10QSB: Optional form for quarterly and transition reports of small business issuers
Published on May 21, 2001
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 2001.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ______ to ______ .
Commission file number: 000-27407
----------
DELTA CAPITAL TECHNOLOGIES, INC.
----------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 98-0187705
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1331 Homer St. #B201, Vancouver, B.C., Canada V6B 5M5
-----------------------------------------------------
(Address of principal executive office) (Zip Code)
(604) 644-4979
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes XX No
------ ----
The number of outstanding shares of the issuer's common stock, $0.001 par value
(the only class of voting stock), as of April 12, 2001, was 55,034,827.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS..................................4
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.....................................................5
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES...............................5
ITEM 5. OTHER INFORMATION ....................................................6
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................7
SIGNATURES.....................................................................8
INDEX TO EXHIBITS..............................................................9
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
2
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Delta Capital Technologies, Inc., a
Delaware corporation and predecessors unless otherwise indicated. Unaudited,
condensed interim financial statements including a balance sheet for the Company
as of the quarter ended March 31, 2001 and statements of operations, and
statements of cash flows for the interim period up to the date of such balance
sheet and the comparable period of the preceding year are attached hereto as
Pages F-1 through F- 7 and are incorporated herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
3
INDEX TO FINANCIAL STATEMENTS
PAGE
Balance Sheet...............................................................F-2
Statement of Operations.....................................................F-3
Statement of Cash Flows.....................................................F-4
Notes to Unaudited Financial Statements.....................................F-6
F-1
DELTA CAPITAL TECHNOLOGIES, INC.
(A Development State Company)
CONSOLIDATED BALANCE SHEETS
March 31, 2001
See Notes To Financial Statements.
F-2
DELTA CAPITAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS For
the Three Months Ended March 31, 2001 and 2000 and
the Period from March 4, 1998 (Date of Incorporation) to March 31, 2001
(Unaudited)
See Notes to Financial Statements.
F-3
DELTA CAPITAL TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH
FLOWS For the Three Months Ended March 31,
2001 and 2000 and
the Period from March 4, 1998 (Date of Incorporation) to March 31, 2001
(Unaudited)
F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued) For the Three Months Ended
March 31, 2001 and 2000 and
the Period from March 4, 1998 (Date of Incorporation) to March 31, 2001
(Unaudited)
See Notes to Financial Statements.
F-5
DELTA CAPITAL TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS For the Three Months Ended
March 31, 2001
(Unaudited)
Note 1. Basis of Presentation
The interim period consolidated financial statements contained herein include
the accounts of Delta Capital Technologies, Inc. and it's subsidiary (the
"Company").
The interim period consolidated financial statements have been prepared by the
Company pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission (the "SEC"). Certain information and footnote disclosure
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
SEC rules and regulations. The interim period consolidated financial statements
should be read together with the audited consolidated financial statements and
accompanying notes included in the Company's latest annual report on Form 10-KSB
for the fiscal year ended December 31, 2000. In the opinion of the Company, the
unaudited consolidated financial statements contained herein contain all
adjustments necessary to present a fair statement of the results of the interim
periods presented.
Note 2. Summary of Significant Accounting Policies
Earnings Per Share
Basic earnings per share is computed by dividing income (loss) for the period by
the weighted average number of common shares outstanding during a period.
Diluted earnings per share takes into consideration common shares outstanding
(computed under basic earnings per share) and potentially dilutive common
shares. The weighted average number of shares was 48,834,359 and 42,620,630 for
the three months ended March 31, 2001 and March 31, 2000, respectively. The
weighted average number of shares was 35,308,924 for the period from March 4,
1998 to March 31, 2001.
Note 3. Going Concern
As shown in the financial statements, the Company incurred a net loss of
$6,479,811 since inception, largely due to its write-off of assets related to
its investment in its computer software. Further, the Company has net deficiency
in capital of $336,314. These factors raise concerns about the Company's ability
to continue as a going concern.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued) For the Three Months Ended
March 31, 2001
(Unaudited)
Note 3. continued
The Company will need additional working capital to be successful in any future
business activities and to service its current debt for the coming year.
Therefore, continuation of the Company as a going concern is dependent upon
obtaining the additional working capital necessary to accomplish its objective.
Management is presently engaged in seeking additional working capital equity
funding and plans to continue to invest in other businesses with funds obtained.
The accompanying financial statements do not include any adjustments to the
recorded assets or liabilities that might be necessary should the Company fail
in any of above objectives and is unable to operate for the coming year.
Note 4. Notes Receivable
The $10,000 note receivable is due from UMDN, Inc. (note 5), which was acquired
by the Company subsequent to March 31, 2001.
Note 5. Subsequent Events
On May 4, 2001, the Company agreed to acquire 100% of the outstanding common
shares of UMDN, Inc. In consideration the Company will issue 1,000,000 shares of
its own common stock. UMDN, Inc. offers discounted goods to union members who
sign up for their service. Revenues are earned by fees charged to businesses
providing goods to members.
The Company has also entered into an agreement to acquire Au-On Line which
offers gold products for sale through the Internet. The Company is awaiting
certain documents from Au-On Line prior to completing the transaction.
Both acquisitions will be accounted for as purchases. The results of operations
will be included from the date of acquisition. Management has not determined the
amount of goodwill, if any, from these purchases.
F-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
As used herein the term "Company" refers to Delta Capital Technologies, Inc., a
Delaware corporation and its predecessors, unless the context indicates
otherwise. The Company discontinued its software development in October, 2000.
As of March 31, 2001, The Company was a shell company whose purpose was to
acquire operations through an acquisition or merger, or to begin its own
start-up business. The Company's executive offices are currently located at
B201-1331 Homer Street, Vancouver, B. C., Canada.
On January 22, 2001, the Company reached an agreement in principle with Acer
Capital Corp., an Alberta corporation and a reporting issuer whose shares are
traded on the Canadian Venture Exchange (trading symbol ""ART""), and its joint
venture partner Rio Minerals Ltd. to co-develop its Au-online.com business
venture.
Au-online.com, Inc., a Nevada corporation, has the exclusive purchase and
marketing rights for all gold-nugget production originating from a group of
claims in the Ten Mile district of north-central Nevada held by Kayzak Resources
of Winnemucca, Nevada. On February 26, 2001, the Company finalized the terms of
the acquisition of Au-online.com, Inc. The Company agreed to issue 6,500,000
common shares as consideration for an 85% interest in the venture and the right
to acquire the remainder of the shares of Au-online.com, Inc. for a one-time
cash payment of $150,000 or the issuance of a further 1,500,000 shares. See
Share Exchange Agreement, Exhibit 10(i)
As part of the agreement, the Company has agreed to finance the development of
the venture and work with Acer and Rio Minerals Ltd. to immediately implement
the web presence and marketing of Au-online.com. The e- Commerce business model
for the venture provides Au-online.com the exclusive purchase and marketing
rights for all gold-nugget production originating from a group of claims in the
Ten Mile district of north-central Nevada held by Kayzak Resources of
Winnemucca, Nevada.
On March 8, 2001, the Company elected to exercise its option to acquire the
remaining minority interest of the outstanding shares of Au-online.com. Pursuant
to the terms of its agreement, upon closing, the Company will issue a total of
8,000,000 shares in exchange for all the issued and outstanding shares of
Au-online.com, Inc. Upon the closing of the acquisition, the Company, through
its subsidiary, Au-online.com, Inc., intends to market gold nuggets through the
company"s web site at Au-online.com.
The acquisition has not yet closed. Closing will occur following the delivery of
the financial statements of Au- Online.Com, Inc. which are called for in the
February 26, 2001 Agreement.
