UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
--------- ----------
Commission File Number: 33-17229-D
ART CARDS, INC.
-----------------------------
(Name of Small Business Issuer
in its Charter)
Colorado 84-0978589
------------------------------ ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
933 Pearl Street
Denver, Colorado 80203
-------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone: (303) 831-9335
Securities registered under Section 12(b) or Section 12(g) of the Act:
None
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 [ ] NO [X]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The issuer's revenues for the fiscal year ended December 31, 1994, were $2,653.
The aggregate market value of the voting stock held as of May 15, 1996, by
nonaffiliates of the Registrant was $0 as there was no bid on that day.
As of May 15, 1996, Registrant had 876,602,000 shares of its $0.0001 par value
common stock outstanding.
1
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Art Cards, Inc. (the "Company") was incorporated under the laws of the
state of Colorado on January 30, 1984, as World Greetings, Inc., and changed its
name to Art Cards, Inc. on March 31, 1987. The Company designed, manufactured,
produced and marketed greeting cards.
On November 7, 1993, the Company sold its remaining inventory of greeting
cards, approximately 337,000, for $22,000 and is no longer in the business of
designing, manufacturing, producing and marketing greeting cards. The Company
has been looking for a suitable merger or acquisition candidate.
In May 1996, the Company entered into a letter of intent with Legacy
Brands, Inc. ("Legacy") relating to a proposed transaction pursuant to which the
Company would acquire all of the assets of, and assume certain of the
liabilities of, Legacy in exchange for shares of the Company's Common Stock,
which after the transaction, would represent 92.5% of the outstanding Common
Stock of the Company. As a part of the transaction, the Company would effectuate
a reverse split of its outstanding Common Stock leaving approximately 375,000
shares issued and outstanding that would be owned by the Company's current
stockholders and approximately 4,625,000 shares issued and outstanding that
would be owned by Legacy or its stockholders. Further, upon completion of the
transaction, the Company would change its name to Legacy Brands, Inc. and would
likely reincorporate in either California or Delaware. The Company and Legacy
are negotiating a definitive agreement relating to the transaction and there are
no assurances that the transaction will occur.
Legacy has provided the Company with the following information in this
paragraph. Legacy is a development stage California corporation that has an
exclusive license to use certain names and marks of Mrs. Field's Development
Corporation to market Mrs. Field's frozen dough for cookies, muffins, brownies,
pound cakes, baked goods and frozen dessert items containing Mrs. Field's cookie
dough in North America, Hawaii and Puerto Rico through grocery stores,
supermarkets, convenience stores, club stores, and other similar retail
prepackaged food and snack distribution channels. The Company currently markets
the dough products nationally in retail supermarkets, as well as in the Sam's
Club wholesale division of Wal-Mart stores and in Price/Costco Club Stores. As
of January 31, 1996, Legacy had a negative net worth of approximately $608,000.
For the 12 months ended January 31, 1996, Legacy realized a loss of
approximately $2,900,000.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's executive offices are located at 933 Pearl Street, Denver,
Colorado, which is the home of the Company's President.
2
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the Company's fourth quarter for the fiscal year ended December 31,
1994, no matter was submitted to a vote of the Company's security holders,
either by proxy solicitation or otherwise.
PART II
ITEM 5. MARKET FOR THE THE COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Company's common
stock.
As of May 15, 1996, the Company had approximately 984 shareholders of
record of its common stock.
The Company has not declared cash dividends on its common stock since its
inception and the Company does not anticipate paying a cash dividend in the
foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Liquidity and Capital Resources
During the fiscal year ended December 31, 1994, the Company's working
capital deficit increased slightly from $71,614 at December 31, 1993 to $74,045
at December 31, 1994. The increase was the result of an increase in accounts
payable for 1994. The Company is no longer in the business of designing,
manufacturing, producing, and marketing greeting cards. The Company's auditors
have included a qualification in their report as to the Company's ability to
continue as a going concern due to the significant operating losses and working
capital deficit. The Company has been seeking a business combination. Although
the Company has entered into a letter of intent for a business combination,
there are no assurances the Company will be successful in combining with any
other entity.
Results of Operations
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993.
Sales for the year ended December 31, 1994 were $2,653 and represented
royalties from a license agreement. Expenses represent primarily accounting,
legal fees and bank service fees. The Company no longer actively markets its
greeting cards and sold its entire inventory in 1993.
Inflation
The management of the Company does not believe that inflation has had any
material effect on the Company during the fiscal year ended December 31, 1994.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are filed as part of this Annual Report on Form
10-KSB
3
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(a) On May 16, 1996, the Company retained the firm of Janet Loss, C.P.A.,
P.C. to serve as the Company's principal independent accountants in place of
Mitchell . Finley and Company, P.C., which had served in that capacity for the
two fiscal years ended December 31, 1993. On June 7, 1996, the Company advised
Mitchell . Finley and Company, P.C. that the Company was terminating Mitchell .
Finley and Company, P.C., as the Company's principal independent accountants as
of May 16, 1996.
(b) There were no disagreements during the Company's two fiscal years ended
December 31, 1993, or any interim period subsequent thereto between the Company
and Mitchell . Finley and Company, P.C. on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
which, if not resolved to the satisfaction of Mitchell . Finley and Company,
P.C., would have caused Mitchell . Finley and Company, P.C. to make reference in
its reports to the subject matter of such disagreement.
(c) The opinions of Mitchell . Finley and Company, P.C. on the Company's
financial statements for the fiscal years ended December 31, 1993 and 1992,
contained no adverse opinion or disclaimer of opinion, nor were such opinions
qualified as to uncertainty, audit scope or accounting principles, except that
such opinions raised substantial doubt about the Company's ability to continue
as a going concern.
(d) The decision to change accountants was not approved by the Company's
Board of Directors or any committee thereof.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The present term of office of each director will expire at the next annual
meeting of shareholders. The name, position with the Company and the age of each
director, and the period during which each director has served are as follows:
<TABLE>
<CAPTION>
Name and position, if any,
in the Company Age Director Since
- -------------------------- --- --------------
<S> <C> <C>
Richard H. Miller
(President and Chairman of the Board) .................. 50 1984
Richard M. Gawlik
(Secretary/Treasurer) .................................. 58 1986
Marilyn R. Goldberg .................................... 50 1984
John W. Rapparlie ...................................... 52 1987
</TABLE>
4
<PAGE>
There was no arrangement or understanding between any director and any
other person pursuant to which any director was selected as a director.
The executive officers of the Company are elected annually. Each executive
officer shall hold office until his successor duly is elected and qualified or
until his resignation or until he shall be removed in the manner provided by the
Company's Bylaws. The Company's executive officers, their ages, positions with
the Company and periods during which they have served as such are as follows:
<TABLE>
<CAPTION>
Name of Executive Officer and
Position in Company Age Officer Since
- ----------------------------- --- -------------
<S> <C> <C>
Richard H. Miller
(President and Chairman of the Board) .................. 50 1984
Richard M. Gawlik
(Secretary/Treasurer) .................................. 58 1986
</TABLE>
There was no arrangement or understanding between any executive officer and
any other person pursuant to which any executive officer was selected as an
executive officer.
The following is a brief account of the business experience during the past
five years of each director and executive officer:
Name of Director Principal Occupation During
or Officer the Last Five Years
- ---------------- ----------------------------
Richard H. Miller Chairman of the Board and President of the Company.
Richard M. Gawlik Secretary/Treasurer of the Company since August,
1986; Independent consultant since 1992; President
of The Kober Corporation and of Kober Financial
Corporation where he has also acted a
broker/dealer, from January, 1986 to March, 1992;
sole proprietor of RMG Enterprises, Inc., which
provides accounting and financial consulting
services to small and medium sized corporations,
from 1981 to 1987.
Marilyn R. Goldberg President of Mari Hube (formerly Marigold
Enterprises, Ltd.), a publisher and distributor of
fine art graphics, limited edition prints and
posters.
