U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended May 31, 1999
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934 for the transition period from . . . . to . . . .
Commission file number 0-26578
LANDMARK INTERNATIONAL, INC.
Exact name of small business issuer as specified in its charter)
Nevada 33-0662114
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1720 East Garry, Suite 201, Santa Ana, California 92705
(Address of principal executive offices) (Zip Code)
(949) 475-4500
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all the reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past twelve 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.
The number of shares of common stock outstanding as of May 31, 1999 is
25,386,666.
Transitional Small Business Disclosure Format (check one): Yes ... No .X.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
LANDMARK COMMUNICATIONS INC.
Balance Sheet (Unaudited)
For the periods ended as indicated
Aug. 31, May 31,
ASSETS 1998 1999
Cash 3,772 10,168
Accounts Receivable 98,352 78,372
Employee Advances 0 845
Due from Officers 0 0
Deferred tax assets 1,900 1,900
Total Current Assets 104,024 91,285
Equipment 147,058 147,058
Accumulated Depreciation (3,897) (12,663)
Total Equipment less
Accumulated depreciation 143,161 134,395
Total Assets 247,185 225,680
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable 81,189 141,371
Accrued payroll taxes 8,089 2,963
Accrued income taxes 2,000 2,000
Capitalized lease obligations due
within one year 39,182 39,182
Loans from officers 0 20,000
Total current liabilities 130,460 205,516
Capitalized Lease LT 79,778 54,447
Stockholders' equity
Paid in capital 88,942 128,942
Retained Earnings (40,776) (51,995)
Current Years Earnings (11,219) (111,231)
Total Stockholders Equity 36,947 (34,284)
Total Stockholders Equity and
Liabilities 247,185 225,680
LANDMARK COMMUNICATIONS INC.
Statement of Operations (Unaudited)
For the periods ended as indicated
Three Months Nine Months
Ended May 31, Ended May 31,
1998 1999 1998 1999
Sales 119,203 308,556 257,533 546,945
Cost of Sales 7,365 141,932 7,365 212,242
Gross Profit 111,838 166,624 250,168 334,703
Selling Expense 29,298 98,486 83,052 255,213
General and administrative
Expenses 47,455 74,013 160,708 180,910
Gain or (loss) from
Operations 35,085 (5,875) 6,408 (101,420)
Interest, net 575 3,926 575 9,811
Gain or (loss) before
Provision for income
Taxes 34,510 (9,801) 5,833 (111,231)
Provision for income taxes 0 0 0
Net gain or (loss) 34,510 (9,801) 5,833 (111,231)
LANDMARK COMMUNICATIONS INC.
Statement of Cash Flows (Unaudited)
For the periods ended as indicated
Nine Months
Cash flows from operating activities: Ended May 31,
1998 1999
Net gain or (loss) 5,833 (111,231)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 974 8,766
Deferred Income Taxes 0 0
Changes in assets and liabilities
Accounts Receivable (32,764) 19,980
Employee Advances (5,668) (845)
Due to/from officers 1,000 20,000
Accounts Payable 9,202 60,183
Accrued payroll related
Liabilities (259) (5,126)
Accrued income taxes 0 0
(21,683) (8,272)
Cash flows from investing activities
Purchase of capital equipment 2,523 0
Cash flows from financing activities
Repayment of capitalized lease
Obligations (9,606) (25,331)
Proceeds from common stock 40,200 40,000
30,594 14,669
Net increase (decrease) in cash 6,388 6,397
Cash at beginning of periods 5,410 3,772
Cash at end of periods 11,798 10,168
LANDMARK COMMUNICATIONS INC.
Notes to Financial Statements (Unaudited)
For the Nine Months Ended May 31, 1999
1. Basis of Presentation and Summary of significant accounting policies
The unaudited interim condensed financial statements and related notes have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. In the opinion of management, all
adjustments, consisting of normal recurring adjustments necessary for a fair
presentation of the financial position, and the results of operations and
cash flows for the interim periods presented have been made. Due to
seasonality of the Company's operations and unsettled transactions, the
results of operations and cash flows for the interim periods presented may
not be indicative of total results for the full year.
