SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (section) 240.14a-11(c) or (section)
240.14a-12
INTERNATIONAL MERCANTILE CORPORATION
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(Name of Registrant as Specified in Its Charter)
INTERNATIONAL MERCANTILE CORPORATION
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No filing fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11.
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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INTERNATIONAL MERCANTILE CORPORATION
1801 GOLD MINE ROAD,
BROOKEVILLE, MARYLAND 20814
SPECIAL MEETING OF SHAREHOLDERS
MARCH 12, 1999
INFORMATION STATEMENT
GENERAL INFORMATION
This Information Statement is furnished to the Shareholders of
International Mercantile Corporation (the "Company", or "IMTL") in connection
with the Special Meeting of Shareholders to be held on Friday, March 12, 1999,
at 10:00 a.m. at the IMTL offices, 7979 Old Georgetown Road, Bethesda, Maryland
20814, or at any adjournment or adjournments of such meeting, for the purposes
set forth in the accompanying Notice of Annual Meeting of Shareholders. This
Information Statement is being mailed to Shareholder on or about February 26,
1999.
RECORD DATE AND VOTING RIGHTS
Only Shareholders of record at the close of business on February 1, 1999,
are entitled to notice of, and to vote at, the Annual Meeting of Shareholders.
On the record data, there were 3,074,615 shares of Class "A" Common Stock and
1,000,000 shares of Class "B" Common Stock of the Company ("Shares") issued and
outstanding and entitled to vote at the Annual Meeting.
At the Annual Meeting, each holder of Class "A" Common Stock is entitled to
one (1) vote for each Share held and each holder of Class "B" Common Stock is
entitled to fifty-one (51) votes for each share of record on all matters to come
before the meeting.
The issue of a reverse split of the Company's Class "A" Common Stock on a 5
to 1 basis requires a majority vote of all shares entitled to vote.
REVOCABILITY OF PROXY AND VOTING OF PROXY
Your proxy is not being sought by management of the Company. However,
shareholders may cast votes by executing a Proxy in form approved in advance by
the Company and delivering same to the Company at the following address no later
than March 10, 1999: International Mercantile Corporation c/o Craft Fridkin &
Rhyne, Attn: Arthur E. Fillmore, 1100 One Main Plaza, 4435 Main Street, Kansas
City, Missouri 64111. Any Proxy may be revoked by the person giving it at any
time before it is exercised. A Proxy may be revoked by the giving of another
Proxy bearing a later date or by notifying the Secretary of the Company in
writing of such revocation at any time before the proxy is exercised. Any Proxy
delivered to the Company will, unless it is revoked or unless it is received in
such form as to render it invalid, be voted in accordance with the instructions
indicated thereon.
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The Proxy may confer discretionary authority with respect to the voting of
the Shares represented thereby on any other business that may properly come
before the meeting or any adjournment thereof. The Board of Directors is not
aware that any such other business is to be presented for action at the meeting
and does not itself intend to present any such other business; however, if any
such other business does come before the meeting, Shares represented by any such
Proxy conferring discretionary authority pursuant to this paragraph will be
voted by the person(s) named in the Proxy in accordance with their best
judgement.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of December 29, 1998, the only persons
known to the Company to be the beneficial owners of more than five percent (5%)
of the outstanding number of Shares of the Company:
<TABLE>
<CAPTION>
Amount & Equity Voting
Title Nature of Percent Percent
of Name and Address of Beneficial of of
Class Beneficial Owner Ownership (1) Class Class
- ----- ---------------- ------------- ----- -----
<S> <C> <C> <C> <C>
Class "A" Continent Finance 200,000 6.5% 6.5%
Common Corporation
Class "B" Continent Finance 1,000,000 100% 100%
Common Corporation
Class "A" Urban Agriculture 300,000 9.76% 9.76%
Common Network
Class "A" AB Securities, Inc. 310,000 10.08% 10.08%
Common
Class "A" Scott Hess 310,000 10.08% 10.08%
Common
Class "A" Vinny Pazlenza 220,000 7.16% 7.16%
Common
</TABLE>
(1) To the best knowledge of the Company, as of December 31, 1999, such holders
had the sole voting and investment power with respect to the voting securities
of IMC beneficially owned by them, unless otherwise indicated by footnote. In
July, 1997 the Company reverse split the number of shares of common stock
outstanding in a ratio of 31 to 1, restating the number of shares of common
stock outstanding to 101,083.