John Rapparlie Chief Executive Officer since July 1986 and
President and Sales Director for Paper Cargo, Inc.,
a greeting card sales and marketing corporation,
since August, 1982.
5
<PAGE>
No director is a director of any company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or
subject to the requirements of Section 15(d) of such Act or any company
registered as an investment company under the Investment Company Act of 1940.
None of the Company's directors or executive officers is involved in any
legal proceedings required to be reported pursuant to this Item 9.
Identification of Certain Significant Employees.
Not Applicable.
There are no family relationships between any officers and directors of the
Company.
The Company does not have a class of equity securities registered pursuant
to Section 12 of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth for the Company's last three fiscal years
ended December 31, 1994, 1993 and 1992, the compensation paid by the Company for
services rendered in all capacities to the Company to Richard H. Miller, who was
the chief executive officer of the Company during the Company's fiscal year
ended December 31, 1994. No person who served as an executive officer of the
Company during the Company's fiscal year ended December 31, 1994, received total
annual salary and bonus in excess of $100,000 from the Company during the
Company's fiscal year ended December 31, 1994:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
----------------------------------- ----------
Year Other Securities All
Name and Ended Annual Underlying Other
Principal Position December 31, Salary($) Bonus($) Compensation($) Options (#) Compensation($)
- ------------------ ------------ --------- ------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Richard H. Miller ... 1994 -- - -- -- --
President 1993 $ 2,338 (1) - -- -- --
1992 $26,000 (2) - -- -- --
- --------------
</TABLE>
(1) An additional amount of $37,662 has been accrued but not paid.
(2) An additional amount of $34,000 has been accrued but not paid.
6
<PAGE>
Option Grants in Fiscal Year Ended December 31, 1994
No options were granted by the Company to Richard H. Miller during the
Company's fiscal year ended December 31, 1994.
Option Exercises and Fiscal Year-End Option Values
No options were owned by Richard H. Miller at December 31, 1994, and no
options were exercised by Richard H. Miller during the Company's fiscal year
ended December 31, 1994.
Compensation of Directors
There were no standard or other arrangements for the compensation of the
Company's directors in effect for the Company's fiscal year ended December 31,
1994.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
The following person is the only person known to the Company who on May 15,
1996, owned beneficially more than 5% of the Company's $0.0001 par value common
stock, its only class of outstanding voting securities:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1) of Class
- ------------------- ----------------------- --------
<S> <C> <C>
Richard H. Miller ............ 414,315,800 47.3%
933 Pearl Street
Denver, Colorado 80203
</TABLE>
(1) Mr. Miller has the sole voting and investment power with respect to
the shares.
(b) Security Ownership of Management.
The following table shows as of May 15, 1996, the shares of the Company's
$0.0001 par value common stock beneficially owned by each director of the
Company and the shares beneficially owned by all the officers and directors of
the Company as a group:
7
<PAGE>
<TABLE>
<CAPTION>
Amount of Shares and Nature Percent
Name of Beneficial Owner of Beneficial Ownership(1) of Class
- ------------------------ --------------------------- --------
<S> <C> <C>
Richard H. Miller .................... 414,315,800 47.3%
Richard M. Gawlik .................... 1,350,000 0.15%
Marilyn R. Goldberg .................. 10,000,000 1.1%
John W. Rapparlie .................... 100,000 0.01%
All Officers and Directors as a ...... 425,765,800 48.6%
Group (4 Persons)
</TABLE>
(1) The beneficial owners listed have sole voting and investment power with
respect to the shares.
(c) Changes in Control.
Except for the possible transaction with Legacy Brands, Inc. described in
Item 1 hereof, there are no arrangements which may result in a change in
control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no transactions that are required to be reported pursuant to this
Item 12.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3.1(a) Articles of Incorporation.
3.1(b) Articles of Amendment to the Articles of Incorporated filed March
31, 1987.
3.1(c) Amendment to Articles of Incorporation filed November 13, 1987.
3.1(d) Amendment to Articles of Incorporation filed September 30, 1988.
3.1(e) Certificate of Correction to Articles of Incorporation filed April
11, 1989.
3.2 Bylaws.
16 Letter on change in certifying accountant (incorporated by reference
to Exhibit 16 to the Company's Current Report on Form 8-K dated
May 16, 1996).
(b) Reports on Form 8-K.
None.
8
<PAGE>
ITEM 7
PART IV
ART CARDS, INC.
Index to Financial Statements
Independent Auditor's Report ............................... F-1
Balance Sheets ............................................. F-2
Statements of Operations ................................... F-3
Statements of Shareholders' Deficit ........................ F-4
Statements of Cash Flows ................................... F-5
Notes to Financial Statements .............................. F-6 - F-9
<PAGE>
Janet Loss, C.P.A., P.C.
9101 East Kenyon Avenue, Suite 2000
Denver, Colorado 80237
(303) 220-0227
To the Board of Directors and Shareholders
Art Cards, Inc.
Denver, Colorado
I have audited the accompanying balance sheets of Art Cards, Inc. (the Company)
as of December 31, 1994 and 1993, and the related statements of operations,
shareholders' deficit and cash flows for the years ended December 31, 1994 and
1993. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
These standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 1994
and 1993, and the results of its operations and its cash flows for the years
ended December 31, 1994 and 1993 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As shown in the financial statements, the
Company has incurred a net loss of $2,431 and $54,632 for the years ended
December 31, 1994 and 1993, respectively. In addition, the Company has incurred
losses to date in the amount of $1,109,678. The Company's significant operating
losses raise substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Janet Loss, C.P.A., P.C.
Janet Loss, C.P.A., P.C.
May 23, 1996
F-1
<PAGE>
<TABLE>
<CAPTION>
ART CARDS, INC.
BALANCE SHEETS
December 31, December 31,
1994 1993
------------ -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash ...................................................... $ 107 $ 48
----------- -----------
TOTAL CURRENT ASSETS ...................................... 107 48
----------- -----------
OTHER ASSETS:
Organization Costs, net of
accumulated amortization of
$14,509 as of December 31,
1994 and 1993, respectively ............................. 0 0
----------- -----------
TOTAL OTHER ASSETS ........................................ 0 0
----------- -----------
TOTAL ASSETS ....................................................... $ 107 $ 48
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts Payable .......................................... $ 4,290 $ 0
Accrued liabilities, officer .............................. 69,862 71,662
----------- -----------
TOTAL CURRENT LIABILITIES ................................. 74,152 71,662
----------- -----------
SHAREHOLDERS' DEFICIT:
Common Stock, $.0001 par value,
3,000,000,000 shares authorized,
861,602,000 shares issued and
outstanding as of December 31,
1994 and 1993 ............................................. 86,160 86,160
Additional paid-in capital ................................ 949,473 949,473
Accumulated deficit ....................................... (1,109,678) (1,107,247)
----------- -----------
TOTAL SHAREHOLDERS' DEFICIT ............................... (74,045) (71,614)
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT ..................................... $ 107 $ 48
=========== ===========
</TABLE>
See independent auditor's report and notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
ART CARDS, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1994 and 1993
1994 1993
------------ ----------
<S> <C> <C>
Sales, net .......................... $ 2,653 $ 31,423
----------- ----------
OPERATING EXPENSES:
Costs of goods sold ......... -- 12,964
Salaries and payroll taxes .. -- 40,000
General and
administrative expenses ... 136 16,339
Professional fees ........... 4,990 9,252
Commissions and
distribution fees ......... -- 7,500
----------- ----------
TOTAL EXPENSES .............. 5,126 86,055
----------- ----------
LOSS FROM OPERATIONS ................. (2,473) (54,632)
----------- ----------
OTHER INCOME:
Miscellaneous ............... 42 --
----------- ----------
TOTAL OTHER INCOME .......... 42 --
----------- ----------
NET LOSS ............................. $ (2,431) $ (54,632)
=========== ===========
NET LOSS PER COMMON SHARE ............ $ * $ *
=========== ===========
WEIGHTED-AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING .......... 861,602,000 861,602,000
=========== ===========
</TABLE>
* less than $.01 per share
See independent auditor's report and notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
ART CARDS, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT
For the Years Ended December 31, 1994 and 1993
Additional
Par Paid-In Accumulated
Number of Shares Value Capital Deficit
---------------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Balances,
January 1, 1993 ....... 861,602,000 $ 86,160 $ 949,473 $(1,052,615)
Net Loss for Year Ended
December 31, 1993 ..... -- -- -- (54,632)
----------- --------- --------- ----------
Balances,
December 31, 1993 ..... 861,602,000 86,160 949,473 (1,107,247)
Net Loss for Year Ended
December 31, 1994 ..... -- -- -- (2,431)
----------- --------- --------- ----------
Balances,
December 31, 1994 ..... 861,602,000 $ 86,160 949,473 $(1,109,678)
=========== ========= ========= ==========
</TABLE>
See independent auditor's report and notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
ART CARDS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1994 and 1993
1994 1993
------------ ----------
<S> <C> <C>
Operating Activities:
Net Loss ................................... $ (2,431) $(54,632)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization ............ -- 2,282
Changes in operating assets and liabilities:
Decrease in accounts receivable .......... -- 3,913
Decrease in inventories, prepaid
expenses and other current
assets ................................. -- 6,482
Decrease in noncurrent inventory ......... -- 6,482
Increase (decrease) in accounts
payable and other current
liabilities ............................ 2,490 34,947
-------- --------
NET CASH USED IN OPERATING ACTIVITIES ............... 59 (526)
-------- --------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS .............................. 59 (526)
CASH, BEGINNING OF YEAR ............................. $ 48 $ 574
-------- --------
CASH, END OF YEAR ................................... $ 107 $ 48
======== ========
</TABLE>
See independent auditor's report and notes to financial statements.
