SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT is made this 16th day of March 2000, by and
between Art Cards, Inc., a Colorado corporation ("Art Cards"), and
xXxxxxx.xxx.Xxx., a California corporation ("uMember").
WHEREAS, Art Cards desires to acquire all of the issued and outstanding
shares of common stock of uMember in exchange for shares of the common stock
of Art Cards (the "Common Stock") (the "Exchange Offer"); and
WHEREAS, uMember desires to assist Art Cards in a business combination
which will result, if uMember's shareholders desire to participate, in the
shareholders of uMember owning approximately 85% of the then issued and
outstanding shares of Art Cards's Common Stock, and Art Cards holding 100% of
the issued and outstanding shares of uMember's common stock; and
WHEREAS, the voluntary share exchange contemplated hereby will result in
the uMember shareholders tendering all of the outstanding common stock of
uMember to Art Cards in exchange solely for the Common Stock and no other
consideration, which the parties hereto intend to treat as a reorganization
under Internal Revenue Code Section 368(a)(1)(B).
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
representations contained herein, THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE 1
EXCHANGE OF SECURITIES
1.1 Issuance of Shares. Subject to all of the terms and conditions
of this Agreement, Art Cards agrees to offer up to a total of 17,000,000
shares of Common Stock (after the reverse split) to the shareholders of
uMember. The Common Stock will be issued directly to the shareholders of
uMember which accept the Exchange Offer. Schedule 1, which is attached hereto
and incorporated herein by reference, is a complete list of the shareholders
of uMember which sets forth the number of shares each person owns in uMember
and the number of shares they will be offered in Art Cards.
1.2 Exemption from Registration. The parties hereto intend that the
Common Stock to be issued by Art Cards to uMember shareholders shall be exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Act"), pursuant to Section 4(2) of the Act and the rules and regulations
promulgated thereunder.
1.3 Investment Intent. Prior to the consummation of the Exchange
Offer, the shareholders of uMember accepting the Exchange Offer shall execute
Letters of Acceptance and such other documents containing, among other things,
representations and warranties relating to investment intent and investor
status, restrictions on transferability and restrictive legends such that the
counsel for both Art Cards and uMember shall be satisfied that the offer and
sale of Art Cards shares as contemplated by this Agreement shall be exempt
from the registration requirements of the Act and any applicable state blue
sky laws.
1.4 Options to Purchase uMember Common Stock. On the Closing, each
option granted by uMember to purchase shares of uMember's common stock which
is outstanding and unexercised immediately prior to the Closing shall be
assumed by Art Cards and converted into an option to purchase shares of Art
Cards in the same number and at the same exercise price as was in effect
immediately prior to the Closing.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF UMEMBER
Except as disclosed in Schedule 2 which is attached hereto and
incorporated herein by reference, uMember hereby represents and warrants to
Art Cards that:
2.1 Organization. uMember is a corporation duly organized, validly
existing, and in good standing under the laws of California, has all necessary
corporate powers to own its properties and to carry on its business as now
owned and operated by it, and is duly qualified to do business and is in good
standing in each of the jurisdictions where its business requires
qualification.
2.2 Capital. The authorized capital stock of uMember consists of
50,000,000 shares of common stock, no par value, of which 5,681,825 are
currently issued and outstanding. All of the issued and outstanding shares of
common stock of uMember are duly authorized, validly issued, fully paid, and
nonassessable. Except for options to purchase 328,000 shares of common stock,
there are no outstanding subscriptions, options, rights, warrants, debentures,
instruments, convertible securities, or other agreements or commitments
obligating uMember to issue or to transfer from treasury any additional shares
of its capital stock of any class. Prior to Closing, uMember plans to raise
up to $5,000,000 in gross proceeds from the sale of its common stock which
will be exchangeable for 2,000,000 shares of Art Card's common stock.
2.3 Subsidiaries. uMember does not have any subsidiaries or own any
interest in any other enterprise (whether or not such enterprise is a
corporation).
2.4 Directors and Officers. Schedule 2 contains the names and titles
of all directors and officers of uMember as of the date of this Agreement.
2.5 Financial Statements. uMember has delivered to Art Cards
unaudited balance sheets and statements of operations for the years ended
December 31, 1999 and 1998 (the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods indicated. The Financial
Statements accurately set out and describe the financial condition of uMember
as of December 31, 1999. uMember's financial statements will be able to be
audited in accordance with Regulation S-B adopted under the Act.