The accompanying condensed financial statements and related notes should be
read in conjunction with the Company's audited financial statements included
in its Annual Report on Form 10-KSB for the year ended August 31, 1998. The
results of operations for the nine months ended May 31, 1999 are not
necessarily indicative of the results to be expected for the full calendar
year.
2.Nature of Business and Summary of Significant Accounting Policies
Nature of Business: Landmark International, Inc. (the "Company") is a Nevada
Corporation engaged in providing communication services to individuals and
businesses.
Equipment: Equipment is carried at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the depreciable
assets, which range from three to seven years.
Equipment under capitalized lease obligations are carried at estimated fair
market value determined at the inception of the lease. Amortization is
computed using the straight-line method over the original term of the lease
or the estimated useful lives of the assets, whichever is shorter.
Reporting Comprehensive Income: In June 1997, Statement of Financial
Accounting Standards ("SFAS") No. 130, " Reporting Comprehensive Income" was
issued, which established standards for reporting and display of
comprehensive income and its components as separate amounts in the financial
statements. Comprehensive income includes all changes in equity during a
period of an enterprise that results from recognized transactions and other
economic events other than transactions with owners. This statement requires
all items that are to be recognized under accounting standards as components
of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. This
statement affects only financial statement presentation. As of May 31, 1999,
the Company does not carry any items required to be disclosed as other
comprehensive income in accordance with the statement.
Revenue Recognition: Fees for services are recognized at month-end as
services are completed and income earned.
Advertising: The Company expenses the cost of advertising as selling
expenses as incurred. Advertising expenses was approximately $1698 for the
nine month period ended May 31, 1999.
Income Taxes: Income taxes are accounted for and reported using an asset and
liability approach. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax basis of
assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to effect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change during the year
in deferred tax assets and liabilities.
Net loss per common share: Net loss per share is computed by dividing net
loss by the weighted average number of common shares outstanding during the
period. The weighted average number of common stock shares outstanding was
25,386,666 for the three month period ending May 31, 1999. Stock options
outstanding are not considered to be common stock equivalents, as the affect
on net loss per common share would be anti-dilutive.
Concentration Risk: The Company grants credit to customers in the Southern
portion of the State of California. The Company's ability to collect broker
fees and to fund borrower's transactions are affected both by economic
fluctuations in the geographic areas served by the Company.
Risks and Uncertainties: The process of preparing financial statements in
conformity with generally accepted accounting principles requires the use of
estimates and assumptions regarding certain types of assets, liabilities,
revenues and expenses. Management of the Company has made certain estimates
and assumptions regarding the collectibility of accounts receivable. Such
estimates and assumptions primarily relate to unsettled transactions and
events as of the date of the financial statements. Accordingly, upon
settlement, actual results may differ from estimated amounts.
Recently Issued Accounting Pronouncements:
Accounting for Derivative Instruments and Hedging Activities: In June 1998,
SFAS No. 133, " Accounting for Derivative Instruments and Hedging Activities"
was issued. The Statement requires that all derivatives be carried on the
balance sheet at fair value and changes in the fair value of derivatives be
recognized in income when they occur, unless the derivatives qualify as
hedges in accordance with the standard. If a derivative qualifies as a
hedge, a company can elect to use hedge accounting. The type of accounting
to be applied varies depending on the nature of the exposure that is being
hedged, and the standard defines three hedge risks: change in fair value,
change in cash flows and change in foreign currency.
A fair-value hedge represents the hedge of an exposure to changes in the fair
value of an asset, liability or an unrecognized firm commitment. Changes in
fair value hedges are recognized in earnings, as well as the gain or loss on
the hedged item attributable to the hedged risk. Certain criteria must be
met in order for a hedging relationship to qualify as a fair-value hedge.