F-5
<PAGE>
ART CARDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Art Cards, Inc. (the Company), formerly World Greetings, Inc., was incorporated
in Colorado on January 30, 1984, for the purpose of manufacturing and marketing
greeting cards and similar products. The Company disposed of all its inventory
in 1993 and no longer markets greeting cards and similar products.
The Company's ability to continue as a going concern is dependent upon the
Company's ability to obtain financing. The Company is currently looking for a
suitable candidate to merge with or be acquired by. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles necessarily requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the balance sheet date and reported amounts of revenues and
expenses during the reporting periods.
The Financial Standards Board has recently issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets" and SFAS No. 123, "Accounting for Stock-Based Compensation."
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles be reported at the lower of the carrying amounts or their estimated
recoverable amount and the adoption of this statement by the Company is not
expected to have an impact on the financial statements. SFAS No. 123 encourages
the accounting for stock- based employee compensation programs to be reported
within the financial statements on a fair-value based method. If the fair-value
based method is not adopted, then the statement requires proforma disclosure of
net income and earnings per share as if the fair value based method has been
adopted. The Company has not yet determined how SFAS No. 123 will be adopted nor
its impact on the financial statements. Both statements are effective for fiscal
years beginning after December 15, 1995.
Cash and Cash Equivalents
The Company considers investments in Treasury Bills and certificates of deposits
with maturities of less than three months of the balance sheet date to be cash
equivalents.
F-6
<PAGE>
ART CARDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109), which changed the
criteria for measuring the provisions for income taxes and recognizing deferred
tax assets and liabilities in the accompanying financial statements. SFAS 109
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined, based upon the difference between the financial
statements and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. The
adoption of SFAS 109 did not have a material impact on the financial statements.
Net Loss Per Common Share
The net loss per share of common stock is determined using the weighted-average
number of shares issued and outstanding during the period, according to rules of
the Securities and Exchange Commission. The Company's common stock equivalents
were not included in the computation because their effect was antidilutive.
NOTE C - LICENSE AGREEMENTS
The Company has entered into several license agreements with various artists and
publishers to use designated graphic images in its manufacture, distribution and
sale of greeting cards, postcards and similar products. Generally, the license
agreements are exclusive and require royalties on net sales of licensed products
by the Company. Certain agreements can be terminated by the licensor, after
specified periods of time, if minimum sales requirements are not met. Under some
license agreements, the Company has made non-refundable advance royalty
payments. The advance royalties are charged to expense as they are earned by the
licensor. The Company no longer uses the license agreements.
On June 28, 1991, the Company entered into a five-year license agreement with
Recycled Paper Products, Inc. (Recycled Paper) and Rob Barber. Recycled Paper
has the exclusive right to receive, sell and distribute greeting cards and
related products created by Rob Barber in the United States, Canada and
Australia. Recycled Paper has agreed to pay the Company and Rob Barber five
percent of all net sales. In addition, Recycled Paper has agreed to pay the
Company and Rob Barber 50 percent of all license fees, advances against
royalties and royalties that Recycled Paper may receive from sublicenses granted
by Recycled Paper. Such sublicenses may only be granted outside the United
States, Canada and Australia. This agreement will terminate in June or July
1996.
F-7
<PAGE>
ART CARDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE D - SHAREHOLDERS' DEFICIT
In connection with the Company's public offering, the Company issued 20,000,000
callable Class A common stock purchase warrants. Each Class A warrant consisted
of one callable Class B common stock purchase warrant and entitled the holder to
purchase ten additional shares of common stock at an exercise price of $.0075
per share until February 9, 1996. Each Class B warrant entitled the holder to
purchase ten shares of common stock at an exercise price of $.01 per share until
February 9, 1996. All of the above-referenced warrants expired on February 9,
1996.
NOTE E - RELATED PARTY TRANSACTIONS
The Company leased office space from its president on a month-to-month basis. As
of December 31, 1994, $2,715 was owed to the president for rent and accrued
salaries of $67,147.00.
NOTE F - INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS 109, "Accounting for Income
Taxes." As allowed by SFAS 109, prior years' financial statements have not been
restated.
As of December 31, 1994, the Company had net operating loss carryforwards for
income tax purposes of approximately $1,000,000 to offset future taxable income.
The net operating loss carryforwards expire through 2008. However, the Company's
ability to utilize such losses to offset future taxable income is subject to
various limitations imposed by the rules and regulations on the Internal Revenue
Service.
The tax effects of the temporary differences and operating loss carryforwards
that give rise to significant portions of the deferred tax assets at December
31, 1994, are presented below. The entire valuation allowance was recorded
during 1994.
Net operating loss
carryforwards .......... $ 185,100
Compensation expense not
allowed for income tax
reporting purposes ..... 8,000
Valuation allowance ...... (193,000)
Balance, December 31, 1994 $ 0
=========
There is no provision for income taxes in 1994 and 1993 because the Company had
net operating losses.
F-8
<PAGE>
ART CARDS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE G - LETTER OF INTENT
The Company signed a letter of intent with Legacy Brands, Inc. to acquire Legacy
Brands, Inc. in a transaction which may or may not be tax-free under Internal
Revenue Code Section 368.
F-9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ART CARDS, INC.
Date: June 11, 1996 By /s/ Richard H. Miller
------------------------------------
Richard H. Miller, President
Date: June 11, 1996 By /s/ Richard M. Gawlik
------------------------------------
Richard M. Gawlik, Treasurer,
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: June 11, 1996 By /s/ Richard H. Miller
------------------------------------
Richard H. Miller, Director
Date: June 11, 1996 By /s/ Richard M. Gawlik
------------------------------------
Richard M. Gawlik, Director
Date: June 11, 1996 By /s/ Marilyn R. Goldberg
------------------------------------
Marilyn R. Goldberg, Director
Date: June 11, 1996 By /s/ John W. Rapparlie
------------------------------------
John W. Rapparlie, Director
Supplemental information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act
No annual report to security holders covering the the Issuer's last fiscal
year or proxy material was sent to security holders.
ARTICLES OF INCORPORATION
OF
WORLD GREETINGS, INC.
