor is elected and qualified.
3
Section 2.3. Regular Meetings. Regular meetings of the Board of
-----------------
Directors may be held at such places within or without the State of Delaware and
at such times as the Board of Directors may from time to time determine, and if
so determined notices thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of
-----------------
Directors may be held at any time or place within or without the State of
Delaware whenever called by the President, any Vice President, the Secretary, or
by any member of the Board of Directors. Reasonable notice thereof shall be
given by the person or persons calling the meeting, not later than the second
day before the date of the special meeting.
Section 2.5. Telephonic Meetings Permitted. Members of the Board
-----------------------------
of Directors, or any committee designated by the Board, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
bylaw shall constitute presence in person at such meeting.
Section 2.6 Quorum; Vote Required for Action. At all meetings of
--------------------------------
the Board of Directors a majority of the whole Board shall constitute a quorum
for the transaction of business. Except in cases in which the certificate of
incorporation or these bylaws otherwise provide, the vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 2.7. Organization. Meetings of the Board of Directors
------------
shall be presided over by the Chairman of the Board, if any, or in his absence
by the Vice Chairman of the Board, if any, or in his absence by the President,
or in their absence by a chairman chosen at the meeting. The Secretary shall
act as secretary of the meeting, but in his absence the chairman of the meeting
may appoint any person to act as secretary of the meeting.
Section 2.8. Informal Action by Directors. Unless otherwise
-------------------------------
restricted by the certificate of incorporation or these bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or such committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
4
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may, by
----------
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of the
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent provided in the resolution of the Board of Directors, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it, but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that any such committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of Preferred Stock adopted by the Board of Directors pursuant to Article Fourth
of the Certificate of Incorporation, fix any of the preferences or rights of
such shares relating to dividends, redemption, dissolution, any distribution of
the assets of the corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the same
or any other class or classes of stock of the corporation), adopting an
agreement of merger or consolidation under Sections 251 or 252 of the General
Corporation Law of the State of Delaware, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or amending these Bylaws; and
unless the resolution or the Certificate of Incorporation expressly so provides,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law of the State of
Delaware.
Section 3.2. Committee Rules. Unless the Board of Directors
----------------
otherwise provides, each committee designated by the Board may make, alter and
repeal rules for the conduct of its business. In the absence of such rules each
committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these Bylaws.
5
ARTICLE IV
Officers
Section 4.1. Executive Officers; Election; Qualifications; Term of
-----------------------------------------------------
Office; Resignation; Removal; Vacancies. The Board of Directors shall choose a
- ----------------------------------------
President and Secretary, and it may, if it so determines, choose a Chairman of
the Board and a Vice Chairman of the Board from among its members. The Board of
Directors may also choose one or more Vice Presidents, one or more Assistant
Secretaries, a Treasurer and one or more Assistant Treasurers. Each such
officer shall hold office until the first meeting of the Board of Directors
after the annual meeting of stockholders next succeeding this election, and
until his successor is elected and qualified or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to the
corporation. The Board of Directors may remove any officer with or without
cause at any time, but such removal shall be without prejudice to the
contractual rights of such officer, if any, with the corporation. Any number of
offices may be held by the same person. Any vacancy occurring in any office of
the corporation by death, resignation, removal or otherwise may be filled for
the unexpired portion of the term by the Board of Directors at any regular or
special meeting.
Section 4.2. Powers and Duties of Executive Officers. The
--------------------------------------------
officers of the corporation shall have such powers and duties in the management
of the corporation as may be prescribed by the Board of Directors and, to the
extent not so provided, as generally pertain to their respective offices,
subject to the control of the Board of Directors. The Board of Directors may
require any officer, agent or employee to give security for the faithful
performance of his duties.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock shall be
------------
entitled to have a certificate signed by or in the name of the corporation by
the Chairman or Vice Chairman of the Board of Directors, if any, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, of the corporation, certifying the
number of shares owned by him in the corporation. Any of or all the signatures
on the certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue. Records shall be kept of the amount of stock of the corporation issued
and outstanding, the manner in which and the time when such stock was paid for,
the respective names, alphabetically arranged, and the addresses, of the
persons, firms or corporations owning of record the stock represented by
certificates for stock of the corporation, the number, class and series of
shares represented by such certificates, respectively, the time when each became
an owner of record thereof, and the respective dates of such certificates, and
in case of cancellation, the respective dates of cancellation. Every certificate
surrendered to the corporation for exchange or transfer shall be cancelled and a
new certificate or certificates shall not be issued in exchange for any existing
certificate until such existing certificate shall have been so cancelled except
as provided in Section 5.2 of this Article V.l
6
Section 5.2. Lost, Stolen or Destroyed Stock Certificates;
----------------------------------------------------
Issuance of New Certificates. The corporation may issue a new certificate of
- -------------------------------
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, and the corporation may require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 5.3. Transfers of Stock. Transfer of shares of the stock
------------------
of the corporation shall be made only on the books of the corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary, or with a transfer agent
appointed as in Section 5.4 of this Article IV provided, and upon surrender of
the certificate or certificates for such shares properly endorsed and payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the corporation shall be deemed the owner thereof for all purposes as regards
the corporation. Whenever any transfer of shares shall be made for collateral
security and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate of certificates shall be presented to the
corporation for transfer, both the transferor and the transferee request the
corporation to do so.
Section 5.4. Regulations Concerning Transfer of Stock. The Board
----------------------------------------
of Directors may make such rules and regulations as it may deem expedient, not
inconsistent with these Bylaws, concerning the issue, transfer and registration
of certificates for stock of the corporation. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars, and may require all certificates for stock to
bear the signature or signatures of any of them.
7
ARTICLE VI
Indemnification of Directors,
Officers, Employees and Agents
Section 6.1. Right to Indemnification. The corporation shall
--------------------------
indemnify and hold harmless, to the fullest extent permitted by applicable law
as it presently exists or may hereafter be amended, any person who was or is
made or is threatened to be made a party or is otherwise involved in any action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(a "proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or non-profit entity, including service with
respect to employee benefit plans, against all liability and loss suffered and
expenses reasonably incurred by such person. The corporation shall indemnify a
person in connection with a proceeding initiated by such person only if the
proceeding was authorized by the Board of Directors of the corporation.
Section 6.2. Prepayment of Expenses. The corporation shall pay
------------------------
the expenses incurred in defending any proceeding in advance of its final
disposition, provided, however, that the payment of expenses incurred by a
------------------
director or officer in his capacity as a director or officer (except with regard
to service to an employee benefit plan or non-profit organization) in advance of
the final disposition of the proceeding shall be made only upon receipt of an
undertaking by the director or officer to repay all amounts advanced if it
should be determined that the director or officer is not entitled to be
indemnified under this Article VI or otherwise.