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REVERSE SPLIT OF THE SHARES OF THE COMPANY'S
CLASS "A" COMMON STOCK
July, 1997, the Company underwent a reverse split of the stock, in which 31
shares of Common Stock previously held were exchanged for one share of newly
issued common stock. The purpose of this transaction was to reduce the public
"float" of Company's stock and to increase tradeability of the Company's common
shares.
At the Company's Annual Shareholders meeting on September 11, 1998, the
Shareholders authorized the creation of new classes of stock. The stock which
was formerly classified as Common Stock was reclassified as Class "A" Common
Stock. A new class of Common Stock was created, with superior voting rights.
Each share of Class "B" Common Stock entitles the holder to 51 votes per share,
while each holder of Class "A" Common Stock has one vote per share.
Subsequent to the Annual Shareholder Meeting, Continent Finance Corporation
was authorized to receive one million shares of Class "B" Common Stock in
exchange for one million shares Class "A" Common Stock which it previously held.
Continent Finance Corporation is controlled by a trust established for the
family of Frederic Richardson, the Chairman of the Company. The purpose of this
exchange was to maintain voting control with management as management enters
into negotiations with other companies for mergers and acquisitions utilizing
Class "A" Common Stock. The exchange has not been effectuated as of this date.
Management now proposes that Class "A" Common Stock be reverse split so
that a current holder of five shares of Class "A" Common Stock, formerly know as
the Company's Common Stock, would be exchanged for one share of Class "A" Common
Stock. All fractional shares will be rounded up to the next whole share. The
purpose of the reverse split is to increase investor interest the Company's
stock and to support an increased trading price in the over-the-counter market.
The Company has been engaging in mergers and acquisition activity to
increase the asset base and the cash flow of the Company. See Subsequent Events
herein. Additionally, the Company is undergoing a private placement of its Class
"A" Common Stock in which one million shares of Class "A" Common Stock, along
with one million shares of convertible Series "1" Preferred Stock, will be
issued.
Management of the Company hopes that the reduction of the number of Class
"A" Common shares trading over-the-counter will increase market value and
trading value of the Company's Class "A" Common Stock, thereby making such stock
more desirable both to individual and institutional investors and to holders of
shares of stock of companies that the Company may wish to acquire.
Following the reverse split of the Common Stock, the Company intends to
issue two special dividends of stock to its shareholders.
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The first special dividend of Class "A" Common Stock will be given to those
Shareholders who were shareholders as of August 5, 1997, the day before which
the Company reverse split its stock on a 31 to one basis. Each shareholder of
record on that day will be issued 1,000 shares of post five to one reverse split
Class "A" Common Stock, regardless of the number of shares held prior to the
reverse split. Such stock will subject to the various holding and trading
restriction of Rule 144. In general, the stock will not be tradeable in public
markets for a period of one year and will be subject to certain volume trading
restrictions. The purpose of the special dividend to these shareholders is to
increase their number of shares held to reward their investment in the Company
over a period of years.
A second dividend will be issued to Shareholders who participated in
private placement of the Company common stock in November, 1997. The
Shareholders were given a right to have their stock registered no later than
November, 1998. Because the Company has not registered these shares, the Company
will issue to each shareholder 1,000 shares of post 5 to 1 reverse split Class
"A" Common Stock. The newly issued shares of Class "A" Common Stock will be
subject to the holding and trading restrictions of Rule 144. In general, the
stock will not be tradeable in public markets for a period of one year and will
be subject to volume trading restrictions. The purpose of this special dividend
is to compensate for the Company's inability to register these shares in a
timely manner.