The Company does not have sufficient capital to operate over the next fiscal
year without a substantial infusion of operating capital. It will be necessary
for the Company to either borrow funds to operate or generate operating funds
through the sale of equity in the Company or its subsidiaries. There can be no
assurance that the Company will be able to generate sufficient income from
either borrowing, the sale of equity, or a combination therof to allow it to
operate its business during the coming year. Unless the Company is successful in
raising additional operating capital, it will not have sufficient funds to
operate during the balance of the fiscal year.
The Company has no current plans to perform any product research and development
during the coming year.
The Company has no current plans to spend any significant amount in the coming
year on Plant or Equipment.
4
At the present time, it is not anticipated that the Company will have any
significant increase in the number of employees working for the Company.
However, the Company is intending to develop the business of UMDN during the
coming year. If the Company is successful in raising the funds necessary to
begin operations of UMDN, additional employees will need to be hired by UMDN,
and possibly by the Company. At the present time it is not possible to give a
valid estimate of the number of additional employees that may be needed.
Going Concern
The Company's auditors have expressed an opinion as to the Company's ability to
continue as a going concern. The Company's ability to continue as a going
concern is subject to the ability of the Company to obtain a profit and/or
obtaining the necessary funding from outside sources. Management's plan to
address the Company's ability to continue as a going concern, includes: (1)
obtaining funding from the sale of the Company's securities; (2) increasing
sales, and (3) obtaining loans and grants from various financial institutions
where possible. Although management believes that it will be able to obtain the
necessary funding to allow the Company to remain a going concern through the
methods discussed above, there can be no assurances that such methods will prove
successful.
PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Daniel Turner vs. Delta Capital Technologies, Inc. filed in the Court of Queen's
Bench of Alberta, Judicial District of Calgary (Canada). Daniel Turner has filed
suit asking for $22,580.41 for unpaid expenses and salary and vacation pay, and
$40,000 in general damages based upon a claim of unreasonable termination of
employment. The Company has denied liability. Settlement negotiations are
ongoing. The Company has offered $10,000 to settle the case.
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
The following is a list of all securities sold by the Company within the period
covered by this report, including, where applicable, the identity of the person
who purchased the securities, title of the securities, and the date sold.
On February 21, 2001, the Company issued 300,000 shares of common stock at $0.05
per share to Corporate Imaging company for consulting services pursuant to
section 4(2) of the Securities Act of 1933 in an isolated private transaction by
the Company which did not involve a public offering. The Company made this
offering based on the following factors: (1) The issuance was an isolated
private transaction by the Company which did not involve a public offering; (2)
there was only one offeree who was issued stock for consulting services; (3) the
offeree did not resell the stock but has continued to hold it since the date of
issue; (4) there were no subsequent or contemporaneous public offerings of the
stock; (5) the stock was not broken down into smaller denominations; and (6) the
negotiations for the sale of the stock took place directly between the offeree
and the Company.
On March 1, 2001, the Company issued 600,000 shares of common stock at $0.05 per
share to Kingsley Capital Corporation for consulting services pursuant to
section 4(2) of the Securities Act of 1933 in an isolated private transaction by
the Company which did not involve a public offering. The Company made this
offering based on the following factors: (1) The issuance was an isolated
private transaction by the Company which did not involve a public offering; (2)
there was only one offeree who was issued stock for consulting services; (3) the
offeree did not resell the stock but has continued to hold it since the date of
issue; (4) there were no subsequent or contemporaneous public offerings of the
5
stock; (5) the stock was not broken down into smaller denominations; and (6) the
negotiations for the sale of the stock took place directly between the offeree
and the Company.
On March 13, 2001, the Company issued 202,812 shares of common stock at $0.05
per share to Cliff Eschner, 5,806 shares of common stock at $0.05 per share to
Colleen Eschner, and 2,861 shares of common stock at $0.05 per share to Nina
Froemgen for consulting services pursuant to section 4(2) of the Securities Act
of 1933 in an isolated private transaction by the Company which did not involve
a public offering. The Company made this offering based on the following
factors: (1) The issuance was an isolated private transaction by the Company
which did not involve a public offering; (2) there were only three offerees who
were issued stock for consulting services; (3) the offerees did not resell the
stock but have continued to hold it since the date of issue; (4) there were no
subsequent or contemporaneous public offerings of the stock; (5) the stock was
not broken down into smaller denominations; and (6) the negotiations for the
sale of the stock took place directly between the offerees and the Company.
On March 16, 2001, the Company issued 144,556 shares of common stock at $0.05
per share to Nolke Professional Services for consulting services pursuant to
section 4(2) of the Securities Act of 1933 in an isolated private transaction by
the Company which did not involve a public offering. The Company made this
offering based on the following factors: (1) The issuance was an isolated
private transaction by the Company which did not involve a public offering; (2)
there was only one offeree who was issued stock for consulting services; (3) the
offeree did not resell the stock but has continued to hold it since the date of
issue; (4) there were no subsequent or contemporaneous public offerings of the
stock; (5) the stock was not broken down into smaller denominations; and (6) the
negotiations for the sale of the stock took place directly between the offeree
and the Company.
On March 30, 2001, the Company issued 600,000 shares of common stock at $0.075
per share to Judith Miller for cash on the exercise of an option, and pursuant
to section 4(2) of the Securities Act of 1933 in an isolated private transaction
by the Company which did not involve a public offering. The Company made this
offering based on the following factors: (1) The issuance was an isolated
private transaction by the Company which did not involve a public offering; (2)
there was only one offeree who was issued stock for cash; (3) the offeree did
not resell the stock but has continued to hold it since the date of issue; (4)
there were no subsequent or contemporaneous public offerings of the stock; (5)
the stock was not broken down into smaller denominations; and (6) the
negotiations for the sale of the stock took place directly between the offeree
and the Company.
ITEM 5. OTHER INFORMATION
On May 4, 2001, the Company entered into a Stock Purchase and Sale Agreement
with the shareholders of UMDN, Inc., a Delaware corporation ("UMDN") whereby the
Company acquired all of the issued and outstanding common shares of UMDN or
3,500,000 shares and the right to exercise 200,000 options to purchase
additional common shares, in exchange for 1,000,000 shares of the Company's
common stock. The shareholders of UMDN retained 1,050,000 shares of preferred
class A shares. Each preferred class A share is convertible into 10 common
shares on the occurrence of any one of the following events:
1.) the total number of shares of common stock outstanding or subject
to the then currently exercisable options, warrants or conversion
rights exceeds 7,500,000 shares;
2.) UMDN obtains $500,000 in equity financing from sales of the common
stock;
3.) UMDN common stock becomes publically traded;
6
4.) the majority of the outstanding shares of common stock is no longer
owned or record or beneficially, by the holders of a majority of the
outstanding shares of common stock prior to the Company's purchase or
by other persons to who the holders of the majority of the outstanding
preferred class A shares have consented in writing.
UMDN is a marketing company that enrolls members of large affinity groups,
unions and/or associations within a networking service in order to leverage
their buying power to elicit proprietary discounts from both local and national
businesses. The network is created through local discount networks, national
providers and strategic partners. The local network is where members of affinity
groups, unions, and/or associations receive substantial savings on products or
services in a branded environment, on a contractual basis, such as for cellular
service or insurance. UDMN's primary revenue is expected to be generated from
the business sector by charging flats fees for membership. UMDN hopes to
generate secondary revenue from permitting strategic partners access to its
captive consumer groups on an exclusive basis. UMDN's strategic partners will
pay UMDN a percentage of all revenue derived from accessing its network. The
Company intends to do business by providing networking services among small to
medium sized businesses through its wholly owned subsidiary Union Members
Discount Network, Inc. ("UMDN")
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B
are listed in the Index to Exhibits on page 7 of this Form 10-QSB, and
are incorporated herein by this reference.
(b) Reports on Form 8-K. The Company filed no reports on Form 8-K during
the period covered by this report.