2.6 Absence of Changes. Since December 31, 1999, except for changes
in the ordinary course of business which have not in the aggregate been
materially adverse, to the best of uMember's knowledge, uMember has conducted
its business only in the ordinary course and has not experienced or suffered
any material adverse change in the condition (financial or otherwise), results
of operations, properties, business or prospects of uMember or waived or
surrendered any claim or right of material value.
2.7 Absence of Undisclosed Liabilities. Neither uMember nor any of
its properties or assets are subject to any material liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise
and whether due or to become due, that are not reflected in the financial
statements presented to Art Cards.
2.8 Tax Returns. Within the times and in the manner prescribed by
law, uMember has filed all federal, state and local tax returns required by
law, or has filed extensions which have not yet expired, and has paid all
taxes, assessments and penalties due and payable.
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2.9 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, Art
Cards and/or its attorneys shall have the opportunity to meet with accountants
and attorneys to discuss the financial condition of uMember. uMember shall
make available to Art Cards and/or its attorneys all books and records of
uMember.
2.10 Trade Names and Rights. uMember does not use any trademark,
service xxxx, trade name, or copyright in its business, or own any trademarks,
trademark registrations or applications, trade names, service marks,
copyrights, copyright registrations or applications.
2.11 Compliance with Laws. To the best of uMember's knowledge,
uMember has complied with, and is not in violation of, applicable federal,
state or local statutes, laws and regulations (including, without limitation,
any applicable building, zoning or other law, ordinance or regulation)
affecting its properties or the operation of its business, except for matters
which would not have a material affect on uMember or its properties.
2.12 Litigation. uMember is not a party to any suit, action,
arbitration or legal, administrative or other proceeding, or governmental
investigation pending or, to the best knowledge of uMember, threatened against
or affecting uMember or its business, assets or financial condition, except
for matters which would not have a material affect on uMember or its
properties. uMember is not in default with respect to any order, writ,
injunction or decree of any federal, state, local or foreign court,
department, agency or instrumentality applicable to it.
2.13 Authority. uMember has full corporate power and authority to
enter into this Agreement. The board of directors of uMember has taken all
action required to authorize the execution and delivery of this Agreement by
or on behalf of uMember and the performance of the obligations of uMember
under this Agreement. No other corporate proceedings on the part of uMember
are necessary to authorize the execution and delivery of this Agreement by
uMember in the performance of its obligations under this Agreement. This
Agreement is, when executed and delivered by uMember, and will be a valid and
binding agreement of uMember, enforceable against uMember in accordance with
its terms, except as such enforceability may be limited by general principles
of equity, bankruptcy, insolvency, moratorium and similar laws relating to
creditors' rights generally.
2.14 Ability to Carry Out Obligations. Neither the execution and
delivery of this Agreement, the performance by uMember of its obligations
under this Agreement, nor the consummation of the transactions contemplated
under this Agreement will to the best of uMember's knowledge: (a) materially
violate any provision of uMember's articles of incorporation or bylaws; (b)
with or without the giving of notice or the passage of time, or both, violate,
or be in conflict with, or constitute a material default under, or cause or
permit the termination or the acceleration of the maturity of, any debt,
contract, agreement or obligation of uMember, or require the payment of any
prepayment or other penalties; (c) require notice to, or the consent of, any
party to any agreement or commitment, lease or license, to which uMember is
bound; (d) result in the creation or imposition of any security interest,
lien, or other encumbrance upon any material property or assets of uMember; or
(e) violate any material statute or law or any judgment, decree, order,
regulation or rule of any court or governmental authority to which uMember is
bound or subject.
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2.15 Full Disclosure. None of the representations and warranties
made by uMember herein, or in any schedule, exhibit or certificate furnished
or to be furnished in connection with this Agreement by uMember, or on its
behalf, contains or will contain any untrue statement of material fact or
omits or will omit any material fact required to make any representation or
warranty not misleading.
2.16 Assets. uMember has good and marketable title to all of its
tangible properties and such tangible properties are not subject to any
material liens or encumbrances.