Section 6.3 Claims. If a claim for indemnification or payment of
------
expenses under this Article VI is not paid in full within ninety (90) days after
a written claim therefor has been received by the corporation, the claimant may
file suit to recover the unpaid amount of such claims and, if successful in
whole or in part, shall be entitled to be paid the expense of prosecuting such
claim. In any such action the corporation shall have the burden of proving that
the claimant was not entitled to the requested indemnification or payment of
expenses under applicable law.
Section 6.4 Non-Exclusivity of Rights. The rights conferred on
---------------------------
any person by this Article shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 6.5. Amendment or Repeal. Any repeal or modification of
--------------------
the foregoing provisions of this Article VI shall not adversely affect any right
or protection of a director, officer or employee of the corporation in respect
of any act or omission occurring prior to the time of such repeal or
modification.
8
ARTICLE VII
Miscellaneous
Section 7.1. Fiscal Year. The fiscal year of the corporation
------------
shall be determined by resolution of the Board of Directors.
Section 7.2 Seal. The corporate seal shall have the name of the
----
corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
Section 7.3. Waiver of Notice of Meetings of Stockholders,
----------------------------------------------------
Directors and Committees. Any written waiver of notice, signed by the person
- --------------------------
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 7.4 Interested Directors; Quorum. No contract or
------------------------------
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if: (1) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the affirmative votes of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (2) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (3) the contract or transaction is fair as to the corporation as of the time
it is authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee, which authorizes the contract or transaction.
Section 7.5. Form of Records. Any records maintained by the
-----------------
corporation in the regular course of its business, including its stock ledger,
books of account, and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs, or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
9
Section 7.6. Amendment of Bylaws. These Bylaws may be altered or
-------------------
repealed, and new bylaws made, by the Board of Directors, but the stockholders
may make additional bylaws and may alter and repeal any bylaws whether adopted
by them or otherwise.
The undersigned Incorporator certifies that he has adopted the foregoing
by-laws as the first by-laws of the Corporation.
Dated:
------------------------
Incorporator
10
EXHIBIT C
AGREEMENT AND PLAN OF REINCORPORATION
BY AND BETWEEN INTERACTIVE INC.,
A SOUTH DAKOTA CORPORATION,
AND
INTERACTIVE INC.,
A DELAWARE CORPORATION
THIS AGREEMENT AND PLAN OF REINCORPORATION is made and entered into on
__________, 2001 (this "Agreement") by and between InterActive Inc., a South
Dakota corporation (the "Company"), and InterActive Inc., a Delaware corporation
("InterActive Delaware"). The Company and InterActive Delaware are sometimes
referred to herein as the "Constituent Corporations."
RECITALS
A. The Company is a corporation duly organized and existing under the
laws of the State of South Dakota and has an authorized capital of 15,000,000
shares, 10,000,000 of which are designated "Common Stock", $0.001 par value, and
5,000,000 of which are designated "Preferred Stock", $0.001 par value. As of
_________, 2001, 5,162,138 shares of Common Stock, 113,901 shares of Series A
Preferred Stock and 2,000,000 shares of Series B Stock were outstanding.
B. InterActive Delaware is a corporation duly organized and existing under
the laws of the State of Delaware and has an authorized capital of 60,000,000
shares, 50,000,000 of which are designated "Common Stock", $.001 par value, and
10,000,000 of which are designated "Preferred Stock", $.001 par value. As of
____________, 2001, 1,000 shares of Common Stock were issued and outstanding,
all of which were owned by the Company. No shares of Preferred Stock had been
issued or were outstanding.
C. The Board of Directors of the Company has determined that, for the
purpose of effecting the reincorporation of the Company in the State of
Delaware, it is advisable and in the best interests of the Company and its
shareholders that the Company merge with and into InterActive Delaware upon the
terms and conditions herein provided.
D. The respective Boards of Directors of the Company and InterActive
Delaware have approved this Agreement and have directed that this Agreement be
submitted to a vote of their respective stockholders and executed by the
undersigned officers.
NOW THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, the Company and InterActive Delaware hereby agree, subject to the
terms and conditions hereinafter set forth, as follows:
1
I. MERGER
1.1 Merger. In accordance with the provisions of this Agreement, the
------
South Dakota Business Corporations Act and the Delaware General Corporation Law,
the Company shall be merged with and into InterActive Delaware (the "Merger"),
the separate existence of the Company shall cease and InterActive Delaware shall
be, and is herein sometimes referred to as, the "Surviving Corporation," and the
name of the Surviving Corporation shall be InterActive Inc.
1.2 Filing and Effectiveness. The Merger shall become effective when
--------------------------
the following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and approved by
the stockholders of each Constituent Corporation in accordance with the
requirements of the South Dakota Business Corporations Act and the Delaware
General Corporation Law;
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof;
(c) An executed Certificate of Merger or an executed counterpart of this
Agreement meeting the requirements of the Delaware General Corporation Law shall
have been filed with the Secretary of State of the State of Delaware; and
(d) An executed counterpart of this Agreement, together with any and all
other necessary documents and instruments, meeting the requirements of the South
Dakota Business Corporations Act shall have been filed with the Secretary of the
State of the State of South Dakota.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Time of the Merger."
1.3 Effect of the Merger. Upon the Effective Time of the Merger, the
-----------------------
separate existence of the Company shall cease and InterActive Delaware, as the
Surviving Corporation, (i) shall continue to possess all of its assets, rights,
powers and property as constituted immediately prior to the Effective Time of
the Merger, (ii) shall be subject to all actions previously taken by its and the
Company's Board of Directors, (iii) shall succeed, without other transfer, to
all of the assets, rights, powers and property of the Company in the manner more
fully set forth in Section 259 of the Delaware General Corporation Law, (iv)
shall continue to be subject to all of its debts, liabilities and obligations as
constituted immediately prior to the Effective Time of the Merger, and (v) shall
succeed, without other transfer, to all of the debts, liabilities and
obligations of the Company in the same manner as if InterActive Delaware had
itself incurred them, all as more fully provided under the applicable provisions
of the Delaware General Corporation Law and the South Dakota Business
Corporations Act.
2
II. CHARTER DOCUMENTS; DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation of
------------------------------
InterActive Delaware as in effect immediately prior to the Effective Time of the
Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
2.2 Bylaws. The Bylaws of InterActive Delaware as in effect immediately
------
prior to the Effective Time of the Merger shall continue in full force and
effect as the Bylaws of the Surviving Corporation until duly amended in
accordance with the provisions thereof and applicable law.