KNOW ALL MEN BY THESE PRESENTS:
THAT I, the undersigned, C. HENRY ROATH, 1700 Writers' Center Five, 1873
South Bellaire Street, P.O. Box 5560 T.A., Denver, Colorado 80217-5560, desiring
to form a corporation under the laws of the State of Colorado, do hereby make,
execute and acknowledge this certificate in writing of my intention to form a
body corporate under said laws, and declare:
ARTICLE ONE
NAME
The corporate name of the corporation shall be WORLD GREETINGS, INC.
ARTICLE TWO
PURPOSE
The purpose for which this corporation is organized is the transaction of
all lawful business for which corporations may be incorporated pursuant to the
Colorado Corporation Code.
ARTICLE THREE
DURATION
This corporation shall have perpetual existence.
ARTICLE FOUR
CAPITAL STOCK
The amount of authorized capital stock of this corporation is 20,000,000
shares of common stock, each share having a $.001 par value. All shares when
issued shall be fully paid and nonassessable, and the private property of
shareholders shall not be liable for corporate debts. ARTICLE FIVE RIGHTS OF
SHAREHOLDERS The rights and privileges relating to the shares of capital stock
named in Article Four hereof shall be as follows: 5-1. No holder of any shares
of any class of the corporation shall, as such, have any preemptive right to
purchase or subscribe for any shares of the capital stock or any other
securities of the corporation which it may issue or sell, whether out of the
number of shares authorized by the Articles of Incorporation of the corporation
as originally filed, or by any amendment thereof, or out of shares of the
capital stock of the corporation acquired by it after the issue thereof, nor
shall any holder of any such shares of any class, as such, have any right to
purchase or subscribe for any obligation which the corporation may issue or sell
that shall be convertible into or exchangeable for any shares of the capital
stock of the corporation, or to which shall be attached or appertain any warrant
or warrants or any instrument or instruments that shall confer upon the owner of
- 1 -
<PAGE>
such obligation, warrant or instrument the right to subscribe for or to purchase
from the corporation any shares of any class of its capital stock. 5-2. Each
share of capital stock shall be entitled to one vote, either in person or by
proxy, on all matters upon which shareholders are entitled to vote at
shareholders' meetings. Cumulative voting shall not be allowed in the election
of directors. 5-3. All outstanding shares of common stock shall share equally in
dividends and upon liquidation. Dividends are payable at the discretion of the
Board of Directors at such times and in such amounts as they deem advisable,
subject, however, to the provisions of the laws of the Colorado Corporation
Code. 5-4. The Board of Directors may cause any stock issued by the corporation
to be issued subject to such lawful restrictions, qualifications, limitations or
special rights as they deem fit, which restrictions, qualifications, limitations
or special rights may be created by provisions in the Bylaws of the corporation
or in the minutes of any properly convened meeting of the Board of Directors;
provided, however, notice of such special restrictions, qualifications,
limitations or special rights must appear on the certificate evidencing
ownership of such stock.
ARTICLE SIX
DIRECTORS
The affairs of the corporation shall be governed by a Board of Directors.
The number of directors shall be fixed in accordance with the Bylaws. So long as
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<PAGE>
the number of directors shall be less than three, no shares of this corporation
may be issued and held of record by more shareholders than there are directors.
Any shares issued in violation of this paragraph shall be null and void. This
provision shall also constitute a restriction on the transfer of shares and a
legend shall be conspicuously placed on each certificate respecting shares
preventing transfer of the shares to more shareholders than there are directors.
The organization and conduct of the Board shall be in accordance with the
following:
6-1. The names and addresses of the members of the initial Board of
Directors, who shall hold office until the first annual meeting of the
shareholders of the corporation, or until their successors shall have been
elected and qualified are: Richard Miller 800 Pearl Street, #1206 Denver,
Colorado 80203
6-2. Directors of the corporation need not be residents of Colorado
nor holders of shares of the corporation's capital stock.
6-3. Meetings of the Board of Directors, regular or special, may be
held within or without Colorado upon such notice as may be prescribed by the
Bylaws of the corporation. Attendance of a director at a meeting shall
constitute a waiver by him of notice of such meeting unless he attends only for
the express purpose of objecting to the transaction of any business thereat on
the ground that the meeting is not lawfully called or convened.
- 3 -
<PAGE>
6-4. A majority of the number of directors at any time constituting
the Board of Directors shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
6-5. By resolution adopted by a majority of the number of directors at
any time constituting the Board of Directors, the Board of Directors may
designate two or more directors to constitute an executive committee which shall
have and may exercise, to the extent permitted by law or in such resolution, all
of the authority of the Board of Directors in the management of the corporation;
provided, however, that such delegation of authority thereto shall not operate
to relieve the Board of Directors or any member thereof of any responsibility
imposed on it or him by law.
6-6. Any vacancy in the Board of Directors, however caused, may be
filled by the affirmative vote of a majority of the remaining directors, though
less than a quorum of the Board of Directors. A director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office.
ARTICLE SEVEN
PLACE OF BUSINESS
The principal office and the principal place of business of the corporation
initially shall be located in the City and County of Denver, State of Colorado.
The Board of Directors may, however, from time to time establish such other
offices, branches, subsidiaries or divisions in such other place or places
- 4 -
<PAGE>
within or without the State of Colorado as it deems advisable. The address of
the corporation's initial registered office in Colorado for the purposes of the
Colorado Corporation Act, as amended, shall be:
1873 S. Bellaire St., #1700
P. O. Box 5560 T.A.
Denver, Colorado 80217-5560
The name of the corporation's initial registered agent at the address of
the aforesaid registered office for purposes of said Act shall be: C. Henry
Roath.
ARTICLE EIGHT
OFFICERS
The officers of the corporation shall consist of a President, a Secretary
and a Treasurer, each of whom shall be elected by the Board of Directors at such
time and in such manner as may be prescribed by the Bylaws of the corporation.
Such other officers, assistant officers and agents as deemed necessary may be
elected or appointed by the Board of Directors or chosen in such other manner as
may be prescribed by the Bylaws. Any two or more offices may be held by the same
person, except the offices of President and Secretary.
ARTICLE NINE
BYLAWS
The Board of Directors shall have the power to make and adopt Bylaws for
the government of the corporation not inconsistent with the laws of the State of
Colorado for the purpose of regulating and carrying on the business of the
corporation within the scope of its objects and purposes; and the Board of
- 5 -
<PAGE>
Directors from time to time may change, alter or amend the same as may be
beneficial to the interests of the corporation except as otherwise specifically
provided therein.
ARTICLE TEN
MEETINGS OF SHAREHOLDERS
Meetings of shareholders of the corporation shall be held at such place
within or without the State of Colorado and at such times as may be prescribed
in the Bylaws of the corporation. Special meetings of the shareholders of the
corporation may be called by the President of the corporation, the Board of
Directors, or by the record holder or holders of at least 33% of all shares
entitled to vote at the meeting. At the meeting of the shareholders, except to
the extent otherwise provided by the Bylaws or by law, a quorum shall consist of
not less than one-half (1/2) of the shares entitled to vote at the meeting; and,
if a quorum is present, the affirmative vote of the majority of shares
represented at the meeting and entitled to vote thereat shall be the act of the
shareholders unless the vote of a greater number or voting by classes is
required by law.
ARTICLE ELEVEN
SALE OF ASSETS
Whenever the Board of Directors at any meeting thereof, by a majority vote
of the whole Board, determines that it is in the best interests of the
corporation, the corporation may sell, lease, exchange, or convey all of its
property and assets, including its goodwill and its corporate franchises, upon
such terms and conditions and for such consideration as the Board of Directors
- 6 -
<PAGE>
shall deem expedient; provided, however, that the sale or disposal of all or
substantially all of the property and assets of the corporation shall be
authorized or ratified by the affirmative vote of the holders of at least a
majority of the capital stock then issued and outstanding, such vote to be taken
at a meeting of shareholders duly called for that purpose as provided by the
statutes of the State of Colorado.