2.17 Material Contracts and Obligations. Attached hereto on Schedule
2 is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which uMember is a party or by which it is bound that are
material to the conduct and operations of its business and properties, which
provide for payments to or by uMember in excess of $25,000; or which involve
transactions or proposed transactions between uMember and its officers,
directors, affiliates or any affiliate thereof. Copies of such agreements and
contracts and documentation evidencing such liabilities and other obligations
have been made available for inspection by Art Cards and its counsel. All of
such agreements and contracts are valid, binding and in full force and effect
in all material respects, assuming due execution by the other parties to such
agreements and contracts.
2.18 Consents and Approvals. No consent, approval or authorization
of, or declaration, filing or registration with, any governmental or
regulatory authority is required to be made or obtained by uMember in
connection with: (a) the execution and delivery by uMember of this Agreement;
(b) the performance by uMember of its obligations under this Agreement; or (c)
the consummation by uMember of the transactions contemplated under this
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ART CARDS
Except as disclosed in Schedule 3 which is attached hereto and
incorporated herein by reference, Art Cards represents and warrants to uMember
that:
3.1 Organization. Art Cards is a corporation duly organized, valid
existing, and in good standing under the laws of Colorado, has all necessary
corporate powers to own properties and to carry on business, and it is not now
conducting any business, except to the extent to which the effecting of the
transaction contemplated by this Agreement constitutes doing business.
3.2 Capitalization. The authorized capital stock of Art Cards
consists of 3,000,000,000 shares of $.0001 par value Common Stock of which
978,402,000 shares of Common Stock are currently issued and outstanding. All
of the issued and outstanding shares of Common Stock are duly authorized,
validly issued, fully paid and nonassessable. Prior to Closing, Art Cards
will complete a reverse split which will reduce the number of shares
outstanding to approximately 476,500. There are no outstanding subscriptions,
options, rights, warrants, convertible securities, or other agreements or
commitments obligating Art Cards to issue or to transfer from treasury any
additional shares of its capital stock of any class.
3.3 Subsidiaries. Art Cards does not presently have any subsidiaries
or own any interest in any other enterprise (whether or not such enterprise is
a corporation).
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3.4 Directors and Officers. Schedule 3 contains the names and titles
of all directors and officers of Art Cards as of the date of this Agreement.
3.5 Financial Statements. Art Cards has delivered to uMember its
audited balance sheet and statements of operations and cash flows as of and
for the period ended December 31, 1998, and its unaudited balance sheet and
statements of operations and cash flows as of and for the period ended
September 30, 1999 (collectively the "Financial Statements"). The Financial
Statements are complete and correct in all material respects and have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods indicated. The Financial
Statements accurately set out and describe the financial condition and
operating results of the Company as of the dates, and for the periods,
indicated therein.
3.6 Absence of Changes. Since September 30, 1999, except for direct
expenses incurred by Art Cards in connection with this Agreement and the
transactions contemplated hereby, and except for changes in the ordinary
course of business which have not in the aggregate been materially adverse, to
the best of Art Cards's knowledge, Art Cards has not experienced or suffered
any material adverse change in its condition (financial or otherwise), results
of operations, properties, business or prospects or waived or surrendered any
claim or right of material value.
3.7 Absence of Undisclosed Liabilities. Except for direct expenses
incurred by Art Cards in connection with this Agreement and the transactions
contemplated hereby, neither Art Cards nor any of its properties or assets are
subject to any liabilities or obligations of any nature, whether absolute,
accrued, contingent or otherwise and whether due or to become due, that are
not reflected in the financial statements presented to uMember.
3.8 Tax Returns. Within the times and in the manner prescribed by
law, Art Cards has filed all federal, state and local tax returns required by
law and has paid all taxes, assessments and penalties due and payable.
3.9 Investigation of Financial Condition. Without in any manner
reducing or otherwise mitigating the representations contained herein, uMember
shall have the opportunity to meet with Art Cards's accountants and attorneys
to discuss the financial condition of Art Cards. Art Cards shall make
available to uMember all books and records of Art Cards.
3.10 Trade Names and Rights. Art Cards does not use any trademark,
service xxxx, trade name, or copyright in its business, or own any trademarks,
trademark registrations or applications, trade names, service marks,
copyrights, copyright registrations or applications.