2.3 Directors and Officers. The directors and officers of InterActive
------------------------
Delaware immediately prior to the Effective Time of the Merger shall be the
directors and officers of the Surviving Corporation until their successors have
been duly elected and qualified or until as otherwise provided by law, the
Certificate of Incorporation of the Surviving Corporation or the Bylaws of the
Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
3.1 The Company's Common Shares. At the Effective Time of the Merger,
-----------------------------
each share of the Company's Common Stock, $.001 par value, issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by the Constituent Corporations, the holder of such share or any
other person, be converted into and exchanged for one fully paid and
nonassessable share of Common Stock, $.001 par value, of the Surviving
Corporation.
3.2 The Company's Series A Preferred Stock. At the Effective Time of the
--------------------------------------
Merger, each share of the Company's Series A Preferred Stock, $.001 par value,
issued and outstanding immediately prior thereto shall, by virtue of the Merger
and without any action by the Constituent Corporations, the holder of such share
or any other person, be converted into and exchanged for one fully paid and
nonassessable share of Common Stock, $.001 par value, of the Surviving
Corporation.
3.3 The Company's Series B Preferred Stock. At the Effective Time of the
--------------------------------------
Merger, each share of the Company's Series B Preferred Stock, $.001 par value,
issued and outstanding immediately prior thereto shall, by virtue of the Merger
and without any action by the Constituent Corporations, the holder of such share
or any other person, be converted into and exchanged for one fully paid and
nonassessable share of the Series A Preferred Stock, $.001 par value, of the
Surviving Corporation.
3
3.4 The Company's Stock Options and Stock Purchase Warrants. At the
-------------------------------------------------------------
Effective Time of the Merger, the Surviving Corporation shall assume and
continue the stock option plans and all other employee benefit plans of the
Company. Each outstanding and unexercised option, stock purchase warrant and/or
other right to purchase, or security convertible into, shares of the Company's
Common Stock shall become an option, or right to purchase, or a security
convertible into the Surviving Corporation's Common Stock for each share of the
Company's Common Stock issuable pursuant to any such option, or stock purchase
right or convertible security, on the same terms and conditions and at an
exercise or conversion price per share equal to the exercise or conversion price
per share applicable to any such option, stock purchase right or other
convertible security of the Company at the Effective Time of the Merger. There
are no options, purchase rights or securities convertible into Preferred Stock
of the Company.
A number of shares of the Surviving Corporation's Common Stock will be
reserved for issuance upon the exercise of options, stock purchase rights and
convertible securities equal to the number of shares of the Company's Common
Stock so reserved immediately prior to the Effective Time of the Merger.
3.5 InterActive Delaware Common Stock. At the Effective Time of the
------------------------------------
Merger, each share of InterActive Delaware Common Stock, $.001 par value, issued
and outstanding immediately prior thereto shall, by virtue of the Merger and
without any action by InterActive Delaware, the holder of such share or any
other person, be canceled and returned to the status of authorized but unissued
shares.
3.6 Exchange of Certificates. At the Effective Time of the Merger, each
------------------------
holder of an outstanding certificate representing shares of the Company's Common
Stock and/or Series A Preferred Stock may, at such stockholder's option,
surrender the same for cancellation to Computershare Investor Services, 12039
West Alameda Parkway, Suite Z-2, Lakewood, CO 80228, as exchange agent (the
"Exchange Agent"), and each such holder shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of shares of the
Surviving Corporation's Common Stock into which the surrendered shares were
converted as herein provided. Until so surrendered, each outstanding certificate
theretofore representing shares of the Company's Common Stock and/or Series A
Preferred Stock shall be deemed for all purposes to represent the number of
whole shares of the Surviving Corporation's Common Stock into which such shares
of the Company's Common Stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation
or the Exchange Agent of any such outstanding certificate shall, until such
certificate shall have been surrendered for transfer or conversion or otherwise
accounted for to the Surviving Corporation or the Exchange Agent, have and be
entitled to exercise any voting and other rights with respect to and to receive
dividends and other distributions upon the shares of Common Stock of the
Surviving Corporation represented by such outstanding certificate as provided
above.
Each certificate representing Common Stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of the Company so converted
and given in exchange therefore, unless otherwise determined by the Board of
Directors of the Surviving Corporation in compliance with applicable laws.
4
If any certificate for shares of InterActive Delaware stock is to be issued
in a name other than that in which the certificate surrendered in exchange
therefor is registered, it shall be a condition of issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer, that such transfer otherwise be proper and that the person
requesting such transfer pay to the Exchange Agent any transfer or other taxes
payable by reason of issuance of such new certificate in a name other than that
of the registered holder of the certificate surrendered or establish to the
satisfaction of InterActive Delaware that such tax has been paid or is not
payable.
IV. GENERAL
4.1 Covenants of InterActive Delaware. InterActive Delaware covenants
-----------------------------------
and agrees that it will, on or before the Effective Date of the Merger:
(a) Qualify to do business as a foreign corporation in the State of South
Dakota and in connection therewith irrevocably appoint an agent for service of
process as required under the provisions of the South Dakota Business
Corporation Act.
(b) File any and all documents with the South Dakota Secretary of State
necessary for the assumption by InterActive Delaware of all of the franchise tax
liabilities of the Company.
(c) Take such other actions as may be required by the South Dakota
Business Corporations Act.
4.2 Further Assurances. From time to time, as and when required by
-------------------
InterActive Delaware or by its successors or assigns, there shall be executed
and delivered on behalf of the Company such deeds and other instruments, and
there shall be taken or caused to be taken by it such further and other actions
as shall be appropriate or necessary in order to vest or perfect in or conform
of record or otherwise by InterActive Delaware the title to and possession of
all the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of the Company and otherwise to carry out the purposes
of this Agreement and the officers and directors of InterActive Delaware are
fully authorized in the name and on behalf of the Company or otherwise to take
any and all such action and to execute and deliver any and all such deeds and
other instruments.
4.3 Abandonment. At any time before the Effective Date of the Merger,
-----------
this Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either the Company or of InterActive
Delaware, or of both, notwithstanding the approval of this Agreement by the
shareholders of the Company or by the sole stockholder of InterActive Delaware,
or by both.