A cash-flow hedge is a hedge of an exposure to variability in cash flows that
is attributable to a particular risk. That exposure may be associated with
an existing recognized asset or liability or a forecasted transaction. The
effective portion of a hedging instrument's gain or loss is initially
reported as a component of other comprehensive income and is reclassified as
a component of earnings in the same period or periods during which the hedge
forecasted transaction affects earnings. As in fair value hedges, certain
criteria must be met in order for a hedging relationship to qualify as a
cash-flow hedge.
A foreign-currency hedge can be a fair-value hedge or a cash-flow hedge of
the foreign currency exposure, therefore it follows the same principles as
those that apply to the accounting for non-foreign hedges with some
particularities defined in the statement.
This statement is effective for the year beginning after September 1, 1999
and cannot be applied retroactively. Management believes that the adoption
of this statement will not have a material effect on the Company's financial
position or results of operations.
Accounting for the Cost of Computer Software Developed for Internal Use: In
March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, " Accounting for the Cost of Computer Software
Developed for Internal Use" ("SOP 98-1"), which will become effective for
financial statements for the year beginning September 1, 1999, with early
adoption encouraged. SOP 98-1 requires the capitalization of eligible costs
of specified activities related to computer software developed or obtained
for internal use. Management does not believe the impact of adoption will
have a material effect on the Company's financial position or results of
operations.
2. Business Combination:
Effective June 1, 1999, the Company acquired Mobilenetics Corporation
("Mobilenetics"), a supplier of communications equipment. The Company issued
10,000,000 shares of its common stock exchange for all of the outstanding
shares of Mobilenetics. When completed, the acquisition will be accounted
for as a purchase. The excess purchase price, if any, over the estimated
fair value of the assets of Mobilenetics will be amortized using the
straight-line method over five years.
The following unaudited pro forma summary presents the consolidated financial
position and results of operations of the Company as if the business
combination occurred on September 1, 1998:
As of May 31, 1998:
Tangible current assets $ 155,108
Total assets 261.933
Current liabilities 503,668
Total liabilities 520,738
Total stockholders' equity (258,805)
For the nine months ended May 31, 1998:
Net sales 1,075,218
Net (loss) (461,768)
(Loss) per share (.02)
The above amounts are based upon certain assumptions and estimates which the
Company believes are reasonable. The pro forma financial position and
results of operations do not purport to be indicative of the results which
would gave been obtained had the business combination occurred as of
September 1, 1998 or which may be obtained in the future.
3. Capitalized Lease Obligations:
The Company leases equipment under non-cancelable lease agreements.
Equipment under lease agreements aggregated at May 31, 1999 $129,929, less
accumulated amortization at May 31, 1998 of $12,663.
Aggregate future minimum lease payments and the present value of minimum
lease payments are as follows:
Years ending August 31,
1999 $ 53,381
2000 53,381
2001 35,588
Total minimum lease payments 142,350
Less amount representing interest 23,390
Present value of minimum lease payments 118,960
Less amounts due within one year 39,182
Long-term capitalized lease obligations $ 79,778
4. Income Taxes
The components of the provision (benefit) for income taxes are as follows for
the nine month period ended May 31, 1999:
Federal:
Current $ 1,500
Deferred - net operating loss carryover (1,600)
(100)
State of California:
Current 500
Deferred - net operating loss carryover (300)
200
Provision for income taxes $ 100
Reconciliation of income taxes computed at the federal statutory rate to the
provision for income taxes is as follows for the nine month period ended May
31, 1999:
Tax at statutory rates $ (1,600)
Differences resulting from state tax,
net of federal benefit, and
non-deductible and other items 1,700
Effective $ 100
Item 2. Management's Discussion and Analysis or Plan of Operation
Forward Looking Statements
This discussion may contain statements that could be deemed forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act
of 1934 and the Private Securities Litigation Reform Act, which statements
are inherently subject to risks and uncertainties. Forward-looking statements
are statements that include projections, predictions, expectations or beliefs
about future events or results or otherwise are not statements of historical
fact.