3.11 Compliance with Laws. To the best of Art Cards's knowledge, Art
Cards has complied with, and is not in violation of, applicable federal, state
or local statutes, laws and regulations (including, without limitation, any
applicable building, zoning, or other law, ordinance, or regulation) affecting
its properties or the operation of its business or with which it is otherwise
required to comply.
3.12 Litigation. Art Cards is not a party to any suit, action,
arbitration, or legal, administrative, or other proceeding, or governmental
investigation pending or, to the best knowledge of Art Cards, threatened
against or affecting Art Cards or its business, assets, or financial
condition. Art Cards is not in default with respect to any order, writ,
injunction, or decree of any federal, state, local, or foreign court,
department agency, or instrumentality. Art Cards is not engaged in any legal
action to recover moneys due to it.
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3.13 Bulletin Board Listing. Art Card's Common Stock is currently
listed for trading on the OTC Bulletin Board under the symbol ATCD, and Art
Cards is not aware of steps being taken by the NASD to cause the Common Stock
to be delisted.
3.14 No Pending Investigation. Art Cards is not aware of any pending
investigations or legal proceedings by the SEC, any state securities
regulatory agency, or any other governmental agency regarding Art Cards or any
officers or directors of Art Cards.
3.15 Authority. Art Cards has full corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The Board of Directors of Art Cards has taken all action
required to authorize the execution and delivery of this Agreement by or on
behalf of Art Cards, the performance of the obligations of Art Cards under
this Agreement and the consummation by Art Cards of the transactions
contemplated under this Agreement. Other than the shareholders meeting
described in paragraph 6.8 below, no other corporate proceedings on the part
of Art Cards are necessary to authorize the execution and delivery of this
Agreement by Art Cards and the performance of its obligations under this
Agreement. This Agreement is, and when executed and delivered by Art Cards,
will be a valid and binding agreement of Art Cards, enforceable against Art
Cards in accordance with its terms, except as such enforceability may be
limited by general principles of equity, bankruptcy, insolvency, moratorium
and similar laws relating to creditors rights generally.
3.16 Ability to Carry Out Obligations. Subject to the shareholders
of Art Cards authorizing the reverse split described in paragraph 6.8, neither
the execution and delivery of this Agreement, the performance by Art Cards of
its obligations under this Agreement, nor the consummation of the transactions
contemplated under this Agreement will, to the best of Art Cards's knowledge:
(a) violate any provision of Art Cards's articles of incorporation or bylaws;
(b) with or without the giving of notice or the passage of time, or both,
violate, or be in conflict with, or constitute a default under, or cause or
permit the termination or the acceleration of the maturity of, any debt,
contract, agreement or obligation of Art Cards, or require the payment of any
prepayment or other penalties; (c) require notice to, or the consent of, any
party to any agreement or commitment, lease or license, to which Art Cards is
bound; (d) result in the creation or imposition of any security interest, lien
or other encumbrance upon any property or assets of Art Cards; or (e) violate
any statute or law or any judgment, decree, order, regulation or rule of any
court or governmental authority to which Art Cards is bound or subject.
3.17 Validity of Art Cards Shares. The shares of Art Cards Common
Stock to be delivered pursuant to this Agreement, when issued in accordance
with the provisions of this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable.
3.18 Full Disclosure. None of the representations and warranties
made by Art Cards herein, or in any exhibit, certificate or memorandum
furnished or to be furnished by Art Cards, or on its behalf, contains or will
contain any untrue statement of material fact, or omit any material fact the
omission of which would be misleading.
3.19 Assets. Art Cards has good and marketable title to all of its
tangible properties and such tangible properties are not subject to any liens
or encumbrances.
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3.20 Material Contracts and Obligations. Attached hereto on Schedule
3 is a list of all agreements, contracts, indebtedness, liabilities and other
obligations to which Art Cards is a party or by which it is bound that are
material to the conduct and operations of its business and properties, which
provide for payments to or by Art Cards in excess of $25,000; or which involve
transactions or proposed transactions between Art Cards and its officers,
directors, affiliates or any affiliate thereof. Copies of such agreements and
contracts and documentation evidencing such liabilities and other obligations
have been made available for inspection by uMember and its counsel. All of
such agreements and contracts are valid, binding and in full force and effect
in all material respects, assuming due execution by the other parties to such
agreements and contracts.