5
4.4 Amendment. The Boards of Directors of the Constituent Corporations
---------
may amend this Agreement at any time prior to the filing of this Agreement or
certificate in lieu thereof with the Secretary of State of the State of
Delaware; provided that, an amendment made subsequent to the adoption of this
Agreement by the stockholders of either Constituent Corporation shall not: (1)
alter or change the amount or kind of shares, securities, cash, property and/or
rights to be received in exchange for or on conversion of all or any of the
shares of any class or series thereof of such Constituent Corporation, (2) alter
or change any term of the certificate of incorporation of the Surviving
Corporation to be effected by the Merger, or (3) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of capital stock of either
Constituent Corporation.
4.5 Registered Office. The registered office of the Surviving Corporation
-----------------
in the State of Delaware is located at 15 E. North Street, Dover, Delaware
19901, and Paracorp Incorporated is the registered agent of the Surviving
Corporation at such address.
4.6 Agreement. Executed copies of this Agreement will be on file at the
---------
principal place of business of the Surviving Corporation at 204 North Main,
Humboldt, South Dakota 57035, and copies thereof will be furnished to any
stockholder of either Constituent Corporation, upon request and without cost.
4.7 Governing Law. This Agreement shall in all respects be construed,
--------------
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the South
Dakota Business Corporations Act.
4.8 Counterparts. In order to facilitate the filing and recording of this
------------
Agreement, the same may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Board of Directors of the Company and InterActive Delaware,
is hereby executed on behalf of each of such two corporations and attested by
their respective officers thereunto duly authorized.
INTERACTIVE INC., INTERACTIVE INC.,
a South Dakota corporation a Delaware corporation
By: _____________________ By: _____________________
Title: _____________________ Title: _____________________
By: _____________________ By: _____________________
Title: _____________________ Title: _____________________
6
EXHIBIT D
INTERACTIVE INC.
2000 STOCK OPTION PLAN
1. PURPOSE. The Plan is intended to provide incentive to key employees
-------
and directors of, and key consultants, vendors, customers, and others expected
to provide significant services to, the Corporation, to encourage proprietary
interest in the Corporation, to encourage such key employees to remain in the
employ of the Corporation and its Subsidiaries, to attract new employees with
outstanding qualifications, and to afford additional incentive to consultants,
vendors, customers, and others to increase their efforts in providing
significant services to the Corporation.
2. DEFINITIONS.
-----------
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Committee" shall mean the committee, if any, appointed by the
Board in accordance with Section 4 of the Plan.
(d) "Common Stock" shall mean the Common Stock, par value $0.001
per share, of the Corporation.
(e) "Corporation" shall mean InterActive Inc., a Delaware
corporation.
(f) "Disability" shall mean the condition of an Employee who is,
in the judgment of the Board or the Committee, unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than twelve (12)
months.
(g) "Employee" shall mean an individual who is employed (within
the meaning of Code Section 3401 and the regulations thereunder) by the
Corporation or a Subsidiary.
(h) "Exercise Price" shall mean the price per Share of Common
Stock, determined by the Board or the Committee, at which an Option may be
exercised.
(i) "Fair Market Value" shall mean the value of one (1) Share of
Common Stock, determined as follows:
(1) If the Shares are traded on an exchange, the price at
which Shares traded at the close of business on the date of valuation;
-1-
(2) If the Shares are traded over-the-counter on the NASDAQ
System, the closing price if one is available, or the mean between the
bid and asked prices on said System at the close of business on the date
of valuation; and
(3) If neither (1) nor (2) applies, the fair market
value as determined by the Board or the Committee in good faith.
Such determination shall be conclusive and binding on all persons.
(j) "Incentive Stock Option" shall mean an option described in
Section 422(b) of the Code.
(k) "Nonstatutory Stock Option" shall mean an option not described
in Section 422(b), 423(b) or 424(b) of the Code.
(l) "Option" shall mean any option to purchase Common Stock
granted pursuant to the Plan.
(m) "Optionee" shall mean an employee who has received an Option.
(n) "Plan" shall mean the InterActive Inc. 2000 Stock Option Plan,
as it may be amended from time to time.
(o) "Purchase Price" shall mean the Exercise Price times the
number of Shares with respect to which an Option is exercised.
(p) "Retirement" shall mean the voluntary termination of
employment by an Employee upon the attainment of age sixty-five (65) and the
completion of not less than twenty (20) years of service with the Corporation or
a Subsidiary.
(q) "Share" shall mean one (1) share of Common Stock, adjusted in
accordance with Section 10 of the Plan (if applicable).
(r) "Subsidiary" shall mean any corporation at least fifty percent
(50%) of the total combined voting power of which is owned by the Corporation or
by another Subsidiary.
3. EFFECTIVE DATE. The Plan was adopted by the Board on December 15,
---------------
2000, and by the stockholder of the Corporation on December 15, 2000, which
shall be the effective date of the Plan.
-2-
4. ADMINISTRATION. The Plan shall be administered by the Board, or by
--------------
a committee appointed by the Board, which shall consist of not less than three
(3) members (the "Committee"). The Board shall appoint one of the members of
the Committee, if there be one, as Chairman of the Committee. If a Committee
has been appointed, the Committee shall hold meetings at such times and places
as it may determine. Acts of a majority of the Committee at which a quorum is
present, or acts reduced to or approved in writing by a majority of the members
of the Committee, shall be the valid acts of the Committee. The Board, or the
Committee if there be one, shall from time to time at its discretion select the
employees, directors and consultants who are to be granted Options, determine
the number of Shares to be granted to each Optionee and designate such Options
such as Incentive Stock Options or Non-statutory Stock Options, except that no
Incentive Stock Option may be granted to a non-Employee director or a
non-Employee consultant. A member of the Board or a Committee member shall in
no event participate in any determination relating to Options held by or to be
granted to such Board or Committee member. The interpretation and construction
by the Board, or by the Committee if there be one, of any provision of the Plan
or of any Option granted thereunder shall be final. No member of the Board or
of the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Option granted thereunder.
5. PARTICIPATION.
-------------
(a) Eligibility. The Optionees shall be such persons as the Board,
-----------
or the Committee if there be one, may select from among the following classes of
persons, subject to the terms and conditions of (b) below:
(1) Employees of the Corporation or of a Subsidiary (who may
be officers, whether or not they are directors);
(2) Directors of the Corporation or of a Subsidiary; and
(3) Consultants, vendors, customers, and others expected to
provide significant services to the Corporation or a Subsidiary.