ARTICLE TWELVE
INTEREST OF DIRECTORS IN CONTRACTS
Any contract or other transaction between the corporation and one or more
of its directors, between the corporation and any firm of which one or more of
its directors are members or employees, or in which they are interested, or
between the corporation and any corporation or association of which one or more
of its directors are shareholders, members, directors, officers or employees, or
in which they are interested, shall be valid for all purposes, notwithstanding
the presence of such director or directors at the meeting of the Board of
Directors of the corporation which acts upon or in reference to such contract or
transaction, and notwithstanding his or their participation in such action, if
the facts of such interest shall be disclosed or known to the Board of
Directors, and the Board of Directors shall, nevertheless, authorize, approve,
and ratify such contract or transaction by a vote of a majority of the Board of
Directors present, such interested director or directors to be counted in
determining whether a quorum is present but not to be counted in calculating the
- 7 -
<PAGE>
majority necessary to carry such vote. This article shall not be construed to
invalidate any contract or other transaction which would otherwise be valid
under the common and statutory law applicable thereto.
ARTICLE THIRTEEN
INDEMNIFICATION OF DIRECTORS
The corporation shall indemnify any person who was or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact that he is or was
a director, officer, employee, fiduciary, or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee,
fiduciary, or agent of another company, partnership, joint venture, trust or
other enterprise, against expenses (including attorney fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the defense or settlement of such action, suit or proceeding, to
the extent and under the circumstances permitted by the Corporation Code of the
State of Colorado. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, fiduciary, or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee, fiduciary,
- 8 -
<PAGE>
or agent of another corporation, partnership, joint venture, trust, or other
enterprise against expenses (including attorney fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit to the extent and under the circumstances permitted by the Corporation Code
of the State of Colorado. Such indemnification (unless ordered by a court) shall
be made as authorized in a specific case upon a determination that
indemnification of the director, officer, employee, fiduciary, or agent is
proper in the circumstances because he has met the applicable standards of
conduct set forth in the Corporation Code of the State of Colorado. Such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such quorum is not obtainable, or even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
The foregoing right of indemnification shall not be deemed exclusive of any
other right to which those seeking indemnification may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise,
and shall continue as to a person who has ceased to be a director, officer,
employee, fiduciary, or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE FOURTEEN
AMENDMENT OF ARTICLES OF INCORPORATION
The corporation expressly reserves the right to amend these Articles of
Incorporation and to alter, change, or repeal any provision contained herein in
any manner now or hereafter permitted or provided by the corporation laws of
Colorado, and the rights of all shareholders are expressly made subject to such
power of amendment.
- 9 -
<PAGE>
ARTICLE FIFTEEN
REDUCED VOTING REQUIREMENTS
When, with respect to any action to be taken by the shareholders of the
corporation, the Colorado Corporation Code requires the vote or concurrence of
two-thirds of the outstanding shares entitled to vote thereon, or of any series
or class, then such action shall be taken by the vote or concurrence of a
majority of such shares or series or class thereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 26th day of
January , 1984.
/s/ C. Henry Roath
---------------------------------------
C. Henry Roath
- 10 -
<PAGE>
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I, M. Sue Lehigh , a notary public, hereby certify that on the 26th day of
January, 1984, personally appeared before me C. HENRY ROATH, who, being by me
first duly sworn severally declared that he was the person who signed the
foregoing document as incorporator and that the statements therein contained are
true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 26th day of
January, 1984.
My Commission expires:
/s/ M. Sue Lehigh
----------------------------
Notary Public
Business Address:
1873 So. Bellaire St #1700
Denver, CO 80222
- 11 -
SS: Form D4 (Rev. 1/86)
Submit in Duplicate
Filing Fee: $22.5O
This document may be typewritten
MAIL TO:
Colorado Secretary of State
Corporations Office
1560 Broadway, Suite 200
Denver, Colorado 80202
(303) 866-2361
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendments to its
Articles of Incorporation:
FIRST: The name of the corporation is (note I ) WORLD GREETINGS, INC.
SECOND: The following amendment to the Articles of Incorporation was
adopted on March 30, 1987, as prescribed by the Colorado Corporation Code, in
the manner marked with an X below:
____ Such amendment was adopted by the board of directors where no shares
have been issued.
XX Such amendment was adopted by a vote of the shareholders. The number
---- of shares voted for the amendment was sufficient for approval.
Name changed from World Greetings, Inc. to Art Cards, Inc.
THIRD: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows:
FOURTH: The manner in which such amendment effects a change in the amount
of stated capital, and the amount of stated capital as changed by such
amendment, are as follows:
World Greetings, Inc. (Note 1)
By /s/ Richard H. Miller
------------------------------------
Its President
and____________________________(Note 2)
Its Secretary
/s/ Richard H. Miller (Note 3)
---------------------------------------
Its Director
MAIL TO:
Colorado Secretary of State
1560 Broadway, Suite 200
Denver, Colorado 80202
(303) 866-2361
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendments to its
Articles of Incorporation:
FIRST: The name of the corporation is (note l) Art Cards, Inc.
SECOND: Tbe following amendment to the Articles of Incorporation was
adopted on September 14, 1987 , as prescribed by the Colorado Corporation Code,
in the manner marked with an X below:
____ Such amendment was adopted by the board of directors where no
shares have been issued
X Such amendment was adopted by a vote of the shareholders. The
---- number of shares voted for the amendment was sufficient for
approval.
ARTICLE FOUR - CAPITAL STOCK
The amount of authorized capital stock of this corporation is 20,000,000
shares of common stock, each share having a $0.0001 par value. All shares, when
issued, shall be fully paid and nonassessable, and the private property of
shareholders shall not be liable for corporate debts.
ARTICLE SIXTEEN - LIABILITY OF DIRECTORS
The officers and directors of this corporation shall be subject to the
doctrine of corporate opportunities only insofar as it applies to business
opportunities in which this corporation has expressed an interest as determined
from time to time by the corporation's Board of Directors as evidenced by
resolutions appearing in the corporation's Minutes. When such areas of interest
are delineated, all such business opportunities with such areas of interest
which come to the attention of the officers and directors of this corporation
shall be disclosed promptly to this corporation and nade available to it. The
Board of Directors may reject any business opportunity presented to it and
thereafter any officer or director may avail himself of such opportunity. Until
such time as this corporation, through its Board of Directors, has designated an
area of interest, the officers and directors of this corporation shall be free
to engage in such areas of interest on their own and this doctrine shall not
limit the rights of any officer or director of this corporation to continue a
business existing prior to the time that such area of interest is designated by
this corporation. The provision shall not be construed to release any employee
of the corporation fron any duties which he may have to the corporation.
THIRD: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for
in the amendment shall be effected, is as follows:
FOURTH The manner in which such amendment effects a change in the amount of
a stated capital, and the amount of stated capital as changed by such amendment,
are as follows:
Art Cards, Inc. (Note 1)
*See attached for signature
of the President *
By /s/ Richard H. Miller
--------------------------------
Its President
and /s/ Richard M. Gawlik (Note 2)
--------------------------------
Its Secretary
(Note 3)
--------------------------------
Its Director
MAIL TO:
Colorado Secretary of State
1560 Broadway, Suite 200
Denver, Colorado 80202
(303) 866-2361
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendments to its
Articles of Incorporation:
FIRST: The name of the corporation is (note l) Art Cards, Inc.
SECOND: The following amendment to the Articles of Incorporation was
adopted on (1) Sept. 26, 1987 (2) Sept. 29, 1988, as prescribed by the Colorado
Corporation Code, in the manner marked with an X below:
____ Such amendment was adopted by the board of directors where no shares
have been issued
x Such amendment was adopted by a vote of the shareholders. The number
---- of shares voted for the amendment was sufficient for approval.
(1) Article Sixteen - Liability of Directors
A director of this corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director except that this provision shall not
eliminate or limit the liability of a director to the corporation or to
its shareholders for monetary damages for (i) any breach of the
director's duty of loyalty to the corporation or to its shareholders;
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) acts specified in
section 7-5-114 of the Colorado Corporation Code as the same may be
amended from time to time; or (iv) any transaction from which the
director derived an improper personal benefit.