3.21 Consents and Approvals. No consent, approval or authorization
of, or declaration, filing or registration with, any governmental or
regulatory authority is required to be made or obtained by Art Cards in
connection with: (a) the execution and delivery by Art Cards of its
obligations under this Agreement; (b) the performance by Art Cards of its
obligations under this Agreement; or (c) the consummation by Art Cards of the
transactions contemplated by this Agreement.
3.22 Real Property. Art Cards does not own, use or claim any
interest in any real property, including without limitation any license,
leasehold or any similar interest in real property.
ARTICLE 4
COVENANTS
4.1 Investigative Rights. From the date of this Agreement until the
Closing Date, each party shall provide to the other party, and such other
party's counsels, accountants, auditors, and other authorized representatives,
full access during normal business hours and upon reasonable advance written
notice to all of each party's properties, books, contracts, commitments, and
records for the purpose of examining the same. Each party shall furnish the
other party with all information concerning each party's affairs as the other
party may reasonably request. If the transaction contemplated hereby is not
completed, all documents received by each party and/or its attorneys and
accountants, auditors or other authorized representatives shall be returned to
the other party who provided same upon request. The parties hereto, their
directors, employees, agents and representatives shall not disclose any of the
information described above unless such information is already disclosed to
the public, without the prior written consent of the party to which the
confidential information pertains. Each party shall take such steps as are
necessary to prevent disclosure of such information to unauthorized third
parties.
4.2 Conduct of Business. Prior to the Closing, Art Cards and uMember
shall each conduct its business in the normal course, and shall not sell,
pledge, or assign any assets, without the prior written approval of the other
party, except in the regular course of business or as contemplated in
previously disclosed contractual obligations. Neither Art Cards nor uMember
shall amend its Articles of Incorporation or Bylaws, declare dividends, redeem
or sell stock or other securities, incur additional or newly-funded
liabilities, acquire or dispose of fixed assets, change employment terms,
enter into any material or long-term contract, guarantee obligations of any
third party, settle or discharge any balance sheet receivable for less than
its stated amount, pay more on any liability than its stated amount, or enter
into any other transaction other than in the regular course of business except
as otherwise contemplated herein.
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4.3 Payments to Art Cards. At the Closing, uMember will pay to Art
Cards the sum of $45,000 which Art Cards will use to reimburse Xxxxxxx Xxxxxx
for his expenses incurred on behalf of Art Cards. The parties acknowledge and
agree that uMember has previously paid Art Cards the additional amount of
$25,000 on the signing of the Letter of Intent between the parties dated
January 28, 2000, and that this $25,000 payment will be forfeited to Art Cards
if this transaction is terminated for any reason. This $25,000 will also be
used to reimburse Xxxxxxx Xxxxxx for his expenses incurred on behalf of Art
Cards.
At the Closing, uMember shall reimburse Art Cards $5,000 for Art Cards'
legal fees and other expenses of this transaction.
ARTICLE 5
CONDITIONS PRECEDENT TO ART CARDS' PERFORMANCE
5.1 Conditions. The obligations of Art Cards hereunder shall be
subject to the satisfaction, at or before the Closing, of all the conditions
set forth in this Article 5. Art Cards may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that
no such waiver of a condition shall constitute a waiver by Art Cards of any
other condition of or any of Art Cards's other rights or remedies, at law or
in equity, if uMember shall be in default of any of their representations,
warranties, or covenants under this Agreement.
5.2 Accuracy of Representations. Except as otherwise permitted by
this Agreement, all representations and warranties by uMember in this
Agreement or in any written statement that shall be delivered to Art Cards by
uMember under this Agreement shall be true and accurate on and as of the
Closing Date as though made at that time.
5.3 Performance. uMember shall have performed, satisfied, and
complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by it, on or before the Closing
Date.
5.4 Acceptance by uMember Shareholders. The holders of not less than
95% of the issued and outstanding shares of common stock of uMember shall have
agreed to exchange their shares for shares of Art Cards Common Stock.
5.5 Absence of Litigation. No action, suit, or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against uMember on or before the Closing Date.
5.6 Shareholders' Meeting. Prior to the Closing, Art Cards will hold
a shareholders' meeting at which the following items must be approved: (1) a
reverse split which will reduce the total number of shares outstanding to
approximately 476,500; (2) a change in the corporation's name to a name
designated by uMember; (3) the adoption of a stock option plan acceptable to
uMember; and (4) any other matters which the parties mutually agree are needed
to "update" the Articles of Incorporation of Art Cards.