BOARD COMMITTEES AND MEETING OF THE BOARD OF DIRECTORS
The Company has a new Board of Directors elected at the Annual Meeting of
the Shareholders held on September 11, 1998. The board currently consists of Mr.
Frederic Richardson, Mr. M. Scott Hess, Mr. Max Apple, Esq., Mr. Walter DeRonde,
Mr. Ed Hutya. The Company has an Executive Committee which, pursuant to the
Company Bylaws, may exercise any and all of the powers of the Board of Directors
in the management of the business and affairs of the Company to the extent
authorized by the Board of Directors. The Executive Committee has three (3)
members: Frederic Richardson, Ed Huyta, and M. Scott Hess.
The Company does not have a nominating committee. Nominees for Director are
recommended by the Executive Committee to the Board of Directors for approval
and submission at the Annual Shareholders Meetings.
EXECUTIVE COMPENSATION
The following sets forth the cash compensation, including bonuses and deferred
compensation, paid during 1997 to those executive officers which compensation
exceeded $60,000 and to all executive officers as a group for services rendered
in all capacities to the Company
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a. Employment Agreement with Mr. Walter Deronde
On January 1, 1997, the Company entered into an employment agreement with
Mr. Walter Deronde as Treasure and Vice President for an annual salary of
$120,000. In addition, Mr. Deronde is responsible for evaluating merger and
acquisition candidates in the mortgage banking industry.
For the year ending December 31, 1997, the Company had accrued $120,000 in
salary.
b. Employment Agreement with Mr. Max Apple
On May 1, 1995, the Company entered into an employment agreement with Mr.
Max Apple as Chairman for an annual salary of $120,000 per annum and
reimbursement of all "out-of-pocket" expenses.
For the year ending December 31, 1997, the Company had accrued $120,000 in
salary.
c. Financial Consulting Agreement
On May 1, 1995, the Company entered into a financial consulting agreement
with Frederic Richardson for a monthly fee of $10,000 per month and
reimbursement of all out-of-pocket expenses. In October of 1997 Mr Richardson
assigned his contract to FSR Group . The term of this agreement is 10 years and
is renewable. From time to time, FSR has engaged in business transactions with
affiliates of the placement agent, including a loan to a corporate stockholder
of the placement agent.
For the year ending December 31, 1997, the Company had accrued $120,000.
d. General
Except as set forth above no cash compensation, including bonuses and
deferred compensation, was paid during 1997 by IMC to any of its executive
officers. No fees were paid to Board members for attending Board meetings during
1997. Shares of the Company's common stock may be issued to its officers
representing the fair market value of services actually rendered by them with
out pay and as reimbursement for expenses actually incurred by them in the
performance of their duties as officers of the Company.
RELATED PARTY TRANSACTIONS
a. Issuance of Shares of Capital Stock
The company issued 1,500,000 shares of common stock to Continent Finance
Corporation ("CFC") to acquire University Mortgage, Inc. ("UMI") and Home
America Mortgage Company ("HAMC").
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HAMC was a former indirect subsidiary of the Company through Frontier Insurance
Company ("FIC"). On November 17, 1995, the Company sold FIC and retained its
interest in HAMC. In 1996, the Company sold HAMC to CFC in consideration for the
forgiveness of certain debt and cash. On December 25, 1996, HAMC was sold by CFC
to University Mortgage, Inc. ("UMI") and in January, 1997, the transaction with
UMI was rescinded with HAMC being returned back to CFC. On August 1, 1997, the
Company acquired UMI and reacquired HAMC from CFC.
CFC is the majority shareholder of the Company.