For purposes of this Plan, an Optionee who is a director or a consultant,
vendor, customer, or other provider of significant services to the Corporation
or a Subsidiary shall be deemed to be an Employee, and service as a director,
consultant, vendor, customer, or other provider of significant services to the
Corporation or a Subsidiary shall be deemed to be employment, except that no
Incentive Stock Option may be granted to a non-Employee director or non-Employee
consultant, vendor, customer, or other provider of significant services to the
Corporation or a Subsidiary, and except that no Nonstatutory Stock Option may be
granted to a non-Employee director or non-Employee consultant, vendor, customer,
or other provider of significant services to the Corporation or a Subsidiary
other than upon a vote of a majority of disinterested directors finding that the
value of the services rendered or to be rendered to the Corporation or a
Subsidiary by such non-Employee director or non-Employee consultant, vendor,
customer, or other provider of services is at least equal to the value of the
option or options granted.
(b) Ten-Percent Shareholders. An Employee who owns more than ten
-------------------------
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Corporation, its parent or any of its Subsidiaries shall not be
eligible to receive an Incentive Stock Option unless (i) the Exercise Price of
the Shares subject to such Option is at least one hundred ten percent (110%) of
the Fair Market Value of such Shares on the date of grant and (ii) such Option
by its terms is not exercisable after the expiration of five (5) years from the
date of grant.
-3-
(c) Stock Ownership. For purposes of (b) above, in determining
----------------
stock ownership an Employee shall be considered as owning the stock owned,
directly or indirectly, by or for his brothers, sisters, spouses, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be considered as being owned
proportionately by or for its shareholders, partners or beneficiaries. Stock
with respect to which such Employee holds an Option shall not be counted.
(d) Outstanding Stock. For purposes of (b) above, "outstanding
------------------
stock" shall include all stock actually issued and outstanding immediately after
the grant of the Option to the Optionee. "Outstanding stock" shall not include
shares authorized for issue under outstanding Options held by the Optionee or by
any other person.
6. STOCK. The stock subject to Options granted under this Plan shall
-----
be Shares of the Corporation's authorized but unissued or reacquired Common
Stock. The aggregate number of Shares that may be issued upon exercise of
Options under the Plan shall not exceed 3,000,000 shares. The number of Shares
subject to Options outstanding at any time shall not exceed the number of Shares
remaining available for issuance under this Plan. In the event that any
outstanding Option for any reason expires or is terminated, the Shares allocable
to the unexercised portion of such Option may again be made subject to any
Option. The limitations established by this Section 6 shall be subject to
adjustment in the manner provided in Section 10 hereof upon the occurrence of an
event specified therein.
7. TERMS AND CONDITIONS OF OPTIONS.
-----------------------------------
(a) Stock Option Agreements. Options shall be evidenced by
-------------------------
written stock option agreements in such form as the Board, or the Committee if
there be one, shall from time to time determine. Such agreements shall comply
with and be subject to the terms and conditions set forth below.
(b) Number of Shares. Each Option shall state the number of
------------------
Shares to which it pertains and shall provide for the adjustment thereof in
accordance with the provisions of Section 10 hereof.
(c) Exercise Price. Each Option shall state the Exercise Price.
---------------
The Exercise Price in the case of any Incentive Stock Option shall not be less
than the Fair Market Value on the date of grant and, in the case of any
Incentive Stock Option granted to an Optionee described in Section 5(b) hereof,
shall not be less than one hundred ten percent (110%) of the Fair Market Value
on the date of grant. The Exercise Price in the case of any Nonstatutory Stock
Option shall not be less than 85% of the Fair Market Value on the date of grant.
-4-
(d) Medium and Time of Payment. The Purchase Price shall be
------------------------------
payable in full in United States dollars upon the exercise of the Option;
provided, however, that if the applicable Option Agreement so provides the
- ------------------
Purchase Price may be paid (i) by the surrender of Shares in good form for
transfer, owned by the person exercising the Option and having a Fair Market
Value on the date of exercise equal to the Purchase Price, or in any combination
of cash and Shares, as long as the sum of the cash so paid and the Fair Market
Value of the Shares so surrendered equal the Purchase Price, (ii) by
cancellation of indebtedness owed by the Corporation to the Optionee, (iii) with
a full recourse promissory note executed by the Optionee, or (iv) any
combination of the foregoing. The interest rate and other terms and conditions
of such note shall be determined by the Board, or the Committee if there be one.
The Board, or the Committee if there be one, may require that the Optionee
pledge his or her Shares to the Corporation for the purpose of securing the
payment of such note. In no event shall the stock certificate(s) representing
such Shares be released to the Optionee until such note shall be been paid in
full. In the event the Corporation determines that it is required to withhold
state or Federal income tax as a result of the exercise of an Option, as a
condition to the exercise thereof, an Employee may be required to make
arrangements satisfactory to the Corporation to enable it to satisfy such
withholding requirements.
(e) Term and Nontransferability of Options. Each Option shall
------------------------------------------
state the time or times, and the conditions upon which, all or part thereof
becomes exercisable. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted, and no Incentive Stock Option granted
to an Optionee described in Section 5(b) hereof shall be exercisable after the
expiration of five (5) years from the date it was granted. During the lifetime
of the Optionee, the Option shall be exercisable only by the Optionee and shall
not be assignable or transferable. In the event of the Optionee's death, the
Option shall not be transferable by the Optionee other than by will or the laws
of descent and distribution.
(f) Termination of Employment, Except by Death, Disability or
--------------------------------------------------------------
Retirement. If an Optionee ceases to be an Employee for any reason other than
- ----------
his or her death, Disability or Retirement, such Optionee shall have the right,
subject to the restrictions of (e) above, to exercise the Option at any time
within three months after termination of employment, but only to the extent
that, at the date of termination of employment, the Optionee's right to exercise
such Option had accrued pursuant to the terms of the applicable option agreement
and had not previously been exercised; provided, however, that if the Optionee
-----------------
was terminated for cause (as defined in the applicable option agreement) any
Option not exercised in full prior to such termination shall be canceled. For
this purpose, the employment relationship shall be treated as continuing intact
while the Optionee is on military leave, sick leave or other bona fide leave of
absence (to be determined in the sole discretion of the Committee). The
foregoing notwithstanding, (i) in the case of an Incentive Stock Option,
employment shall not be deemed to continue beyond the ninetieth (90th) day after
the Optionee's reemployment rights are guaranteed by statute or by contract, and
(ii) in the case of a Nonstatutory Option, the Board, or the Committee if there
be one, may extend or otherwise modify the period of time specified herein
during which the Option may be exercised following termination of Optionee's
employment.