[THIS SPACE INTENTIONALLY LEFT BLANK]
7
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 21st day of May, 2001.
Delta Capital Technologies, Inc.
/s/ Judy Miller
- -----------------------------------
Judy Miller, Secretary and Director
8
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
3(i) * Articles of Incorporation dated March 4, 1998.
(Incorporated by reference from Form 10SB filed
with the SEC on January 5, 2000.)
3(ii) * Amended Articles of Incorporation dated April 23,
1998. (Incorporated by reference from Form 10SB
filed with the SEC on January 5, 2000.)
3(iii) * By-Laws of Delta Capital dated April 23, 1998.
(Incorporated by reference from Form 10SB filed
with the SEC on January 5, 2000.)
10(i) 10 Share Exchange Agreement dated February 26, 2001
between Delta Capital Technologies, Inc. and
Shareholders of Au-Online.Com, Inc.
10(ii) 21 Stock Purchase and Sale Agreement dated May 4, 2001
between Delta Capital Technologies, Inc. and
Shareholders of UMDN, Inc.
* Incorporated by reference from previous filings as noted.
9
STOCK PURCHASE AND SALE AGREEMENT
Between Delta Capital Technologies, Inc., and the
Shareholders of Union Members Discount Network, Inc.
February 22, 2001
10
TABLE OF CONTENTS
RECITALS .....................................................................12
1. Purchase and Sale of Property; Release......................12
1.2 Property..................................12
1.3 Release...................................12
2. Closing Date; Delivery......................................13
2.1 Closing Date..............................13
2.2 Deliveries at Closing.....................13
3. Representations and Warranties of Union.....................13
3.1 Organization, Standing and Authority of
Union.....................................13
3.2 Financial and Operating Status of Union...14
4. Representations and Warranties of Delta.....................15
4.1 Corporate Organization....................15
4.2 Due Execution and Enforceability..........16
5. Conditions to Closing.......................................16
5.1 Conditions to Obligations of Delta........16
5.2 Conditions to Obligations of Union........17
6. Covenants and Agreements of Union...........................18
6.1 Access to Information.....................18
6.2 Conduct of Business Pending the Closing...18
7. Miscellaneous...............................................19
7.1 Successors and Assigns....................19
7.2 Governing Law; Severability...............19
7.3 Waivers...................................19
7.4 Entire Agreement; Modifications...........19
7.5 Notices...................................20
7.6 Counterparts..............................20
7.7 Headings; References......................20
11
STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT (this "Agreement"), dated effective as of
February 22, 1998, is between Union Members Discount Network, Inc., a Delaware
corporation ("Union"), the shareholders of Union ("Shareholders") and Delta
Capital Technologies, Inc., a Delaware corporation ("Delta").
RECITALS
A. Union is a privately held, non-reporting corporation with its principle
operations located in Santa Monica, California.
B. Delta is a publically held, reporting corporation with its principle
operations located in Vancouver, British Columbia Canada.
C. Shareholders desire to sell and Delta desires to purchase all of the
outstanding shares of Union pursuant to the terms and conditions of this
Agreement.
AGREEMENT
In consideration of the foregoing recitals and the mutual promises
contained herein, Delta, Union and the Shareholders hereby agree as follows:
1. Purchase and Sale of Shares.
---------------------------
1.1 Property Subject to the terms and conditions of this Agreement,
Shareholders agree to sell and assign to Delta on the Closing Date (as
defined below), free and clear of all mortgages, security interests,
liens, pledges, adverse claims and other encumbrances, (a) all of the
outstanding shares of stock of Union as set forth on Exhibit A
attached hereto (collectively, the "Shares"); and (b) all of Union's
right, title and interest to the trade or business name "Union Members
Discount Network" (together with the shares, the "Property"). In
exchange for the Property, Delta agrees to sell and assign 1,000,000
shares of Delta common stock to the Shareholders on the Closing Date.
1.2 Release As further inducement to Shareholders performance under
this agreement, effective as of the Closing Date, Delta hereby
releases and discharges each of Union's officers, directors,
shareholders, agents and successors from any and all claims, losses,
demands, actions, expenses, obligations or liabilities relating to any
matters of any kind, presently known or unknown which it may have
arising from any act, omission, event or fact which has occurred up to
and including the Closing Date, including, but not limited to, any
claims relating to or arising out of its relationship with Union.
12
2. Closing Date; Delivery.
----------------------
2.1 Closing Date. The closing of the purchase and sale of the Property
(the "Closing") will be held at the offices of Delta, 1331 Homer
Street, Vancouver, BC V6B 5M5, at 10:00 a.m. on March 14, 2001, or at
such earlier date as may be agreed in writing by Union, Shareholders
and Delta (the "Closing Date").
2.2 Deliveries at Closing.
(a) Deliveries of Shareholders to Delta. At the Closing, if
the conditions precedent set forth in Section 5.2 are
fulfilled in reasonable satisfaction, Shareholders will
deliver to Delta (1) stock certificates or other documents
of title representing all of the shares of stock held of
record or beneficially owned in Union on the Closing Date,
duly endorsed by the Shareholders for transfer to Delta and
(2) all of Union's documents of title pertaining to its
rights to an interest in the trade or business name "Union
Members Discount Network." Shareholders and Union will also
deliver such other documents and instruments as Delta may
reasonably request to confirm that the Shareholders and
Union have performed all of their obligations and fulfilled
all of the conditions of this Agreement.
(b) Deliveries of Delta to Shareholders. At the Closing, if
the conditions precedent set forth in Section 5.1 are
fulfilled in reasonable satisfaction, Delta will deliver to
the Shareholders stock certificates representing 1,000,000
shares of Delta's Common Stock, par value $0.001 issued in
the name of the Shareholders. Delta will also deliver such
other documents and instruments as the Shareholders may
reasonably request to confirm that Delta has performed all
of its obligations and fulfilled all of the conditions of
this Agreement.
3. Representations and Warranties of Union. Shareholders and Union hereby
represent and warrant to Delta that, except as may be set forth in Schedule 3
attached hereto (the "Disclosure Schedule"), the matters set forth in the this
Section 3 are true and correct:
3.1 Organization, Standing and Authority of Union.
(a) Organization. Union is a corporation duly organized and
validly existing under the laws of the State of Delaware and is
in good standing as a domestic corporation under the laws of said
State.
(b) Charter Documents. Union has furnished counsel for Delta with
true and complete copies of its Articles of Incorporation, as
amended to date, and its Bylaws as currently in effect.
(c) Corporate Power. Union has all requisite corporate power to
enter into this Agreement and to carry out and perform its
obligations hereunder.
(d) Authorization for Agreement. The execution and performance of
this Agreement by Union has been duly authorized by its Board of
13
Directors. Upon execution and delivery of this Agreement on
behalf of Union, this Agreement will constitute the valid and
legally binding obligation of Union, enforceable in accordance
with its terms and conditions. The execution, delivery and
performance of this Agreement and compliance with the provisions
hereof by Union does not and will not conflict with, or result in
a breach or violation of the terms, conditions or provisions of,
or constitute a default under, or result in the creation or
imposition of any lien pursuant to the terms of, Union's Articles
of Incorporation, as amended, Union's current Bylaws, or any
statute, law, rule or regulation or any order, judgment, decree,
indenture, mortgage lease or other agreement or instrument to
which Union is subject.
(e) Financial Statements. The audited financial statements of
Union as of December 31, 2000, and the unaudited financial
statements of Union for January 2001 are attached hereto as
Exhibit C (the "Financial Statements"). The Financial Statements
are complete and correct in all material respects and present
fairly the financial condition of Union as of the periods covered
in conformity with generally accepted accounting principles
applied on a basis consistent with preceding periods.