(2) Article Four - Capitalization
The authorized capital stock of the Corporation shall be 3,000,000,000
shares of Common Stock, $.0001 par value. All shares, when issued,
shall be fully paid and non-assessable, the private property of
shareholders and shall not be liable for corporate debts.
THIRD: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows
N/A
FOURTH The manner in which such amendment effects a change in the amount of
a stated capital, and the amount of stated capital as changed by such amendment,
are as follows:
N/A
Art Cards, Inc. (Note 1)
By /s/ Richard H. Miller
----------------------------------------
Its President
and /s/ Richard M. Gawlik (Note 2)
---------------------------------------
Its Secretary
__________________________________(Note 3)
Its Director
CERTIFICATE OF CORRECTION
FOR
ART CARDS, INC.
Pursuant to Section 7-2-115 of the Colorado Corporation Code, Art Cards,
Inc., a Colorado corporation ("Company"), hereby submits the following
Certificate of Correction to its Articles of Amendment to the Articles of
Incorporation filed on November 13, 1987.
1. The name of the corporation is Art Cards, Inc.
2. ARTICLE SECOND of the Articles of Amendment was incorrect in that the
number of shares of authorized capital stock of the Company contained in Article
Four - Capital Stock was incorrectly set forth as 20,000,000 shares rather than
300,000,000 shares.
3. The amendment to Article Four - Capital Stock as contained in ARTICLE
SECOND of the Articles of Amendment was incorrectly set forth as follows:
ARTICLE FOUR - CAPITAL STOCK
The amount of authorized capital stock of this corporation is
20,000,000 shares of common stock, each share having $0.0001 par value. All
shares, when issued, shall be fully paid and nonassessable, and the private
property of shareholders shall not be liable for corporate debts.
4. The amendment to Article Four - Capital Stock as contained in ARTICLE
SECOND of the Company's Articles of Amendment in corrected form is as follows:
ARTICLE FOUR - CAPITAL STOCK
The amount of authorized capital stock of this corporation is
300,000,000 shares of common stock, each share having a $0.0001 par value.
All shares, when issued, shall be fully paid and nonassessable, and the
private property of shareholders shall be not be liable for corporate
debts.
This document shall be effective as of the effective date of the original
document, which is November 13, 1987.
Dated: April 10, 1989.
ART CARDS, INC.
By: /s/ Richard H. Miller
--------------------------------
Richard H. Miller, President
and /s/ Richard Gawlik
---------------------------------
Richard Gawlik, Secretary
BYLAWS
OF
WORLD GREETINGS, INC.
ARTICLE ONE
OFFICES
The principal office of the corporation in the State of Colorado shall be
located in the City and County of Denver, Colorado. The corporation may also
have offices at such other places within or without the State of Colorado as the
Board of Directors may from time to time determine or the business of the
corporation may require.
ARTICLE TWO
SHAREHOLDERS
Section 2-1. Place of Meetings. Meetings of shareholders shall be held at
the principal office of the corporation or at such other place within or without
the State of Colorado as the Board of Directors shall authorize.
Section 2-2. Annual Meeting. The annual meeting of the shareholders shall
be held on the second Tuesday of the fourth month following the close of the
fiscal year at 10:00 o'clock A.M. in each year if not a legal holiday; and if a
legal holiday, then on the next business day following at the same hour, when
the shareholders shall elect direct-rs and transact such other business as may
properly come before the meeting.
Section 2-3. Special Meetings. Special meetings of the shareholders may be
called by the Board of Directors or by the President, and shall be called by the
President or the Secretary at the request, in writing, of a majority of the
Board or at the request, in writing, by shareholders owning not less than 33% of
the voting shares issued and outstanding. Such request and the notice of meeting
issued pursuant thereto shall state the purpose or purposes of the proposed
meeting. Business transacted at a special meeting shall be confined to the
purposes stated in the notice.
Section 2-4. Fixing Record Date. For the purpose of determining the
shareholders qualified or entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to or dissent
from any proposal without a meeting, or for the purpose of determining
shareholders qualified or entitled to receive payment of any dividend or the
allotment of any rights, or for any other proper purpose, the Board of Directors
shall fix, in advance, a date as the record date for any such determination of
shareholders. Such date shall be not more than fifty nor less than ten days
before the date of such meeting. If no record date is fixed by the Board, the
record date for any such purpose shall be ten days before the date of such
meeting or action. When such determination of qualified or entitled shareholders
has been made as provided above, such determination shall also apply to any
adjourned meeting, except where transfer of stock to a new holder has been
entered on the transfer books of the corporation after the criginal meeting was
adjourned and at least ten days before the date of such adjourned meeting.
1
<PAGE>
Section 2-5. Notice of Meetings of Shareholders. Written notice shall be
delivered either personally or by mail to each shareholder entitled to vote at
any meeting of the shareholders. Such notice shall be delivered not less than
ten nor more than 50 days before the date of the meeting. If action is proposed
to be taken at a meeting that might increase the authorized shares, at least
thirty days' notice shall be given. The notice of each meeting shall state the
place, date and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called. The notice shall indicate
that it is being issued by or at the direction of the officer or persons calling
the meeting. If mailed, such notice shall be deemed delivered when deposited in
the United States mail, with postage prepaid, addressed to the shareholder at
his address as it appears on the record of shareholders, or if he shall have
filed with the Secretary a written request that notices to him be mailed to some
other address, then directed to him at such other address. Unless the Board of
Directors shall fix a new record date for an adjourned meeting, notice of such
adjourned meeting need not be given if the time and place to which the meeting
shall be adjourned were announced at the meeting at which the adjournment is
taken.
Section 2-6. Waivers. Notice of meeting need not be given to any
shareholder who signs, either in person or by proxy and whether before or after
the meeting, a waiver of notice. The attendance, whether in person or by proxy,
of any shareholder at a meeting without protesting the lack of notice of the
meeting prior to the conclusion of such meeting shall constitute a waiver of
notice by such shareholder.
Section 2-7. Quorum of Shareholders.
2-7-1. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders for the transaction of any business; provided,
however, that when a specified item of business is required to be voted on by a
class or classes, representatives of a majority of the shares of such class or
classes shall constitute a quorum for the transaction of such specified item of
business. Unless otherwise required by law the vote of a majority of the shares
present at the time of a vote, if a quorum is or has been present, shall be the
act of the shareholders.
2-7-2. If less than a majority of the outstanding shares entitled to
vote thereat are represented at a meeting, or for any valid business reason at a
meeting where such majority is present, a majority in interest of the
shareholders present may adjourn the meeting from time to time to a fixed date
without further notice as to the time and place of such adjourned meeting, but
each adjournment shall be for a period not in excess of 60 days. At any such
adjourned meeting at which a quorum shall be present or represented, only such
business may be transacted which might have been transacted at a meeting as
originally scheduled, unless all shares are represented and do not object.
2-7-3. When a quorum is once present to organize a meeting, it is not
broken by the subsequent withdrawal of any shareholder and those remaining may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 2-8. Proxies. Every shareholder entitled to vote at a meeting
of the shareholders or to express consent or dissent without a meeting may
authorize another person or persons to act for him by proxy. Every proxy must be
signed by the shareholder or his attorney-in-fact and delivered to the secretary
of the meeting prior to or during the roll call, or be returned to the
corporation with the signed consent to action without a meeting. No proxy shall
be valid after the expiration of eleven months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the shareholder executing it, except as otherwise provided by law.
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Section 2-9. Voting.
2-9-1. At all meetings of shareholders voting may be viva voce;
however, any qualified voter may demand a stock vote, whereupon such vote shall
be taken by ballot and the secretary shall record the name of the shareholder
voting, the number of shares voted, and, if such vote shall be by proxy, the
name of the proxy holder.