(g) Death of Optionee. If an Optionee dies while an Employee, or
------------------
after ceasing to be an Employee but during the period while he or she could have
exercised the Option under this Section 7, and has not fully exercised the
Option, then the Option may be exercised in full, subject to the restrictions of
(e) above, at any time within twelve (12) months after the Optionee's death, by
the executors or administrators of his or her estate or by any person or persons
who have acquired the Option directly from the Optionee by bequest or
inheritance, but only to the extent that, at the date of death, the Optionee's
right to exercise such Option had accrued and had not been forfeited pursuant to
the terms of the applicable Option Agreement and had not previously been
exercised. The foregoing notwithstanding, the Board, or the Committee if there
be one, may extend or otherwise modify the period of time specified herein
during which a Nonstatutory Option may be exercised following termination of
Optionee's employment, or amend an Incentive Stock Option to convert it into a
Nonstatutory Option with an extended term.
-5-
(h) Disability of Optionee. If an Optionee ceases to be an
------------------------
Employee by reason of Disability, such Optionee shall have the right, subject to
the restrictions of (f) above, to exercise the Option at any time within twelve
(12) months after termination of employment, but only to the extent that, at the
date of termination of employment, the Optionee's right to exercise such Option
had accrued pursuant to the terms of the applicable Option Agreement and had not
previously been exercised. The foregoing notwithstanding, the Board, or the
Committee if there be one, may extend or otherwise modify the period of time
specified herein during which a Nonstatutory Option may be exercised following
termination of Optionee's employment, or amend an Incentive Stock Option to
convert it into a Nonstatutory Option with an extended term.
(i) Retirement of Optionee. If an Optionee ceases to be an
------------------------
Employee by reason of Retirement, such Optionee shall have the right, subject to
the restrictions of (e) above, to exercise the Option at any time within three
(3) months after termination of employment, but only to the extent that, at the
date of termination of employment, the Optionee's right to exercise such Option
had accrued pursuant to the terms of the applicable Option Agreement and had not
previously been exercised. The foregoing notwithstanding, the Board, or the
Committee if there be one, may extend or otherwise modify the period of time
specified herein during which a Nonstatutory Option may be exercised following
termination of Optionee's employment, or amend an Incentive Stock Option to
convert it into a Nonstatutory Option with an extended term.
(j) Rights as a Stockholder. An Optionee, or a transferee of an
-------------------------
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 10 hereof.
(k) Modification, Extension and Renewal of Option. Within the
-------------------------------------------------
limitations of the Plan, the Board, or the Committee if there be one, may
modify, extend or renew outstanding Options or accept the cancellation of
outstanding Options (to the extent not previously exercised) for the granting of
new Options with, if desired, lower exercise prices, in substitution therefor.
The foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair any rights or obligations under any
Option previously granted.
(l) Other Provisions. The stock option agreements authorized
-----------------
under this Plan may contain such other provisions not inconsistent with the
terms of this Plan (including, without limitation, restrictions upon the
exercise of the Option) as the Board, or the Committee if there be one, shall
deem advisable.
-6-
8. LIMITATION ON VALUE OF EXERCISABLE SHARES. In the case of Incentive
-----------------------------------------
Stock Options granted hereunder, the aggregate Fair Market Value (determined as
of the date of the grant thereof) of the Shares with respect to which Incentive
Stock Options become exercisable by any employee of the Company for the first
time during any calendar year (under this Plan and all other plans maintained by
the Corporation, its parent or its Subsidiaries) shall not exceed $100,000.
9. TERM OF PLAN. Options may be granted pursuant to the Plan until the
------------
expiration of ten (10) years from the effective date of the Plan.
10. RECAPITALIZATIONS. Subject to any required action by shareholders,
-----------------
the number of Shares covered by the Plan as provided in Section 6 hereof, the
number of Shares covered by each outstanding Option and the Exercise Price
thereof shall be proportionately adjusted for any increase of decrease in the
number of issued Shares resulting from a subdivision or consolidation of Shares
or the payment of a stock dividend (but only of Common Stock) or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Corporation. Subject to any required action by
stockholders, if the Corporation is the surviving corporation in any merger or
consolidation, each outstanding Option shall pertain and apply to the securities
to which a holder of the number of Shares subject to the Option would have been
entitled. In the event of a merger or consolidation in which the Corporation is
not the surviving corporation, the date of exercisability of each outstanding
Option shall be accelerated to a date prior to such merger or consolidation,
unless the agreement of merger or consolidation provides for the assumption of
the Option by the successor to the Corporation. To the extent that the foregoing
adjustments relate to securities of the Corporation, such adjustments shall be
made by the Board, or the Committee if there be one, whose determination shall
be conclusive and binding on all persons. Except as expressly provided in this
Section 10, the Optionee shall have no rights by reason of subdivision or
consolidation of shares of stock of any class, the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any class
or by reason of any dissolution, liquidation, merger or consolidation or
spin-off of assets or stock of another corporation, and any issue by the
Corporation of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or Exercise Price of Shares
subject to an Option. The grant of an Option pursuant to the Plan shall not
affect in any way the right or power to the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business assets.
11. SECURITIES LAW REQUIREMENTS.
-----------------------------
(a) Legality of Issuance. The issuance of any Shares upon the
----------------------
exercise of any Option and the grant of any Option shall be contingent upon the
following:
(1) the Corporation and the Optionee shall have taken all
actions required to register the Shares under the Securities Act of 1933,
as amended (the "Act"), and to qualify the Option and the Shares under any
and all applicable state securities or "blue sky" laws or regulations, or
to perfect an exemption from the respective registration and qualification
requirements thereof;
-7-
(2) any applicable listing requirement of any stock exchange
on which the Common Stock is listed shall have been satisfied; and
(3) any other applicable provision of state of Federal law
shall have been satisfied.
(b) Restrictions on Transfer. Regardless of whether the offering and
------------------------
sale of Shares under the plan has been registered under the Act or has been
registered or qualified under the securities laws of any state, the Corporation
may impose restrictions on the sale, pledge or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Corporation and its counsel, such restrictions are necessary
or desirable in order to achieve compliance with the provisions of the Act, the
securities laws of any state or any other law. In the event that the sale of
Shares under the Plan is not registered under the Act but an exemption is
available which required an investment representation or other representation,
each Optionee shall be required to represent that such Shares are being acquired
for investment, and not with a view to the sale or distribution thereof, and to
make such other representations as are deemed necessary or appropriate by the
Corporation and its counsel. Any determination by the Corporation and its
counsel in connection with any of the matters set forth in this Section 11 shall
be conclusive and binding on all persons. Stock certificates evidencing Shares
acquired under the Plan pursuant to an unregistered transaction shall bear the
following restrictive legend and such other restrictive legends as are required
or deemed advisable under the provisions of any applicable law.
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). ANY TRANSFER OF SUCH SECURITIES
WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO
SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH REGISTRATION IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT."