(f) Material Changes. Since January 31, 2001, there have been no
material adverse changes in the financial condition of Union from
that shown on the Financial Statements as of such date.
(g) Loans. As of the Closing Date, Union has repaid or otherwise
satisfied all of its indebtedness to third parties or lenders of
any nature.
3.2 Financial and Operating Status of Union.
(a) Tax Returns. Union has duly filed all federal, state and
local tax returns required to be filed by it, and all taxes,
assessments and penalties set forth in such returns have been
timely and fully paid or adequately reserved against in the
Financial Statements. None of Union's tax returns have ever been
audited by any governmental taxing authority.
(b) Contracts and Commitments. Union has no written or oral
contracts or commitments involving any obligation, consideration
or expenditure, except as set forth in the Schedule of
Disclosures or except for purchases of normal inventory items in
quantities in accordance with previous practices. Union has
delivered to Delta's counsel true, complete and correct copies of
all such contracts and commitments, together with all amendments
thereto, all of which are listed on the Schedule of Disclosures,
and all such contracts are in full force and effect in the form
delivered. Union has set forth in the Schedule of Disclosures (i)
all insurance policies in force on the date hereof; (ii) the
names and locations of all banks and other depositories in which
it has accounts or safe deposit boxes and the names of persons
authorized to sign checks, drafts or other instruments drawn
thereon or to have access thereof; (iii) all mortgages,
promissory notes, deeds of trust, loan or credit agreements or
similar agreements, or modifications thereof, to which it is a
party and all amounts thereof; and (iv) all accounts receivable
of Union as of December 31, 2001 and as reflected in the
14
Financial Statements.
(c) Employees. Union does not have any collective bargaining
agreements with any of its employees. Union is not a party to any
contract with any of its employees, consultants, advisors, sales
representatives, distributors or customers that is not terminable
by Union without liability, penalty or premium on 30 days'
notice, except as otherwise set forth in the Schedule of
Disclosures.
(d) Benefits. Union does not have any health, dental, pension,
retirement, or other benefit programs for its employees or in
which its employees participate, except as set forth in the
Schedule of Disclosures.
(e) Inventory. All inventory of Union is saleable and in good
condition, the value of which as of December 31, 2000 has been
written down or reserved to amounts not in excess of realizable
market value.
(f) Equipment. All equipment of Union is in good order and repair
except minor defects which do not materially interfere with the
continued use of such equipment.
(g) Litigation. There is no action, proceeding or investigation
pending or, to the knowledge of Union, threatened against Union,
or any of Union's property or assets which might result in any
material and adverse change in the property, assets or financial
condition of Union, nor, to the knowledge of Union, is there any
basis for any such action, proceeding or investigation. To the
best knowledge of Union it is in compliance in all material
respects with all laws and regulations applicable to it, its
properties and businesses.
4. Representations and Warranties of Delta. Delta hereby represents and warrants
to Union and the Shareholders that the matters set forth in the following
subsections of this Section 4 are true and correct.
4.1 Corporate Organization
(a) Organization. Delta is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) Financial Statements. The audited consolidated financial
statements of Delta for its last fiscal year and the unaudited
financial statements for the past three quarters are attached hereto
as Exhibit D (the "Delta Financial Statements"). The Delta Financial
Statements are complete and correct in all material respects and
present fairly the financial condition of Delta as of the periods
covered in conformity with generally accepted accounting principles
applied on a basis consistent with preceding periods.
(c) Material Changes. Since the last quarterly report, there have been
no material changes in the financial condition of Delta from that
shown on the Delta Financial Statements as of such date.
15
(d) Reporting Status. Delta is fully reporting as a public company
under Section 13 or 15(d) of the Securities Exchange Act of 1934
4.2 Due Execution and Enforceability. The execution, delivery and
performance of this Agreement and the other agreements between the
parties hereto referred to herein by and on behalf of Delta has been
duly and validly authorized by the Delta Board of Directors.
5. Conditions to Closing.
----------------------
5.1 Conditions to Obligations of Delta. The obligations of Delta to
purchase the Property at the Closing and to consummate any other
transaction contemplated by this Agreement are subject to the
fulfillment to Delta's satisfaction on or prior to the Closing date of
the following conditions, any of which may be waived in whole or in
part by Delta.
(a) Representation and Warranties True at Closing. The representations
and warranties made by the Shareholders and Union in Section 3 above
shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as if they had been made
and given on and as of the Closing Date, and the Shareholders and
Union shall have performed and complied with all agreements and
obligations to be performed by it under this Agreement on or prior to
the Closing.
(b) Authorization. Union shall have obtained all Board of Directors
and shareholder approval necessary to authorize its participation in
the transaction described in this Agreement.
(c) No Adverse Change. Prior to the Closing there shall not have
occurred any loss or destruction of any material part of the assets of
Union or any material and adverse change in the financial condition,
properties, business or operation of Union from that shown in the
Financial Statements.
(d) 2000 Financial Statements. Union shall have provided to Delta the
financial statements for Union as of December 31, 2000, together with
a sworn statement of the officers and directors of Union that the
financial statements accurately reflect the financial condition of
Union to the best of their knowledge and belief.
(e) Due Diligence Satisfactory. Shareholders and Union have received
all of the information reasonably requested by it from Delta in
connection with this transaction, and, based on its due diligence
investigation, are satisfied with the financial and operating
condition of Delta.
(f) Closing Certificate: Good Standing. At the Closing, Shareholders
will cause Union to deliver or cause to be delivered to Delta a
certificate executed by the President of Union, dated as of the
Closing Date and certifying to the fulfillment of the conditions
specified in subparagraphs (a), (b) and (c) above. On or prior to the
Closing Date, Union will deliver to Delta certificates issued by the
16
Secretary of State of Delaware evidencing the corporate good standing
of Union as of a date not more than 30 days prior to the Closing Date.
(g) Rights to Business Name. Union shall have obtained such director
and shareholder approval and prepared and filed such documents as are
necessary to make the name "Union Members Discount Network" available
to Delta as a business name registered in the states and every other
jurisdiction in which Union is authorized to do business.
(h) Documents and Instruments Satisfactory. All documents and
instruments to be provided by Union and the Shareholders in connection
with the transactions contemplated by this Agreement must be
satisfactory in form and substance to counsel for Delta.
(i) Opinion of Counsel for Union. At the Closing, Shareholders and
Union will deliver to Delta an opinion of counsel dated as of the
Closing Date, addressed to Delta in a form acceptable to Delta.
5.2 Conditions to Obligations of Union. The obligations of the Shareholders
and Union to consummate this Agreement and carry out and perform their
obligations hereunder are subject to the satisfaction of all of the
following conditions unless waived by Shareholders.
(a) Representations and Warranties True at Closing. The
representations and warranties made by Delta in this Agreement shall
be true and correct in all material respects on and as of the Closing
Date with the same force and effect as if they had been made and given
on as of the Closing Date. Delta shall have performed and complied in
all material respects with all agreements and obligations to be
performed by it under this Agreement on or before the Closing Date.
(b) Authorization. Delta shall have obtained all Board of Directors
and shareholder approval necessary to authorize its participation in
the transaction described in this agreement.
(c) No Adverse Change. Prior to the Closing there shall not have
occurred any material and adverse change in the financial condition,
properties, business or operations of Delta since the date of this
Agreement.
(d) Closing Certificate; Good Standing. At the Closing, Delta will
deliver or cause to be delivered to Union and the Shareholders a
certificate executed by the President of Delta, dated as of the
Closing Date and certifying to the fulfillment of the conditions
specified in subparagraphs (a), (b) and (c) above. On or prior to the
Closing Date, Delta will deliver to Union and the Shareholders a
certificate issued by the State of Delaware evidencing the corporate
and good standing of Delta as of the date not more than 30 days prior
to the Closing Date.