5.7 Officer's Certificate. uMember shall have delivered to Art Cards
a certificate, dated the Closing Date, and signed by the Chief Executive
Officer of uMember, certifying that each of the conditions specified in
Sections 5.2 through 5.6 hereof have been fulfilled.
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ARTICLE 6
CONDITIONS PRECEDENT TO UMEMBER'S PERFORMANCE
6.1 Conditions. uMember's obligations hereunder shall be subject to
the satisfaction, at or before the Closing, of all the conditions set forth in
this Article 6. uMember may waive any or all of these conditions in whole or
in part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by uMember of any other condition of or
any of uMember's rights or remedies, at law or in equity, if Art Cards shall
be in default of any of its representations, warranties, or covenants under
this Agreement.
6.2 Accuracy of Representations. Except as otherwise permitted by
this Agreement, all representations and warranties by Art Cards in this
Agreement or in any written statement that shall be delivered to uMember by
Art Cards under this Agreement shall be true and accurate on and as of the
Closing Date as though made at that time.
6.3 Performance. Art Cards shall have performed, satisfied, and
complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by them, on or before the Closing
Date.
6.4 Absence of Litigation. No action, suit or proceeding before any
court or any governmental body or authority, pertaining to the transaction
contemplated by this Agreement or to its consummation, shall have been
instituted or threatened against Art Cards on or before the Closing Date.
6.5 Directors of Art Cards. Effective on the Closing, Art Cards
shall have fixed the size of its Board of Directors at three (3) persons, and
such Board of Directors shall include Xxxx Xxxxxxxx, Xxx Xxxxxx and Xxx
Xxxxxxxx. The current Officers and Directors of Art Cards shall have
submitted their resignations as the Officers and Directors of Art Cards
effective on the Closing of this transaction.
6.6 Officers of Art Cards. Effective on the Closing, Art Cards shall
have elected the following new Officers of Art Cards:
Xxxx Xxxxxxxx - Chairman of the Board and CEO
Xxx Xxxxxx - CFO and Treasurer
Xxx X. Xxxxxxxx - Secretary
6.7 Completion of Private Offering. uMember shall have completed a
private placement of its Common Stock at $7.50 per share (on a post-split
basis) and shall have raised a total of approximately $5,000,000 before
commissions and expenses.
6.8 Shareholders' Meeting. Prior to the Closing, Art Cards will hold
a shareholders' meeting at which the following items must be approved: (1) a
reverse split which will reduce the total number of shares outstanding to
approximately 476,500; (2) a change in the corporation's name to a name
designated by uMember; (3) the adoption of a stock option plan acceptable to
uMember; (4) a reduction in the number of authorized shares of common stock
from 3 billion to 100 million; and (5) any other matters which the parties
mutually agree are needed to "update" the Articles of Incorporation of Art
Cards.
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6.9 No Outstanding Debt. On the Closing, all outstanding liabilities
and obligations of Art Cards shall have been paid or settled, except for the
costs of printing and mailing the Art Cards proxy materials for the March 16
meeting, which are estimated to be approximately $1,708, and the cost of the
audit for December 31, 1999, which was $650. Art Cards agrees to apply any
unused funds from the $5,000 payment referred to in Section 4.3 to those
expenses and to pay one-half of the remaining balance.
6.10 Officer Certificate. Art Cards shall have delivered to uMember
a certificate, dated the Closing Date and signed by the President of Art Cards
certifying that each of the conditions specified in Sections 6.2 through 6.9
have been fulfilled.
ARTICLE 7
CLOSING
7.1 Closing. The Closing of this transaction shall be held at the
offices of Xxxx Xxxxx Xxxxxxxx Xxxxx & Xxxxxx, P.C., 600 Seventeenth Street,
Suite 0000 Xxxxx Xxxxx, Xxxxxx, Xxxxxxxx 00000, or such other place as shall
be mutually agreed upon, on such date as shall be mutually agreed upon by the
parties, but in no event shall the Closing be later than March 22, 2000. At
the Closing:
7.2 uMember shall deliver Letters of Acceptance and the certificates
representing the shares of uMember held by the shareholders of uMember
accepting the Exchange Offer ("Accepting Shareholders") to Art Cards.