-8-
(c) Registration or Qualification of Securities. The Corporation
--------------------------------------------
may, but shall not be obligated to register or qualify the issuance of Options
and/or the sale of Shares under the Act or any other applicable law. The
Corporation shall not be obligated to take any affirmative action in order to
cause the issuance of Options or the sale of Shares under the plan to comply
with any law.
(d) Exchange of Certificates. If, in the opinion of the
--------------------------
Corporation and its counsel, any legend placed on a stock certificate
representing shares sold under the Plan is no longer required, the holder of
such certificate shall be entitled to exchange such certificate for a
certificate representing the same number of Shares but lacking such legend.
12. AMENDMENT OF THE PLAN. The Board may from time to time, with
------------------------
respect to any Shares at the time not subject to Options, suspend or discontinue
the plan or revise or amend it in any respect whatsoever except that, without
the approval of the Corporation's stockholders, no such revision or amendment
shall:
(a) Increase the number of Shares subject to the Plan;
(b) Change the designation in Section 5 hereof with respect to the
classes of persons eligible to receive Options; or
(c) Amend this Section 12 to defeat its purpose.
13. APPLICATION OF FUNDS. The proceeds received by the Corporation
----------------------
from the sale of Common Stock pursuant to the exercise of an Option will be used
for general corporate purposes.
14. EXECUTION. To record the adoption of the Plan in the form set
---------
forth above by the Board effective as of December 15, 2000, the Corporation has
caused this Plan to be executed in the name and on behalf of the Corporation
where provided below by an officer of the Corporation thereunto duly authorized.
INTERACTIVE INC.,
a Delaware corporation
By: ___________________________________
Title: ___________________________________
-9-
EXHIBIT E
SECTIONS 47-6-23 THROUGH 47-6-23.3, INCLUSIVE, AND SECTIONS 47-6-40 THROUGH
47-6-50, INCLUSIVE, OF THE SOUTH DAKOTA BUSINESS CORPORATION ACT.
47-6-23 Dissent by shareholder -- Right to receive payment for shares.
Any shareholder of a domestic corporation shall have the right to dissent
from, and to obtain payment for his shares in the event of, any of the following
corporate actions:
(1) Any plan of merger or consolidation to which the corporation is
a party;
(2) Any sale or exchange of all or substantially all of the property
and assets of the corporation not made in the usual and regular course of its
business, including a sale in dissolution, but not including a sale pursuant to
an order of a court having jurisdiction in the premises or a sale for cash on
terms requiring that all or substantially all of the net proceeds of sale be
distributed to the shareholders in accordance with their respective interests
within one year after the date of sale;
(3) Any plan of exchange to which the corporation is a party as the
corporation the shares of which are to be acquired;
(4) Any amendment of the articles of incorporation which materially
and adversely affects the rights appurtenant to the shares of the dissenting
shareholder in that it:
(a) Alters or abolishes a preferential right to such shares;
(b) Creates, alters or abolishes a right in respect of the
redemption of such shares, including a provision respecting a sinking fund for
the redemption or repurchase of such shares;
(c) Alters or abolishes a preemptive right of the holder of such
shares to acquire shares or other securities;
(d) Excludes or limits the right of the holder of such shares
to vote on any matter, or to cumulate his votes, except as such right may be
limited by dilution through the issuance of shares or other securities with
similar voting rights; or
(5) Any other corporate action taken pursuant to a shareholder vote
with respect to which the articles of incorporation, the bylaws, or a resolution
of the board of directors directs that dissenting shareholders shall have a
right to obtain payment for their shares.
47-6-23.1. Dissent as to less than all shares held -- Beneficial owner.
A record holder of shares may assert dissenters' rights as to less than all
of the shares registered in his name only if he dissents with respect to all the
shares beneficially owned by any one person, and discloses the name and address
of the person or persons on whose behalf he dissents. In that event, his rights
shall be determined as if the shares as to which he has dissented and his other
shares were registered in the names of different shareholders.
A beneficial owner of shares who is not the record holder may assert
dissenters' rights with respect to shares held on his behalf, and shall be
treated as a dissenting shareholder under the terms of this section if he
submits to the corporation at the time of or before the assertion of these
rights a written consent of the record holder.
47-6-23.2. Rights of shareholders not entitled to vote on merger.
The right to obtain payment under 47-6-23 does not apply to the
shareholders of the surviving corporation in a merger if a vote of the
shareholders of such corporation is not necessary to authorize such merger.
47-6-23.3. Shareholder entitled to payment may not attack validity of
action.
A shareholder of a corporation who has a right under 47-6-23 to obtain
payment for his shares may not, at law or in equity, attack the validity of the
corporate action that gives rise to his right to obtain payment, have the action
set aside or rescinded, unless the corporate action is unlawful or fraudulent
with regard to the complaining shareholder or to the corporation.
47-6-40. Definitions.
Terms used in this chapter mean:
(1) "Corporation," the issuer of the shares held by the dissenter before
the corporate action, or the successor by merger or consolidation of that
issuer;
(2) "Dissenter," a shareholder or beneficial owner who is entitled to
and does assert dissenters' rights under this chapter, and who has performed
every act required up to the time involved for the assertion of such rights;
(3) "Fair value" of shares, their value immediately before the
effectuation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of such corporate action unless
such exclusion would be inequitable;
(4) "Interest," 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 such rate as is fair
and equitable under all the circumstances.
47-6-41. Notice to shareholders of right to dissent and obtain payment.
If a proposed corporate action which would give rise to dissenters' rights
under this chapter is submitted to a vote at a meeting of shareholders, the
notice of meeting shall notify all shareholders that they have or may have a
right to dissent and obtain payment for their shares by complying with the terms
of this chapter, and shall be accompanied by a copy of 47-6-23 to 47-6-23.3,
inclusive, and 47-6-40 to 47-6-50, inclusive.
47-6-42. Notice of intent to dissent -- Refraining from voting -- Effect of
failure.
If the proposed corporate action is submitted to a vote at a meeting of
shareholders, any shareholder who wishes to dissent and obtain payment for his
shares shall file with the corporation, prior to the vote, a written notice of
intention to demand that he be paid fair compensation for his shares if the
proposed action is effectuated, and shall refrain from voting his shares in
approval of such action. A shareholder who fails in either respect acquires no
right to payment of his shares under this section or 47-6-23 to 47-6-23.3,
inclusive.
47-6-43. Notice of procedure for demanding payment and depositing
certificates.