2-9-2. Each shareholder shall have one vote for each share issued and
outstanding which is registered in his name on the books of the corporation,
except as otherwise provided in the Articles of Incorporation and except where
the transfer books of the corporation shall have been closed or a date shall
have been fixed as a record date for the determination of shareholders entitled
to vote prior to his becoming a shareholder. A complete list of shareholders
entitled to vote at such meeting of the shareholders or any adjournment thereof,
arranged in alphabetical order and setting forth the number of voting shares
held by each shareholder, shall be prepared by the Secretary or the transfer
agent of the corporation who shall have charge of the stock ledger and stock
transfer books of the corporation. Such list shall be subject to inspection by
any shareholder at the principal office of the corporation during business hours
for ten days prior to such meeting and throughout the meeting or any adjournment
thereof.
Section 2-10. Written Consent of Shareholders. Any action that may be taken
by vote may be taken without a meeting on the written consent setting forth the
action so taken, signed by the holders of all the outstanding shares entitled to
vote thereon.
Section 2-11. Inspectors. The Board may, in advance of any meeting of
shareholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the chairman
of the meeting or any shareholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as an inspector of an election of
directors. Inspectors need not be shareholders.
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ARTICLE THREE
DIRECTORS
Section 3-1. Board of Directors. The business of the corporation shall be
managed by a Board of Directors, consisting of not less than three (3) nor more
than nine (9) members (except that there need be only as many directors as there
are shareholders in the event that the outstanding shares are held of record by
fewer than three (3) shareholders), each of whom shall be at least 18 years of
age but who need not be shareholders nor residents of the State of Colorado. The
number of directors of the corporation shall be fixed from time to time by
resolution of the Board of Directors.
Section 3-2. Election and Term of Directors. At each annual meeting of
shareholders, the shareholders shall elect directors. Each director shall hold
office until the next annual meeting and until his successor has been elected
and qualified, or until his death, resignation or removal.
Section 3-3. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors or vacancies
occurring in the Board for any reason may be filled by a vote of a majority of
the directors then in office, although less than a quorum exists, unless
otherwise provided in the Articles of Incorporation. A director chosen to fill a
position resulting from an increase in the number of directors shall hold office
until the next annual meeting of shareholders and until his successor shall have
been elected and qualified, or until his death, resignation or removal. A
director elected to fill a vacancy caused by resignation, death or removal shall
be elected to hold office for the unexpired term of his predecessor.
Section 3-4. Resignation and Removal. A director may resign at any time by
giving written notice to the Board, the President, or the Secretary of the
corporation. Unless otherwise specified in the notice, the resignation shall
take effect upon receipt thereof by the Board or such officer, and the
acceptance of the resignation shall not be necessary to make it effective. Any
director may be removed at any time, with or without cause, as provided by law.
Section 3-5. Quorum of Directors. A majority of the entire Board of
Directors shall constitute a quorum for the transaction of business or of any
specified item of business.
Section 3-6. Action of the Board of Directors. Unless otherwise required by
law, the vote of a majority of the directors present at the time of the vote, if
a quorum is present at such time, shall be the act of the Board of Directors.
Each director present shall have one vote regardless of the number of shares, if
any, which he may hold.
Section 3-7. Place and Time of Board Meetings. The Board of Directors may
hold its meetings at the office of the corporation or at such other places,
either within or without the State of Colorado, as it may from time to time
determine. If the meeting is held without the State of Colorado, notice must be
given by certified mail not less than five days before the meeting, and said
notice shall contain the date, place and purpose of the meeting. Notice is given
when deposited in the United States mail with postage prepaid.
Section 3-8. Regular Annual Meeting. A regular annual meeting of the Board
of Directors shall be held immediately following the annual meeting of
shareholders at the place of such annual meeting of shareholders.
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Section 3-9. Notice of Meetinas of the Board. Adiournment.
3-9-1. Regular meetings of the Board may be held without notice at
such time and place as the Board shall from time to time determine. Special
meetings of the Board shall be held upon notice to the directors and may be
called by the President upon two days' notice to each director either personally
or by mail, telegraph, telephone, cable, or wireless, except as provided by
Section 3-7 of this Article. Special meetings shall be called by the President
or by the Secretary in a like manner at the written request of at least two
directors. Notice of a meeting need not be given to any director who submits a
waiver of notice, whether before or after the meeting, or who attends the
meeting without protesting prior thereto or at its commencement, the lack of
notice to him.
3-9-2. A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. Notice of the
adjournment shall be given to all directors who were absent at the time of the
adjournment and, unless such time and place are announced at the meeting, to the
other directors.
Section 3-10. Chairman. At all meetings of the Board of Directors the
Chairman of the Board, if one has been elected, shall preside. In the absence of
a Chairman the President, or in his absence the next highest officer, shall
preside. In the event there be two or more persons of equal title, a chairman
chosen by the Board shall preside.
Section 3-ll. Executive and Other Committees. The Board of Directors, by
resolution adopted by a majority of the entire Board, may designate from among
its members an executive committee and other committees, each consisting of two
or more directors. Each such committee shall serve at the pleasure of the Board.
Section 3-12. Compensation. No compensation shall be paid to directors, as
such, for their services, but by resolution of the Board a fixed sum and
expenses for actual attendance at each regular or special meeting of the Board
may be authorized. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 3-13. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless he
shall file his written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
Section 3-14. Written Consent of Directors. Any action that may be taken by
vote may be taken without a meeting on written consent setting forth the action
so taken, signed by all the directors entitled to vote thereon.
ARTICLE FOUR
OFFICERS
Section 4-1. Offices, Election and Term of Office.
4-1-1. The Board of Directors shall elect or appoint a President, a
Secretary and a Treasurer, and such other officers, including a Chairman of the
Board, as the Board may determine who shall have such duties, powers and
functions as hereinafter provided.
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<PAGE>
4-1-2. All officers that are elected or appointed shall hold office at
the pleasure of the Board.
Section 4-2. Removal, Resignation, Salary, Etc.
4-2-1. Any officer elected or appointed by the Board may be removed by
the Board with or without cause.
4-2-2. In the event of the death, resignation or removal of an
officer, the Board in its discretion may elect or appoint a successor to fill
the unexpired term.
4-2-3. Any two or more offices may be held by the same person, except
the offices of President and Secretary.
4-2-4. The salaries of all officers shall be fixed by the Board from
time to time.
Section 4-3. Chairman of the Board. The Chairman of the Board, if any,
shall, if present, preside at each meeting of the Board of Directors and shall
be an ex officio member of all committees of the Board. He shall perform all
such duties as may from time to time be assigned to him by the Board of
Directors.
Section 4-4. President. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders, and, in the absence of the Chairman of the Board, of the Board
of Directors. He may sign, with the Secretary or any other proper officer of the
corporation thereunto authorized by the Board of Directors, certificates for
shares of the corporation, and any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these Bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed. In
general the President shall perform all duties incident to the office and such
other duties as may be prescribed by the Board of Directors from time to time.
Section 4-5. Vice-President. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice-President shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The
Vice-President shall perform such other duties as from time to time may be
assigned to him by the President or by the Board of Directors.
Section 4-6. Secretary. The Secretary shall attend all meetings of the
Board of Directors and of the shareholders, record all votes and minutes of all
proceedings in a book or books to be kept for that purpose. He shall keep in
safe custody the seal of the corporation and affix it to any instrument when
authorized, and he shall keep all the documents and records of the corporation
as required by law or otherwise in a proper and safe manner. When required he
shall prepare or cause to be prepared and available at each meeting of
shareholders entitled to vote thereat, a list of shareholders indicating the
number of shares of each respective class held by each. In general he shall
perform all duties incident to the office of Secretary and such other duties as
may be prescribed from time to time by the President or the Board of Directors.