7.3 Each Accepting Shareholder shall receive a certificate or
certificates representing the number of shares of Art Cards Common Stock for
which the shares of uMember common stock shall have been exchanged.
7.4 Each person who holds an option to purchase shares of uMember's
common stock on the Closing will receive a new option to purchase shares of
Art Cards' common stock in accordance with the provisions of Section 1.4
above.
7.5 uMember will deliver a cashier's check to Art Cards in the amount
of $45,000 pursuant to the provisions of paragraph 4.3 above with the
understanding that Art Cards will immediately use these funds to reimburse
Xxxxxxx Xxxxxx for expenses he has incurred on behalf of Art Cards.
7.6 uMember will deliver a cashier's check to Art Cards to cover its
legal expenses up to $5,000 pursuant to the provisions of paragraph 4.3 above
with the understanding that Art Cards will immediately use these funds to pay
its outstanding legal fees.
7.7 Art Cards shall deliver an officer's certificate, as described in
Section 6.10 hereof, dated the Closing Date, that all representations,
warranties, covenants and conditions set forth in this Agreement on behalf of
Art Cards are true and correct as of, or have been fully performed and
complied with by, the Closing Date.
7.8 Art Cards shall deliver a signed Consent and/or Minutes of the
Directors of Art Cards approving this Agreement and each matter to be approved
by the Directors of Art Cards under this Agreement.
7.9 uMember shall deliver an officer's certificate, as described in
Section 5.7 hereof, dated the Closing Date, that all representations,
warranties, covenants and conditions set forth in this Agreement on behalf of
uMember are true and correct as of, or have been fully performed and complied
with by, the Closing Date.
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7.10 uMember shall deliver a signed Consent or Minutes of the
Directors of uMember approving this Agreement and each matter to be approved
by the Directors of uMember under this Agreement.
7.11 Art Cards shall deliver certificates for a total 2,537,000
(post-split) shares of its Common Stock to those persons and in the amounts as
designated by uMember as payment in full for all finder's fees in connection
with this transaction.
ARTICLE 8
POST CLOSING
8.1 Current Report on Form 8-K. Within 15 days after the Closing
Date, Art Cards will file a Current Report on Form 8-K with the Securities and
Exchange Commission reporting this transaction and will file the financial
statements of uMember required by Item 7 of the Current Report on Form 8-K
within 75 days after the Closing Date.
ARTICLE 9
MISCELLANEOUS
9.1 Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall in
no way be deemed to define, limit, or add to the meaning of any provision of
this Agreement.
9.2 No Oral Change. This Agreement and any provision hereof, may not
be waived, changed, modified, or discharged orally, but it can be changed by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, or discharge is sought.
9.3 Non-Waiver. Except as otherwise expressly provided herein, no
waiver of any covenant, condition, or provision of this Agreement shall be
deemed to have been made unless expressly in writing and signed by the party
against whom such waiver is charged; and (i) the failure of any party to
insist in any one or more cases upon the performance of any of the provisions,
covenants, or conditions of this Agreement or to exercise any option herein
contained shall not be construed as a waiver or relinquishment for the future
of any such provisions, covenants, or conditions, (ii) the acceptance of
performance of anything required by this Agreement to be performed with
knowledge of the breach or failure of a covenant, condition, or provision
hereof shall not be deemed a waiver of such breach or failure, and (iii) no
waiver by any party of one breach by another party shall be construed as a
waiver with respect to any other or subsequent breach.
9.4 Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
9.5 Entire Agreement. This Agreement contains the entire Agreement
and understanding between the parties hereto, and supersedes all prior
agreements and understandings.
9.6 Choice of Law. This Agreement and its application shall be
governed by the laws of the State of Colorado, except to the extent its
conflict of laws provisions would apply the laws of another jurisdiction.
9.7 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party
to whom notice is to be given, or on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed as follows:
11
Art Cards:
Art Cards, Inc.
000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxx X. Xxxxx
Xxxxx XxXxxxxxxx, P.C.
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000-0000
uMember:
xXxxxxx.xxx.Xxx.