Such statements are often characterized by the use of qualifying words (and
their derivatives) such as "expect," "believe," "estimate," "plan,"
"project," "anticipate," or other statements concerning opinions or judgment
of the Company and its management about future events. Factors that could
influence the accuracy of such forward-looking statements include, but are
not limited to, the financial success or changing strategies of the Company's
customers, actions of government regulators, the level of market interest
rate and general economic conditions. All forward-looking statements included
herein are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward-looking
statements. It is important to note that the Company's actual results could
differ materially from those in such forward-looking statements due to the
factors cited above. As a result of these factors, there can be no assurance
the Company will not experience material fluctuations in future operating
results on a quarterly or annual basis, which would materially and adversely
affect the Company's business, financial condition and results of operations.
Results of Operations
The Company's operating results have fluctuated in the past and may in the
future fluctuate significantly, depending upon a variety of factors,
including the timely deployment and expansion of new network architectures,
the incurrence of related capital costs, variability and length of the sales
cycle associated with the Company's product and service offerings, the
receipt of new value-added network services and consumer services
subscriptions and the introduction of new services by the Company and its
competitors. Additional factors that may contribute to variability of
operating results include: the pricing and mix of services offered by the
Company; customer retention rate; market acceptance of new and enhanced
versions of the Company's services; changes in pricing policies by the
Company's competitors; the Company's ability to obtain sufficient supplies of
sole- or limited-source components; user demand for network and Internet
access services; balancing of network usage over a 24-hour period; the
ability to manage potential growth and expansion; the ability to identify,
acquire and integrate successfully suitable acquisition candidates; and
charges related to acquisitions. In response to competitive pressures, the
Company may take certain pricing or marketing actions that could have a
material adverse affect on the Company's business. As a result, variations in
the timing and amounts of revenues could have a material adverse affect on
the Company's quarterly operating results. Due to the foregoing factors, the
Company believes that period-to-period comparisons of its operating results
are not necessarily meaningful and that such comparisons cannot be relied
upon as indicators of future performance. In the event that the Company's
operating results in any future period fall below the expectations of
securities analysts and investors, the trading price of the Company's common
stock would likely decline.
Revenue. Revenue totaled approximately $308,556 for the three
month period ended May 31, 1999, a 158% increase over revenue of
$119,203 for the three month period ended May 31, 1998.
This increase reflects growth in revenue from:
. the Company's broadened product offerings to its enterprise
customers, especially the shifting from reselling GTE services to
exclusively selling DSL and T-1 services.
. the Company's marketing arrangements with its strategic partners;
. continued growth in revenue derived from Internet access
customers;
Cost of Revenue. Cost of revenue consists primarily of personnel
costs to maintain and operate the Company's network, access charges from
local exchange carriers, backbone and Internet access costs, depreciation of
network equipment and amortization of related assets. Cost of revenue
increased for the three month period ended May 31, 1999 was approximately
$141,932, an increase of 1,827% from cost of revenue of $7,365 for the three
month period ended May 31, 1998. This increase is attributable to the shift
from reselling GTE services to exclusively DSL and T-1 services. In
addition, the increase in cost of revenue to the overall growth in the size
of the network and costs associated with operations. The Company expects its
cost of revenue to continue to increase in dollar amount, while declining as
a percentage of revenue as the Company expands its customer base.
Sales Expense. Sales expense consists primarily of personnel
expenses, including salary and commissions, and costs of for customer support
functions.
Marketing and sales expense was approximately $98,486 for the three month
period ended May 31, 1999 and $29,298 for the three month period ended May
31, 1998. The $69,188 increase in 1999 reflects an expansion of the sales
organizations necessary to support the Company's shift from reselling GTE
services to DSL and T-1 services. This increase also reflects a growth in
subscriber acquisition costs, related to both increased direct marketing
efforts as well as commissions paid sales staff. Sales expense as a
percentage of revenue increased to 32% for the three month period ended May
31, 1999 from 25% in the year earlier period as a result of the Company's
product shift. The Company expects sales expenditures to continue to increase
in dollar amount, but to decline as a percentage of revenue.