The Company issued 60,000 shares of common stock to Ed Huyta, a Director,
in consideration for the forgiveness of debt arising from expenses paid on
behalf of the Company aggregating $60,000,
The Company has issued an aggregate of 200,000 shares of common stock to
Ventana Consulting, Inc., a Michigan corporation.
b. Due to Related Parties
Certain officers and consultants of the Company paid expenses in the amount
of $180,263 on behalf of the Company during 1995. This amount is due on demand
and bears no interest. All expenses incurred during 1996 were paid by the
officers of the Company who waived reimbursement.
c. Employment Agreement with Mr. Walter Deronde
On January 1, 1997, the Company entered into an employment agreement with
Mr. Walter Deronde as COO, Treasurer and Vice President for an annual salary of
$120,000. In addition, Mr. Deronde is responsible for evaluating merger and
acquisition candidates in the mortgage banking industry.
For the year ending December 31, 1997, the Company had accrued $120,000 in
salary.
d. Employment Agreement with Mr. Max Apple
On May 1, 1995, the Company entered into an employment agreement with Mr.
Max Apple as Chairman for an annual salary of $120,000 per annum and
reimbursement of all "out-of-pocket expenses".
For the year ending December 31, 1997, the Company had accrued $120,000 in
salary.
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e. Financial Consulting Agreement
On May 1, 1995, the Company entered into a financial consulting agreement
with Frederic Richardson for a monthly fee of $10,000 per month and
reimbursement of all "out-of-pocket expenses". The contract was assigned to FSR
Group in October 1997. The term of this agreement is 10 years and is renewable.
For the year ending December 31, 1997, the Company had accrued $120,000.
f. Capital contribution
On August 15, 1997, AB Securities, Inc., ("ABS"), contributed to UMI
1,000,000 shares of common stock of Global Link Technology, which is traded on
the NASDAQ Bulletin Board with the trading symbol GLTK. The Market price at the
date of contribution and at December 31, 1997 was $0.08 per share.
g. Loans Payable- Affiliated Companies
UMI has Loans receivable - affiliated parties from W-C Consultants, Inc.
aggregating $292,091 at December 31, 1997.
h. Managerial Relationship
On January 1, 1997, the UMI entered into an agreement with James E. Clare,
Donald E. Wolpe and W-C Consultants, Inc., (collectively referred to as "W-C"),
whereby W-C will participate in the management of the UMI's licensed branch at
5480 Wisconsin Avenue, Chevy Chase, Maryland. W-C's sole shareholder is Jeffrey
A. Wolpe who is also Vice President/Counsel to UMI. W-C's Chairman, Donald E.
Wolpe, (Jeffrey A. Wolpe's father) and W-C's President, James E. Clare,
represent UMI as branch managers. For the year ending December 31, 1997, W-C
received $377,970, which was charged to operations.
i. Sublease Agreement
On July 1, 1996, UMI entered into a lease agreement with W-C for the lease
of approximately 1,322 square feet of office and storage space from Highland
House Limited Partnership at Highland House, 5480 Wisconsin Avenue, Suite LL-4,
Chevy Chase, Maryland 20815 at a monthly rental of $1,665 for a term ending
September 30, 1997. On October 1, 1997, the lease agreement was extended to
September 30, 2000 with a monthly rental of $1,766.
For the year ended December 31, 1997, rent expense was $21,483.
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j. Change in Managerial Control
As of December 31, 1997, the Company acquired all of the issued and
outstanding capital stock of the UMI, This acquisition enables the Company to
have majority managerial and financial control in the decision making process of
the UMI.
k. Loan to First Liberty
A group of investors known to Frederic Richardson loaned money to CE
Enterprises, an affiliate of First Liberty. First Liberty, in an unrelated
transaction agreed as an investment baker to place a private placement
memorandum on behalf of The Company. When CE failed to repay the loan in a
timely fashion, Mr. Richardson repaid a portions of the First Liberty loan. The
investors and Mr. Richardson are still unpaid, and the private placement has not
been completed.
l. Change in Equity Ownership
1. On December 25, 1996, UMI acquired all of the issued and outstanding
capital stock of HAMC from CFC in consideration for the issuance of 10,000
shares of nonvoting convertible Class A Preferred stock by the UMI.