17
(e) Documents and Instruments Satisfactory. All documents and
instruments to be provided by Delta in connection with the
transactions contemplated by this Agreement must be satisfactory in
form and substance to counsel for Shareholders and Union.
(f) Opinion of Counsel for Delta. At the Closing, Delta will deliver
to Union and Shareholders an opinion of counsel dated as of the
Closing Date, addressed to Union and in form and substance acceptable
to Union.
6. Covenants and Agreements of Union.
---------------------------------
6.1 Access to Information. From and after the date of this Agreement and
until the Closing, Shareholders agree that the authorized representatives
of Delta shall have access during normal business hours to the properties,
facilities, books, records, contracts and documents of Union and Union
shall furnish or cause to be furnished to the authorized representatives of
Delta copies of all documents and all information with respect to the
affairs and businesses of Union that Delta's representatives may reasonably
request.
6.2 Conduct of Business Pending the Closing. Unless expressly consented to
by Delta or otherwise permitted or required under this Agreement, from and
after the date of this Agreement and until the Closing or the termination
or abandonment of this Agreement as provided herein:
(a) Business in the Ordinary Course. Union will (i) conduct its
business only in the ordinary course in the same manner as before date
of this Agreement, (ii) will not institute any unusual or novel
methods of manufacture, purchase, sale, lease, service, accounting or
operation, (iii) will not grant any increase in the rate of pay or
other benefits or compensation of any officers or employees, and (iv)
will not enter into, amend or terminate any contract or commitment not
in the usual and ordinary course of business and consistent with
Union's past practice.
(b) Indebtedness. Union will not (i) incur or assume or guarantee any
indebtedness other than indebtedness incurred in the usual and
ordinary course of business for goods or services or pursuant to
existing commitments or agreements previously disclosed in writing to
Delta under this Agreement, or (ii) enter into, execute or deliver any
agreement or writing to the release or settlement of claims, except as
otherwise provided by this Agreement.
(c) Corporate Structure. Union will not (i) amend its articles of
incorporation or bylaws or change its officers or directors or (ii)
issue any additional capital stock or other securities or grant any
warrants, options or rights to purchase or acquire any capital stock
or other securities of Union, or (iii) merge or consolidate with any
other corporation or acquire all or substantially all of the stock,
business or assets of any other person or entity or sell, assign or
transfer substantially all of its assets or outstanding securities to
any other person or entity.
18
(d) Dividends and Capital Stock. Union will not (i) declare or pay any
dividend or make any stock split or stock dividend or other
distribution with respect to its capital stock, or (ii) directly or
indirectly redeem, purchase or otherwise acquire for value any of its
capital stock.
(e) Banking Relationships. No change will be made affecting Union's
banking relationships and Union shall open no new bank or other
deposit accounts.
(f) Insurance. Union will maintain in full force and effect all
policies of insurance now in effect and will give all notices and
present all claims under all policies in a timely fashion.
7. Miscellaneous.
-------------
7.1 Successors and Assigns. This Agreement and the terms and conditions
contained herein are binding upon, and will inure to the benefit of, the
parties hereto and their respective representatives, executors,
administrators, heirs, successors and assigns, but, except as otherwise
specifically provided herein, neither this Agreement nor any rights or
obligations hereunder may be assigned, directly, indirectly, voluntarily or
involuntarily, except by operation or law, by any party to this Agreement.
7.2 Governing Law; Severability. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware. If any
provision of this Agreement is found to be invalid, illegal or
unenforceable in any respect, such provision will be enforced to the
maximum extent possible and the remaining provisions of this Agreement will
continue unaffected.
7.3 Waivers. No waiver by any party hereto of any term or condition of this
Agreement will be effective unless set forth in a writing signed by such
party. No waiver of any provision of this Agreement will be deemed a waiver
of any other provision, or constitute a continuing wavier unless otherwise
expressly provided in writing by the waiving party. No failure or delay on
the part of any party in exercising any right, power or privilege under
this Agreement will operate as a waiver thereof, nor will a single or
partial exercise thereof preclude any other or further exercise of any
other rights, powers or privileges.
7.4 Entire Agreement; Modifications. This Agreement, together with the
exhibits and schedules attached hereto, each of which is incorporated
herein by this reference, constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes in
its entirety all prior and contemporaneous agreements, understandings,
negotiations and discussions between the parties (specifically including
without limitation the letter of intent dated January 22, 2001 and executed
by Delta and Union in connection with this Agreement), whether oral or
written, with respect to the subject matter of this Agreement. No
supplement, modification or amendment to this Agreement will be binding
unless executed in writing by Union, Shareholders and Delta.
19
7.5 Notices. All notices and other communications required or permitted
under this Agreement will be in writing and may be hand delivered, mailed
by first-class mail, postage prepaid, or sent via facsimile. Unless
otherwise agreed to in writing by the parties, such notices and other
communications shall be addressed as follows:
If to Delta: With a copy to:
Judith Miller, Director
Delta Capital Technologies, Inc.
B201, 1331 Homer Street
Vancouver, B.C. V6B 5M5
Facsimile: (604) 685-6452 Facsimile: ( )
If to Union: With a copy to:
Kent Keith, President
Union Members Discount Network, Inc.
217 Ashland Avenue
Santa Monica, California 90405
Facsimile: (877) 558-6466 Facsimile: ( )
7.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
7.7 Headings; References. Headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set
forth below, to be effective for all purposes as of the date first written
above.
Union Members Discount Network, Inc., a
Delaware corporation
/s/ Kent Keith
By:___________________________
Kent Keith, President
Delta Capital Technologies, Inc., a Delaware
corporation
/s/ Douglas P. Johnson
By:_____________________________
Douglas P. Johnson, President
Shareholders
- -------------------------------
20
STOCK PURCHASE AND SALE AGREEMENT
Between Delta Capital Technologies, Inc., and the
Shareholders of UMDN, Inc.
May 4, 2001
21
STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT (this "Agreement"), dated effective as of
May 4, 2001 is by and among, UMDN, Inc., a Delaware corporation ("UMDN"), the
shareholders of UMDN who have executed this Agreement as Shareholders
("Shareholders") and Delta Capital Technologies, Inc., a Delaware corporation
("Delta").
RECITALS
A. UMDN is a privately held, non-reporting corporation with its principal
operations located in Santa Monica, California.
B. Delta is a publicly held, reporting corporation with its principal operations
located in Las Vegas, Nevada.
C. Shareholders desire to sell and Delta desires to purchase all of the
outstanding shares of UMDN pursuant to the terms and conditions of this
Agreement.
AGREEMENT
In consideration of the foregoing recitals and the mutual promises
contained herein, Delta, UMDN and the Shareholders hereby agree as follows:
1. Purchase and Sale of Shares.
1.1 Property Subject to the terms and conditions of this Agreement,
Shareholders agree to sell and assign to Delta on the Closing Date (as
defined below), free and clear of all mortgages, security interests, liens,
pledges, adverse claims and other encumbrances, (a) all of the outstanding
shares of stock of UMDN as set forth on Exhibit A attached hereto
(collectively, the "Shares"). In exchange for the Shares, Delta agrees to
issue 1,000,000 shares of Delta common stock to the Shareholders on the
Closing Date pro rata in accordance with their respective holdings of the
shares on the date hereof.
2. Closing Date; Delivery.
2.1 Closing Date. The closing of the purchase and sale of the Shares (the
"Closing") will be held at the offices of Delta, at 10:00 a.m. on May 4,
2001, or at such earlier date as may be agreed in writing by UMDN,
Shareholders and Delta (the "Closing Date").