If the proposed corporate action is approved by the required vote at a
meeting of shareholders, the corporation shall mail a further notice to all
shareholders who gave due notice of intention to demand payment and who
refrained from voting in favor of the proposed action. If the proposed corporate
action is to be taken without a vote of shareholders, the corporation shall send
to all shareholders who are entitled to dissent and demand payment for their
shares a notice of the adoption of the plan of corporate action. The notice
shall (1) state where and when a demand for payment shall be sent and
certificates of certificated shares shall be deposited in order to obtain
payment, (2) inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is received, (3)
supply a form for demanding payment which includes a request for certification
of the date on which the shareholder, or the person on whose behalf the
shareholder dissents, acquired beneficial ownership of the shares, and (4) be
accompanied by a copy of 47-6-23 to 47-6-23.3, inclusive, and
47-6-40 to 47-6-50, inclusive. The time set for the demand and deposit shall be
not less than thirty days from the mailing of the notice.
47-6-44. Failure to demand payment or deposit certificates -- Waiver --
Restrictions on transfers.
A shareholder who fails to demand payment, or fails, in the case of
certificated shares, to deposit certificates, as required by a notice pursuant
to 47-6-43 has no right under this chapter to receive payment for his shares.
If the shares are not represented by certificates, the corporation may restrict
their transfer from the time of receipt of demand for payment until effectuation
of the proposed corporate action, or the release of restrictions under the terms
of 47-6-45 and 47-6-46. The dissenter shall retain all other rights of a
shareholder until these rights are modified by effectuation of the proposed
corporate action.
47-6-45. Return of certificates or release of restrictions on failure to
effectuate action -- New notice.
Within sixty days after the date set for demanding payment and depositing
certificates, if the corporation has not effectuated the proposed corporate
action and remitted payment for shares pursuant to this chapter, it shall return
any certificates that have been deposited, and release uncertificated shares
from any transfer restriction imposed by reason of the demand for payment. If
uncertificated shares have been released from transfer restrictions, and
deposited certificates have been returned, the corporation may at any later time
send a new notice conforming to the requirements of 47-6-43 with like
effect.
47-6-46. Remittance of payment to dissenting shareholders -- Information to
accompany remittance.
Immediately upon effectuation of the proposed corporate action, or upon
receipt of demand for payment if the corporate action has already been
effectuated, the corporation shall remit to dissenters who have made demand and,
if their shares are certificated, have deposited their certificates the amount
which the corporation estimates to be the fair value of the shares, with
interest if any has accrued. The remittance shall be accompanied by:
(1) The corporation's closing balance sheet and statement of income
for a fiscal year ending not more than sixteen months before the date of
remittance, together with the latest available interim financial statements;
(2) A statement of the corporation's estimate of fair value of the
shares; and
(3) A notice of the dissenter's right to demand supplemental payment,
accompanied by a copy of 47-6-23 to 47-6-23.3, inclusive, and 47-6-40 to
47-6-50, inclusive.
47-6-47. Demand for deficiency -- Failure to demand as waiver.
If the corporation fails to remit as required by 47-6-46 or if the
dissenter believes that the amount remitted is less than the fair value of his
shares, or that the interest is not correctly determined, he may send the
corporation his own estimate of the value of the shares or of the interest and
demand payment of the deficiency.
If the dissenter does not file such an estimate within thirty days after
the corporation's mailing of its remittance, he shall be entitled to no more
than the amount remitted.
47-6-48. Petition for judicial determination of value of shares -- Parties
-- Procedure -- Effect of failure to file.
Within sixty days after receiving a demand for payment pursuant to
47-6-47, if any such demands for payment remain unsettled, the corporation shall
file in an appropriate court a petition requesting that the fair value of the
shares and interest thereon be determined by the court.
An appropriate court shall be a court of competent jurisdiction in the
county of this state where the registered office of the corporation is located.
If, in the case of a merger or consolidation or exchange of shares, the
corporation is a foreign corporation without a registered office in this state
the petition shall be filed in the county where the registered office of the
domestic corporation was last located.
All dissenters, wherever residing, whose demands have not been settled
shall be made parties to the proceeding as in an action against their shares. A
copy of the petition shall be served on each such dissenter; if a dissenter is a
nonresident, the copy may be served on him by registered or certified mail or by
publication as provided by law.
The jurisdiction of the court shall be 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 shall have such power and
authority as shall be specified in the order of their appointment or in any
amendment thereof. The dissenters shall be entitled to discovery in the same
manner as parties in other civil suits.
All dissenters who are made parties shall be entitled, after a hearing
without a jury, to judgment for the amount by which the fair value of their
shares is found to exceed the amount previously remitted with interest.
If the corporation fails to file a petition as provided in this section,
each dissenter who made a demand and who has not already settled his claim
against the corporation shall be paid by the corporation the amount demanded by
him with interest, and may sue therefor in an appropriate court.
47-6-49. Assessment of costs and expenses of action.
The costs and expenses of any proceeding under 47-6-48, including the
reasonable compensation and expenses of appraisers appointed by the court, shall
be determined by the court and assessed against the corporation, except that any
part of the costs and expenses may be apportioned and assessed as the court
considers equitable against all or some of the dissenters who are parties and
whose action in demanding supplemental payment the court finds to be arbitrary,
vexatious, or not in good faith.
Fees and expenses of counsel and of experts for the respective parties may
be assessed as the court considers equitable against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the requirements of this section, and may be assessed against either the
corporation or a dissenter 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 in respect to the rights provided by
47-6-23 to 47-6-23.3, inclusive, and 47-6-40 to 47-6-50, inclusive.
If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and should not be
assessed against the corporation it may award to these counsel reasonable fees
to be paid out of the amounts awarded to the dissenters who were benefited.
47-6-50. Value of shares not beneficially owned by dissenter on date of
first announcement.
Notwithstanding 47-6-40 to 47-6-49, inclusive, the corporation may elect
to withhold the remittance required by 47-6-46 from any dissenter with respect
to shares of which the dissenter or the person on whose behalf the dissenter
acts was not the beneficial owner on the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate action. With
respect to such shares, the corporation shall, upon effectuating the corporate
action, state to each dissenter its estimate of the fair value of the shares,
state the rate of interest to be used, explaining the basis thereof, and offer
to pay the resulting amounts on receiving the dissenter's agreement to accept
them in full satisfaction.
If the dissenter believes that the amount offered is less than the fair
value of the shares and interest determined according to this section, he may
within thirty days after the date of mailing of the corporation's offer, mail
the corporation his own estimate of fair value and interest, and demand their
payment. If the dissenter fails to do so, he shall be entitled to no more than
the corporation's offer.
If the dissenter makes a demand as provided herein the provisions of
47-6-48 and 47-6-49 shall apply to further proceedings on the dissenter's
demand.