Section 4-7. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in the corporate books. He shall deposit all money
and other valuables in the name and to the credit of the corporation in such
depositories as may be designated by the Board and disburse the funds of the
corporation as may be ordered or authorized by the Board and preserve proper
vouchers for such disbursements. He shall render to the President and Board at
the regular meetings of the Board, or whenever they require it, an account of
all his transactions as Treasurer and of the financial condition of the
corporation, and he shall render a full financial report at the annual meeting
of the shareholders if so requested. The Treasurer shall be furnished, at his
request, with such reports and statements as he may require from the corporate
officers and agents as to all financial transactions of the corporation. In
general he shall perform all duties as are given to him by these Bylaws or as
from time to time are assigned to him by the Board of Directors or
6
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Section 4-8. Assistant Officers. The Board of Directors may elect (or
delegate to the Chairman of the Board or to the President the right to appoint)
such other officers and agents as may be necessary or desirable for the business
of the corporation. Such other officers shall include one or more assistant
secretaries and treasurers who shall have the power and authority to act in
place of the officer to whom they are elected or appointed as an assistant in
the event of the officer's inability or unavailability to act in his official
capacity.
Section 4-9. Sureties and Bonds. In case the Board of Directors shall so
require, any officer or agent of the corporation shall execute to the
corporation a bond in such sum and with such surety or sureties as the Board may
direct. The Bond shall be conditioned upon the officer's or agent's faithful
performance of his duties to the corporation and including responsibility for
negligence and for the accounting for all property, funds or securities of the
corporation which may come into his hands.
ARTICLE FIVE
CERTIFICATES FOR SHARES
Section 5-1. Certificates. Each owner of stock of the corporation shall be
entitled to have a certificate, in such form as shall be approved by the Board,
certifying the number of shares of stock of the corporation owned by him. The
certificates representing shares of stock shall be signed in the name of the
corporation by the Chairman of the Board or the President and by the Secretary
or an Assistant Secretary and sealed with the seal of the corporation (which
seal may be a facsimile, engraved or printed); provided, however, that where any
such certificate is countersigned by a transfer agent or is registered by a
registrar (other than the corporation or one of its employees), the signatures
of the Chairman of the Board, the President, Secretary or Assistant Secretary
upon such certificates may be facsimiles, engraved or printed. In case any
officer who shall have signed such certificates shall have ceased to be such
officer before such certificates shall be issued, they may nevertheless be
issued by the corporation with the same effect as if such officers were still in
office at the date of their issue.
Section 5-2. Lost or Destroyed Certificates. The Board of Directors may
direct a new certificate or certi______ __ _ issued in place of any certificate
or certificates theretofore issued by the corporation alleged to have been lost
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost or destroyed. When authorizing such issue of
a new certificate or certificates the Board may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and give the corporation a bond in
such sum and with such surety or sureties as it may direct as indemnity against
any claim that may be made against the corporation with respect to the
certificate alleged to have been lost or destroyed.
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<PAGE>
Section 5-3. Transfer of Shares.
5-3-1. Transfers of shares of stock of the corporation shall be made
on the stock records of the corporation only upon authorization by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates for such
shares properly endorsed or accompanied by a duly executed stock transfer power
and the payment of all taxes thereon.
5-3-2. The corporation shall be entitled to treat the holder of record
of any share as the holder in fact thereof and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such share on the
part of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of Colorado.
Section 5-4. Restrictions of Stock. The Board of Directors may restrict the
transfer of any stock issued by giving the corporation or any shareholder "first
right of refusal to purchase" the stock, by making the stock redeemable or by
otherwise restricting the transfer of the stock under such terms and in such
manner as the directors may deem necessary and as are not inconsistent with the
Articles of Incorporation or the laws of the State of Colorado. Any stock whose
transfer is so restricted must carry a stamped legend on the face of the
certificate set- ting out the restriction and where such restriction may be
found in the records of the corporation.
ARTICLE SIX
DIVIDENDS AND FINANCES
Section 6-1. Dividends. Dividends may be declared and paid out of any funds
legally available therefor under the laws of Colorado, as may be deemed
advisable from time to time by the Board of Directors of the corporation. Before
declaring any dividends, the Board may set aside out of net profits or earned or
other surplus such sums as the Board may think proper as a reserve fund to meet
contingencies or for other purposes deemed proper and to the best interests of
the corporation.
Section 6-2. Monies. The monies, securities, and other name of the
corporation in such banks or trust companies as the Board of Directors shall
designate and shall be drawn out or removed only as may be authorized from time
to time by the Board of Directors.
ARTICLE SEVEN
CORPORATE SEAL
The seal of the corporation shall be circular in form and bear the name of
the corporation and the word "seal." The seal may be used by causing it to be
impressed directly on the instrument or writing to be sealed, or upon an
adhesive substance affixed thereto. The seal on the certificates for shares or
on any corporate obligation for the payment of money may be a facsimile,
engraved or printed.
ARTICLE EIGHT
EXECUTION OF INSTRUMENTS
All corporate instruments and documents shall be signed or countersigned,
executed, verified or acknowledged by such officer or officers or other person
or persons as the Board of Directors may from time to time designate.
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ARTICLE NINE
ORDER OF BUSINESS
At all meetings of shareholders or of the Board of Directors, the order of
business, as far as practicable, shall be as follows:
1. Roll call and certifying proxies.
2. Proof of notice of meeting or waiver of notice.
3. Reading and approval of unapproved minutes.
4. Reports of officers and committees.
5. Election of officers or directors.
6. Unfinished business.
7. New business.
8. Adjournment.
ARTICLE TEN
REFERENCES TO ARTICLES OF INCORPORATION
Reference to the Articles of Incorporation in these Bylaws shall include
all amendments thereto or changes thereof unless specifically excepted.
ARTICLE ELEVEN
INDEMNIFICATION AND RELATED MATTERS
Section 11-1. Power to Indemnify -- Third Party Actions. The corporation
shall have power to indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation). This power to indemnify shall
arise only by reason of the fact that the person is or was a director, officer,
employee, fiduciary or agent or is or was serving at the request of the
corporation as a director, officer, employee, fiduciary or agent of another
corporation, partnership, joint venture, trust or other enterprise. The
corporation shall have the power to indemnify against expenses (including
attorney fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, if he had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not of itself create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, that he had reasonable cause to believe that his
conduct was unlawful.
Section 11-2. Power to Indemnify -- Actions Brought in the Right of the
Corporation. The corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee, fiduciary or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee, fiduciary or
agent of another corporation, partnership, joint venture, trust or other
enterprise. The corporation shall have the power to indemnify against expenses
(including attorney fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation. No indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
or liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.
9
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Section 11-3. Right to Indemnification. To the extent that a director,
officer, employee or agent of the corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 11-1 and 11-2, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 11-4. Determination of Entitlement to Indemnification. Any
indemnification under Sections 11-1 and 11-2 (unless ordered by a court) shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Sections 11-1 and 11-2. Such determination shall be made
(1) by the Board of Directors by a majority vote of a quorum consisting of
Directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the shareholders.
Section 11-5. Advancement of Expenses. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding as
authorized in the manner provided in Section 11-4 upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the corporation as authorized in this Article.
Section 11-6. Savings Clause. The indemnification provided by this Article
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs and legal representatives of such a person.
Section 11-7. Insurance. The corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article.
Section 11-8. Disallowed Deductions. With respect to any payment made by
the Corporation to any employee or any officer of the Corporation for
compensation, bonus, interest, rent, travel, entertainment or other expenses
incurred by such employee or officer that is determined to be excessive,
unreasonable or otherwise unallowable, in whole or in part as a tax deductible
expense by any governmental agency, such employee shall have an unconditional
obligation to reimburse the Corporation to the full extent of such unallowable
expense. In lieu of payment by the officer, subject to the determination of the
directors, proportionate amounts may be withheld from his future compensation
payments until the amount owed to the corporation has been recovered.
10
<PAGE>
ARTICLE TWELVE
FISCAL YEAR
The fiscal year of the corporation shall be designated by the Board of
Directors.
ARTICLE THIRTEEN
BYLAW AMENDMENTS
The Bylaws may be amended, repealed or adopted by the majority vote of the
Board of Directors at any regular or special meeting.
DATE ADOPTED: , 19 .
---------------------- --
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