2.2 Deliveries at Closing.
(a) Deliveries of Shareholders to Delta. At the Closing, if the
conditions precedent set forth in Section 5.2 are fulfilled in
reasonable satisfaction, Shareholders will deliver to Delta
22
(1) stock certificates or other documents of title representing all of
the shares of stock held of record or beneficially owned in UMDN on
the Closing Date, duly endorsed by the Shareholders for transfer to
Delta. Shareholders and UMDN will also deliver such other documents
and instruments as Delta may reasonably request to confirm that the
Shareholders and UMDN have performed all of their obligations and
fulfilled all of the conditions of this Agreement.
(b) Deliveries of Delta to Shareholders. At the Closing, if the
conditions precedent set forth in Section 5.1 are fulfilled in
reasonable satisfaction, Delta will deliver to the Shareholders stock
certificates representing 1,000,000 shares of Delta's common stock,
par value $0.001 issued in the respective names of the Shareholders.
Delta will also deliver such other documents and instruments as the
Shareholders may reasonably request to confirm that Delta has
performed all of its obligations and fulfilled all of the conditions
of this Agreement.
3. Representations and Warranties of UMDN. Shareholders and UMDN hereby
represent and warrant to Delta that:
3.1 Organization, Standing and Authority of UMDN.
(a) Organization. UMDN is a corporation duly organized and validly existing
under the laws of the State of Delaware and is in good standing as a
domestic corporation under the laws of said State.
(b) Charter Documents. UMDN has furnished counsel for Delta with true and
complete copies of its Articles of Incorporation, as amended to date, and
its Bylaws as currently in effect.
(c) Corporate Power. UMDN has all requisite corporate power to enter into
this Agreement and to carry out and perform its obligations hereunder.
(d) Authorization for Agreement. The execution and performance of this
Agreement by UMDN has been duly authorized by its board of directors. Upon
execution and delivery of this Agreement on behalf of UMDN, this Agreement
will constitute the valid and legally binding obligation of UMDN,
enforceable in accordance with its terms and conditions. The execution,
delivery and performance of this Agreement and compliance with the
provisions hereof by UMDN does not and will not conflict with, or result in
a breach or violation of the terms, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of any
lien pursuant to the terms of, UMDN's Articles of Incorporation, as
amended, UMDN's current Bylaws, or any statute, law, rule or regulation or
any order, judgment, decree, indenture, mortgage lease or other agreement
or instrument to which UMDN is subject.
23
(e) Financial Statements. The unaudited financial statements of UMDN as of
December 31, 2000, are attached hereto as Exhibit B (the "UMDN Financial
Statements"). The UMDN Financial Statements present fairly the financial
condition of UMDN as of the periods covered in conformity with generally
accepted accounting principles applied on a basis consistent with preceding
periods.
(f) Material Changes. Since December 31, 2000, there have been no material
adverse changes in the financial condition of UMDN from that shown on the
Financial Statements as of such date except to the extent that the
operations of UMDN have continued at a loss.
(g) Loans. As of the Closing Date, UMDN has repaid or otherwise satisfied
all of its indebtedness to third parties or lenders of any nature.
3.2 Financial and Operating Status of UMDN. (
a) Tax Returns. UMDN has duly filed all federal, state and local tax
returns required to be filed by it, and all taxes, assessments and
penalties set forth in such returns have been timely and fully paid or
adequately reserved against in the Financial Statements. None of UMDN's tax
returns has ever been audited by any governmental taxing authority.
(b) Contracts and Commitments. UMDN has no written or oral contracts or
commitments involving any obligation, consideration or expenditure, outside
the purchase of normal inventory items in quantities in accordance with
previous practices, except as set forth in the Schedule of Disclosures
attached hereto as Exhibit C. UMDN has delivered to Delta's counsel true,
complete and correct copies of all such contracts and commitments, together
with all amendments thereto, all of which are listed on the Schedule of
Disclosures, and all such contracts are in full force and effect in the
form delivered. UMDN has set forth in the Schedule of Disclosures (i) all
insurance policies in force on the date hereof; (ii) the names and
locations of all banks and other depositories in which it has accounts or
safe deposit boxes and the names of persons authorized to sign checks,
drafts or other instruments drawn thereon or to have access thereof; (iii)
all mortgages, promissory notes, deeds of trust, loan or credit agreements
or similar agreements, or modifications thereof, to which it is a party and
all amounts thereof; and (iv) all accounts receivable of UMDN as of
December 31, 2000 and as reflected in the Financial Statements.
(c) Employees. UMDN does not have any collective bargaining agreements with
any of its employees. UMDN is not a party to any contract with any of its
employees, consultants, advisors, sales representatives, distributors or
customers that is not terminable by UMDN without liability, penalty or
premium on 30 days' notice, except as otherwise set forth in the Schedule
of Disclosures.
(d) Benefits. UMDN does not have any health, dental, pension, retirement,
or other benefit programs for its employees or in which its employees
participate, except as set forth in the Schedule of Disclosures.
24
(e) Inventory. All inventory of UMDN is saleable and in good condition, the
value of which as of December 31, 2000 has been written down or reserved to
amounts not in excess of realizable market value.
(f) Equipment. All equipment of UMDN is in good order and repair except
minor defects which do not materially interfere with the continued use of
such equipment.
(g) Litigation. There is no action, proceeding or investigation pending or,
to the knowledge of UMDN, threatened against UMDN, or any of UMDN's
property or assets which might result in any material and adverse change in
the property, assets or financial condition of UMDN, nor, to the knowledge
of UMDN, is there any basis for any such action, proceeding or
investigation. To the best knowledge of UMDN it is in compliance in all
material respects with all laws and regulations applicable to it, its
properties and businesses.
4. Representations and Warranties of Delta. Delta hereby represents and warrants
to UMDN and the Shareholders that the matters set forth in the following
subsections of this Section 4 are true and correct. 4.1 Corporate Organization
(a) Organization. Delta is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. (
b) Financial Statements. The audited consolidated financial statements of
Delta for its last fiscal year are attached hereto as Exhibit D (the "Delta
Financial Statements"). The Delta Financial Statements present fairly the
financial condition of Delta as of the periods covered in conformity with
generally accepted accounting principles applied on a basis consistent with
preceding periods.
(c) Material Changes. Since the last annual Delta Financial Statements,
there have been no material changes in the financial condition of Delta
from that shown on the Delta Financial Statements as of such date.
(d) Reporting Status. Delta is fully reporting as a public company under
Section 13 or 15(d) of the Securities Exchange Act of 1934. None of the
information contained in any of the reports filed by Delta pursuant to
Section 13 of such statute contains any misstatement of a material fact or
omits any information required to make the information contained therein
not materially misleading.
25
4.2 Due Execution and Enforceability. The execution, delivery and
performance of this Agreement and the other agreements between the parties
hereto referred to herein by and on behalf of Delta have been duly and
validly authorized by the Delta board of directors.
5. Conditions to Closing.
---------------------
5.1 Conditions to Obligations of Delta. The obligations of Delta to
purchase the Shares at the Closing and to consummate any other transaction
contemplated by this Agreement are subject to the fulfillment to Delta's
satisfaction on or prior to the Closing date of the following conditions, any of
which may be waived in whole or in part by Delta.
(a) Representation and Warranties True at Closing. The representations and
warranties made by the Shareholders and UMDN in Section 3 above shall be
true and correct in all material respects on and as of the Closing Date
with the same force and effect as if they had been made and given on and as
of the Closing Date, and the Shareholders and UMDN shall have performed and
complied with all agreements and obligations to be performed by it under
this Agreement on or prior to the Closing.
(b) Authorization. UMDN shall have obtained all board of directors and
shareholder approval necessary to authorize its participation in the
transaction described in this Agreement.
(c) No Adverse Change. Prior to the Closing there shall not have occurred
any loss or destruction of any material part of the assets of UMDN or any
material and adverse change in the financial condition, properties,
business or operation of UMDN from that shown in the Financial Statements.