0000 Xxxxxxxxx Xxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
with a copy to:
Xxx X. Xxxxxx
Xxxx Xxxxx Xxxxxxxx & Xxxxxx, P.C.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
9.8 Binding Effect. This Agreement shall inure to and be binding
upon the heirs, executors, personal representatives, successors and assigns of
each of the parties to this Agreement.
9.9 Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement, and shall execute such other
and further documents and take such other and further actions as may be
necessary or convenient to effect the transaction described herein.
9.10 Brokers. The parties hereto represent and agree that, other
than the persons who receive the 2,537,000 finder's fee shares referred to in
paragraph 7.10, above, no broker has brought about the aforementioned
transaction. Each of the parties hereto shall indemnify and hold the other
harmless against any and all claims, losses, liabilities or expenses which may
be asserted against it as a result of its dealings, arrangements or agreements
with any broker or person, except as described in this paragraph.
9.11 Announcements. Art Cards and uMember will consult and cooperate
with each other as to the timing and content of any announcements of the
transactions contemplated hereby to the general public or to employees,
customers or suppliers.
9.12 Exhibits. As of the execution hereof, the parties hereto have
provided each other with the Exhibits provided for herein above, including any
items referenced therein or required to be attached thereto. Any material
changes to the Exhibits shall be immediately disclosed to the other party.
9.13 Use of Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
12
AGREED TO AND ACCEPTED as of the date first above written.
ART CARDS, INC. XXXXXXX.XXX.XXX.
By:/s/ Xxxxxxx Xxxxxx By:/s/ Xxxx Xxxxxxxx
Xxxxxxx Xxxxxx, President Xxxx Xxxxxxxx, Chairman and CEO
13
SCHEDULE 1
Number of
Number of Shares of
Name, Address and Shares of Art Cards
Social Security Number xXxxxxx.xxx Common Stock
Xxxxxxxxx.xxx, Inc.
____________________
____________________ 3,390,000 8,949,589
Xxxxxxx Xxxxxxx
____________________
____________________ 427,500 1,128,598
Xxxxxx Xxxxx
____________________
____________________ 2,500 6,600
Xxxxxxxxx Xxxxxxxxxxxxx
____________________
____________________ 7,500 19,800
Xxxx Xxxxxx
____________________
____________________ 420,000 1,108,799
Bezhad Eshghieh
____________________
____________________ 300,000 791,999
Xxxxxx Xxxxxx
____________________
____________________ 300,000 791,999
Xxxxxxx Xxxx
____________________
____________________ 300,000 791,999
Xxx Xxxxxxxx
____________________
____________________ 50,000 132,000
Xxx Xxxxxx
____________________
____________________ 50,000 132,000
Xxxx Xxxxxxxx
____________________
____________________ 250,000 659,999
Xxxxx Xxxxxxx
____________________
____________________ 45,000 118,800
Xxxx Xxxxxxxxx
____________________
____________________ 100,000 264,000
Xxxxx Xxxxx
____________________
____________________ 5,900 15,576
Xxxx Xxxxxx
____________________
____________________ 200 528
Xxxx Xxxxxx
____________________
____________________ 100 264
Xxxxx Xxxxxx
____________________
____________________ 3,000 7,920
Xxx XxXxxxxx
____________________
____________________ 5,000 13,200
Transactional Marketing Partners
____________________
____________________ 15,125 39,930
Xxxx Xxxxx
____________________
____________________ 10,000 26,400
Total 5,681,825 15,000,000
SCHEDULE 2
xXxxxxx.xxx.Xxx.
("uMember")
2.4 The Officers and Directors of uMember are as follows:
Name Position
Xxxx Xxxxxxxx Chairman of the Board, CEO and Director
Xxxx Xxxxxx President and Director
Xxx Xxxxxx Vice President of Finance, CFO and Director
Xxxxxx X. Xxxxxxx Vice President
Xxxx Xxxxxxxxx Vice President of Merchandising
Xxx X. Xxxxxxxx Vice President, Secretary, General Counsel
and Director
2.17 Contracts:
a) Finder's Fee Agreement with CCRI
SCHEDULE 3
Art Cards, Inc.
("Art Cards")
3.4 Directors and Officers of Art Cards:
Name Position
Xxxxxxx X. Xxxxxx Chairman of the Board and President
Xxxxxxx X. Xxxxxxxx Director
Xxxx X. Xxxxxxxxx Director
3.20 Material Contracts of Art Cards:
None