2. On January I, 1997, pursuant to an agreement by and between ABS and
University Consulting, Inc. ("University Consulting"), both Maryland
corporations owned and controlled by M. Scott Hess, University Consulting
exchanged 1,000 shares of the Company's common stock in settlement for a note
payable to AB Securities.
3. In January, 1997, an agreement was executed by and between the UMI and
CFC, whereby CFC caused to be issued 100,000 shares of common stock of the
Company valued at $5.00 per share in consideration for all of the issued and
outstanding capital stock of HAMC with a book value of $471,637. The recording
of the transaction realized a gain of $28,363.
4. On May 14, 1997, the UMI, CFC and ABS entered into an "Agreement and
Plan of Reorganization" whereby CFC exchanged all of the issued and outstanding
Class A preferred shares of the UMI to AB Securities for 10,500 shares of
preferred stock of ABS.
5. On December 31, 1997, the UMI was party to an agreement by and between
the Company and ABS controlled by M. Scott Hess, President of UMI and President
of ABS. ABS exchanged all of the UMI's issued and outstanding stock to the
Company for 175,00 shares of the Company's common stock valued at $385,000 or
$2.20 per share.
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6. Pursuant to a resolution of the Board of Directors at the Annual Meeting
on September 11, 1998, the Company agreed to exchange one million shares of its
newly authorized Class "B" Common Stock for one million shares of newly
designated Class "A" Common Stock held by a trust controlled by Frederick
Richardson, newly appointed Chairman of the Company. Class "B" Common Stock has
a right to 51 votes per share. Accordingly, the one million shares owned by Mr.
Richardson have voting control of the Company.
SUBSEQUENT EVENTS
As reported on Form 8-K filed with the Securities and Exchange Commission
on September 30, 1998, the Company has entered into agreements to purchase the
stock and assets of two companies. In the first transaction, the Company issued
three million shares of Series "2" Preferred Stock to Oxford International in
exchange for three million dollars in publicly traded securities. The Series "2"
Preferred Stock bears a dividend of 6%, which dividend is payable in the
Company's Class "A" Common Stock. Subsequently, on December 2, 1998, The Company
loaned the publicly traded but restricted securities to Oxford International and
received therefore a Promissory Note in the principal amount of $3,000,000,
bearing interest at the rate of 8% per annum, due in full December 15, 1999. The
Promissory Note was collateralized by the securities.
In the second transaction, the Company would acquire 100% of the
outstanding stock of Union Express Mortgage Corporation in exchange for 400,000
shares of Class "A" Common Stock. This transaction as originally contemplated
has been terminated. A new transaction is currently being negotiated.
Details of these transactions, including copies of purchase agreements, can
be found in the referenced 8-K.
SHAREHOLDER PROPOSALS
Written recommendations to the Board of Directors from Shareholders of the
Company will be considered by the Executive Committee if received in writing by
the Secretary of the Company on or before March 10, 1999.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The independent certified public accounting firm of Thomas P. Monaghan, C.P.A.,
examined the financial statements of the Company. It is not anticipated that a
representative from the said firm will be present at the Shareholders' Meeting.
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OTHER MATTERS
The management of the Company knows of no other matters that may come before the
meeting. However, if any matters other than those referred to herein should
properly come before the meeting, it is intention of management to vote on such
matters in accordance with their best business judgment.
FINANCIAL STATEMENTS
The Annual Report to Shareholders covering the fiscal year ended December 31,
1998, is enclosed herewith.
BY THE ORDER OF THE BOARD OF
DIRECTORS OF INTERNATIONAL
MERCANTILE CORPORATION
/s/ Frederic Richardson
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Chairman of the Board
Kansas City, Missouri
January ____, 1999
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