(d) 2000 Financial Statements. UMDN shall have provided to Delta the
financial statements for UMDN as of December 31, 2000, together with a
sworn statement of the officers and directors of UMDN that the financial
statements fairly present the financial condition of UMDN to the best of
their knowledge and belief.
(e) Closing Certificate: Good Standing. At the Closing, Shareholders will
cause UMDN to deliver or cause to be delivered to Delta a certificate
executed by the president of UMDN, dated as of the Closing Date and
certifying to the fulfillment of the conditions specified in subparagraphs
(a), (b) and (c) above. On or prior to the Closing Date, UMDN will deliver
to Delta certificates issued by the Secretary of State of Delaware
evidencing the corporate good standing of UMDN as of a date not more than
30 days prior to the Closing Date.
(f) Documents and Instruments Satisfactory. All documents and instruments
to be provided by UMDN and the Shareholders in connection with the
transactions contemplated by this Agreement must be satisfactory in form
and substance to counsel for Delta.
26
(g) Opinion of Counsel for UMDN. At the Closing, Shareholders and UMDN will
deliver to Delta an opinion of counsel dated as of the Closing Date,
addressed to Delta in a form acceptable to Delta.
5.2 Conditions to Obligations of UMDN and Its Shareholders. The obligations
of the Shareholders and UMDN to consummate this Agreement and carry out and
perform their obligations hereunder are subject to the satisfaction of all of
the following conditions unless waived by Shareholders.
(a) Representations and Warranties True at Closing. The representations and
warranties made by Delta in this Agreement shall be true and correct in all
material respects on and as of the Closing Date with the same force and
effect as if they had been made and given on as of the Closing Date. Delta
shall have performed and complied in all material respects with all
agreements and obligations to be performed by it under this Agreement on or
before the Closing Date.
(b) Authorization. Delta shall have obtained all board of directors and
shareholder approval necessary to authorize its participation
in the transaction described in this agreement.
(c) No Adverse Change. Prior to the Closing there shall not have occurred
any material and adverse change in the financial condition, properties,
business or operations of Delta since the date of this Agreement.
(d) Closing Certificate; Good Standing. At the Closing, Delta will deliver
or cause to be delivered to UMDN and the Shareholders a certificate
executed by the president of Delta, dated as of the Closing Date and
certifying to the fulfillment of the conditions specified in subparagraphs
(a), (b) and (c) above. On or prior to the Closing Date, Delta will deliver
to UMDN and the Shareholders a certificate issued by the State of Delaware
evidencing the corporate and good standing of Delta as of the date not more
than 30 days prior to the Closing Date.
(e) Documents and Instruments Satisfactory. All documents and instruments
to be provided by Delta in connection with the transactions contemplated by
this Agreement must be satisfactory in form and substance to counsel for
Shareholders and UMDN.
(f) Opinion of Counsel for Delta. At the Closing, Delta will deliver to
UMDN and Shareholders an opinion of counsel dated as of the Closing Date,
addressed to UMDN and in form and substance acceptable to UMDN.
27
(g) Due Diligence Satisfactory. Shareholders and UMDN have received all of
the information reasonably requested by them from Delta in connection with
this transaction, and, based on its due diligence investigation, are
satisfied with the financial and operating condition of Delta.
(h) Financing Terms. Delta and UMDN shall have prepared an Offering
Memorandum and related Subscription Agreement with respect to the future
financing of UMDN.
6. Covenants and Agreements of UMDN.
--------------------------------
6.1 Access to Information. From and after the date of this Agreement and
until the Closing, Shareholders agree that the authorized representatives of
Delta shall have access during normal business hours to the properties,
facilities, books, records, contracts and documents of UMDN and UMDN shall
furnish or cause to be furnished to the authorized representatives of Delta
copies of all documents and all information with respect to the affairs and
businesses of UMDN that Delta's representatives may reasonably request. Delta
shall keep all such information confidential and shall not use the same for any
purpose or disclose the same to any other person or entity pending the
consummation of the transactions contemplated hereby.
6.2 Conduct of Business Pending the Closing. Unless expressly consented to
by Delta or otherwise permitted or required under this Agreement, from and after
the date of this Agreement and until the Closing or the termination or
abandonment of this Agreement as provided herein:
(a) Business in the Ordinary Course. UMDN will (i) conduct its business
only in the ordinary course in the same manner as before date of this
Agreement, (ii) will not institute any unusual or novel methods of
manufacture, purchase, sale, lease, service, accounting or operation, (iii)
will not grant any increase in the rate of pay or other benefits or
compensation of any officers or employees, and (iv) will not enter into,
amend or terminate any contract or commitment not in the usual and ordinary
course of business and consistent with UMDN's past
practice.
(b) Indebtedness. UMDN will not (i) incur or assume or guarantee any
indebtedness other than indebtedness incurred in the usual and ordinary
course of business for goods or services or pursuant to existing
commitments or agreements previously disclosed in writing to Delta under
this Agreement, or (ii) enter into, execute or deliver any agreement or
writing to the release or settlement of claims, except as otherwise
provided by this Agreement.
(c) Corporate Structure. UMDN will not (i) amend its articles of
incorporation or bylaws or change its officers or directors or (ii) issue
any additional capital stock or other securities or grant any warrants,
options or rights to purchase or acquire any capital stock or other
securities of UMDN, or (iii) merge or consolidate with any other
corporation or acquire all or substantially all of the stock, business or
assets of any other person or entity or sell, assign or transfer
28
substantially all of its assets or outstanding securities to any other
person or entity.
(d) Dividends and Capital Stock. UMDN will not (i) declare or pay any
dividend or make any stock split or stock dividend or other distribution
with respect to its capital stock, or (ii) directly or indirectly redeem,
purchase or otherwise acquire for value any of its capital stock.
(e) Banking Relationships. No change will be made affecting UMDN's banking
relationships and UMDN shall open no new bank or other deposit accounts.
(f) Insurance. UMDN will maintain in full force and effect all policies of
insurance now in effect and will give all notices and present all claims
under all policies in a timely fashion.
7. Covenants and Agreements of Delta.
---------------------------------
7.1 For a period of not less than two years following the Closing Date,
Delta shall continue timely to file all reports required to be filed by it
pursuant to the Securities Exchange Act of 1934, as amended; and all such
reports shall contain all of the information required to be contained therein,
shall not contain any material misstatements and shall not omit any information
required to be contained therein in order to make the statements contained
therein not materially misleading.
7.2 In order to preserve to the Shareholders the benefits afforded by the
option referenced in Section 7.3 hereof, during the Option Period (as defined in
Section 7.3 hereof), Delta shall not, nor shall it cause, permit or suffer UMDN
to, in each case without the prior written consent of Kent and Starla Keith:
7.2.1 elect as directors of UMDN any more than three individuals, two
of whom shall be Kent and Starla Keith or persons designated by them
or remove any such directors so elected,sell, hypothecate, liquidate
or otherwise dispose of all or any significant portion of the assets
of UMDN or any interest therein;
7.2.3 merge or consolidate UMDN with any other person or entity or
enter into any plan or agreement with respect thereto;
7.2.4 enter into any agreement between UMDN and Delta, or between UMDN
and any person or entity controlled by Delta, any person or entity
controlling Delta or any person or entity under common control with
Delta (any person or entity controlling, controlled by or under common
control with Delta is referenced herein as a "Delta Affiliate");
29
7.2.5 enter into any employment or consulting agreement or any other
agreement to provide compensation to any Delta Affiliate;
7.2.6 issue any shares of the capital stock of UMDN or any shares or
other securities convertible into or exchangeable or exercisable for
such shares of capital stock except to the extent contemplated by
Section 7.6 hereof and except to the extent such shares or other
securities are issued in connection with a public distribution thereof
in a transaction or series of transactions approved by the board of
directors of UMDN;
7.2.7 incur any indebtedness of UMDN for borrowed money, either
directly or as guarantor of any obligations of Delta or any Delta
Affiliate;
7.2.8 adopt any plan or petition any court or governmental agency for
the dissolution of UMDN; or
7.2.9 take any action of UMDN or permit or suffer the occurrence of
any action of UMDN that is otherwise within the prerogatives of the
Board of Directors of a corporation organized under the laws of the
State of Delaware.
7.3 (a) Delta hereby grants to the Shareholders the option to purchase from
Delta, at any time during the period (the "Option Period") between the
Closing Date and the earlier to occur of (i) the public distribution of
shares or other securities of UMDN in a transaction or series of
transactions approved by the Board of Directors of UMDN or (ii) the second
anniversary of the Closing Date, all, but not fewer than all, of the shares
of the capital stock of UMDN now owned or hereafter acquired by UMDN for
consideration consisting of 1,000,000 shares of the capital stock of Delta
plus an amount equal to the amount of capital contributed by Delta to UMDN
during the period between the Closing Date and the date of the exercise of
this option, excluding any amounts paid by Delta for the benefit of UMDN
pursuant to Section 8.8 hereof, which shall be payable without interest
within ninety calendar days following the closing date of the exercise of
this option (the "Cash Consideration").
(b) The Shareholders hereby irrevocably appoint Kent and Starla Keith, and
each of them individually, as their true and lawful attorneys-in-fact, with
full power of substitution to exercise the option granted hereby.
(c) This option may be exercised by written notice to Delta given by either
Kent or Starla Keith during the Option Period, which notice shall specify a
date, which shall not be less than ten, nor more than thirty, calendar days
following the date of such notice, and a time on such date during normal
business hours on which the closing of the transactions contemplated by the
exercise of this option shall occur. Such closing shall occur at the
offices of UMDN on the date and at the time specified in the notice of
exercise of this option. At such closing, Delta shall deliver to Kent or
30
Starla Keith, as agent and attorney-in-fact for the Shareholders, a
certificate or certificates, duly endorsed in blank for transfer or
accompanied by duly executed stock powers in blank, representing all of the
shares of the capital stock of UMDN then owned of record or beneficially by
Delta. In exchange therefore, Kent or Starla Keith shall deliver to Delta a
certificate or certificates, duly endorsed in blank for transfer or
accompanied by duly executed stock powers in blank, representing 1,000,000
shares of the capital stock of Delta, together with a promissory note
evidencing the joint and several obligation of the Shareholders to pay to
Delta the Cash Consideration on the terms specified above.
7.4 Delta shall not, during the Option Period, sell, assign, transfer,
convey, pledge, hypothecate, encumber or otherwise transfer or dispose of any of
the shares of the capital stock of UMDN or any interest therein or rights
appurtenant thereto acquired by Delta either pursuant hereto or otherwise after
the Closing Date without giving to Kent and Starla Keith not less than thirty
calendar days' prior written notice of such transfer or disposition; and the
Shareholders shall have the right to exercise the option contained in Section
7.3 hereof at any time within the thirty day period between the date of such
notice and the consummation of the transaction contemplated thereby.
7.5 The rights of the Shareholders to purchase the shares of the capital
stock of UMDN shall be noted on the stock ledger of UMDN; and the certificates
representing the shares of the capital stock of UMDN registered in the name of
Delta upon the consummation of the transactions contemplated by this Agreement
shall bear a legend as follows:
"The shares of the capital stock of the issuer of this certificate are
subject to the rights of certain individuals to purchase such shares
pursuant to an Agreement dated as off May 4, 2001, by and among the issuer,
Delta Capital Technologies, Inc. and such individuals. The right to vote
the shares of the capital stock of the issuer of this certificate are
subject to a proxy granted to such individuals or their representatives."
7.6 Delta shall not change the terms of the financing of UMDN contained in
the Offering Memorandum and related Subscription Agreement referenced in Section
5.2(h) hereof without the prior written consent of Kent and Starla Keith.
8. Miscellaneous.
-------------
8.1 Successors and Assigns. This Agreement and the terms and conditions
contained herein are binding upon, and will inure to the benefit of, the
parties hereto and their respective representatives, executors,
administrators, heirs, successors and assigns, but, except as otherwise
specifically provided herein, neither this Agreement nor any rights or
obligations hereunder may be assigned, directly, indirectly, voluntarily or
involuntarily, except by operation or law, by any party to this Agreement.
8.2 Governing Law; Severability. This Agreement will be governed by and
construed in accordance with the laws of the State of California. If any
provision of this Agreement is found to be invalid, illegal or
31
unenforceable in any respect, such provision will be enforced to the
maximum extent possible and the remaining provisions of this Agreement will
continue unaffected.
8.3 Waivers. No waiver by any party hereto of any term or condition of this
Agreement will be effective unless set forth in a writing signed by such
party. No waiver of any provision of this Agreement will be deemed a waiver
of any other provision, or constitute a continuing waiver unless otherwise
expressly provided in writing by the waiving party. No failure or delay on
the part of any party in exercising any right, power or privilege under
this Agreement will operate as a waiver thereof, nor will a single or
partial exercise thereof preclude any other or further exercise of any
other rights, powers or privileges.
8.4 Entire Agreement; Modifications. This Agreement, together with the
exhibits and schedules attached hereto, each of which is incorporated
herein by this reference, constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes in
its entirety all prior and contemporaneous agreements, understandings,
negotiations and discussions between the parties (specifically including
without limitation the letter of intent dated January 22, 2001 and executed
by Delta and UMDN in connection with this Agreement), whether oral or
written, with respect to the subject matter of this Agreement. No
supplement, modification or amendment to this Agreement will be binding
unless executed in writing by UMDN, Shareholders and Delta.
8.5 Notices. All notices and other communications required or permitted
under this Agreement will be in writing and may be hand delivered, mailed
by first-class mail, postage prepaid, or sent via facsimile. Unless
otherwise agreed to in writing by the parties, such notices and other
communications shall be addressed as follows:
If to Delta: With a copy to:
Judith Miller, Director
Delta Capital Technologies, Inc.
B201, 1331 Homer Street
Vancouver, B.C. V6B 5M5
Facsimile: (604) 685-6452 Facsimile: ( )
If to UMDN: With a copy to:
Kent Keith, President Christopher P. O'Connell, Esq.
UMDN Members Discount Network, Inc. Parker, Milliken, Clark, O'Hara & Samuelian
217 Ashland Avenue 333 South Hope Street
Santa Monica, California 90405 Los Angeles, California 90071
Facsimile: (877) 558-6466
Facsimile: (213) 683-6669
32
8.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
8.7 Headings; References. Headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
8.8 Expenses. Delta shall timely pay all of the fees and expenses,
including, without limitation, the fees and expenses of counsel and
accountants incurred by itself, by UMDN and by the Shareholders in the
negotiation, preparation and execution of this Agreement and in the
consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set
forth below, to be effective for all purposes as of the date first written
above.
UMDN, Inc., a Delaware corporation Delta Capital Technologies, Inc., a Delaware
corporation
/s/ Kent Keith /s/ Judith Miller
By:___________________________ By:_____________________________
Kent Keith, President Judith Miller
Shareholders
- -------------------------------
- -------------------------------
- -------------------------------
- -------------------------------
33
Exhibit A
[Outstanding shares of stock of UMDN]
Exhibit B
[UMDN unaudited financial statements as of December 31, 2000 and March 31, 2001]
Exhibit C
[Schedule of Disclosures]
Exhibit D
[Delta audited financial statements from
the 10KSB for the year 2000 and
unaudited financial statements from
the QSB dated March 31, 2001]
34