General and Administrative Expense. General and administrative
expense consists primarily of personnel expense, rent and professional fees.
General and administrative expense was approximately $74,013 for the three
month period ended May 31, 1999 and $47,455 for the three month period ended
May 31,
1998. This higher level of expense reflects an increase in personnel and
professional fees necessary to manage the financial, legal and administrative
aspects of the business. General and administrative expense as a percentage
of revenue declined to 24% for the three month period ended May 31, 1999 from
40% in the year earlier period as a result of the Company's increased
revenue.
The Company expects general and administrative expense to increase in dollar
amount, reflecting its growth in operations, but to decline as a percentage
of revenue.
Net Income Attributable to Common Stockholders. The Company's net
loss attributable to common stockholders was approximately $9,801 for the
three month period ended May 31, 1999 as compared to net income approximately
$34,510 for the three month period ended May 31, 1998.
The Company expects to focus in the near term on building and increasing its
revenue base, which will require it to significantly increase its expenses
for personnel, marketing, network infrastructure and the development of new
services, and may adversely impact short term operating results. As a result,
the Company believes that it will incur losses in the near term and we cannot
assure you that the Company will be profitable in the future.
Financial Condition
To date, the Company has satisfied its cash requirements primarily through
the debt financings and capitalized lease financings. The Company's principal
uses of cash are to fund working capital requirements and capital
expenditures, to service its capital lease and debt financing obligations,
and to finance and fund acquisitions. Net cash used by operations for the
nine month periods ended May 31, 1999 and 1998 was approximately $8,272 and
$21,683, respectively. Cash used for operating activities in the period
ending May 31, 1999 was primarily affected by the net loss from operations as
the company was expanding its market share and improving its infrastructure.
The net cash used from operations decreased for the period ending May 31,
1998 was the result of an increase in accounts receivable resulting from a
GTE sales promotion in April and May of 1998.
Net cash used in investing activities for the three month periods ended
May 31, 1999 and 1998 was approximately $2,523 and $0, respectively.
Net cash used in investing activities for the three month period ended May
31, 1999 consisted of $2,523 used for purchases of capital equipment to
support the Company's expanded network infrastructure.
The net cash increase for the three month period ended May 31, 1999 was
$6,397 as compared to a net cash increase for the three month period ended
May 31, 1998 of $6,388.
At May 31, 1999, the Company had cash and cash equivalents of approximately
$10,168, and negative working capital of $114,231. In May of 1999 the
President loaned the company $20,000 at 10% due in twelve months. The Company
anticipates that it will require additional financing on a continuing basis.
The Company will be required to raise such additional funds through public or
private financing, strategic relationships or other arrangements. We cannot
assure you that such additional funding, if needed, will be available on
terms attractive to the Company, or at all.
Year 2000 Compliance
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a result, date-
sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of normal business activities. The Company has reviewed
its products and services, as well as its internal management information
systems in order to identify and modify those products, services and systems
that are not year 2000 compliant.
Based on the Company's assessment to date, the Company has determined that
its internally developed software, including all of its operational,
financial and management information systems software is year 2000 compliant.
The Company's operational, financial and management information systems
software which have not been internally developed have been certified as year
2000 compliant by the third party vendors who have supplied the software.
The equipment and software that runs the Company's data centers are supplied
by Microsoft, Cisco Systems, and Intel Corporation. The Company has
implemented software patches supplied by Microsoft so that the Microsoft
software in these data centers no longer contains any material year 2000
deficiencies. The Company implemented similar patches for the software
supplied by Cisco Systems at the end of 1998. LMCI is building a new
communications network, and, as such, the company does not have a technology
infrastructure comprised of legacy software and systems. In building its
communications network, the company has adopted a strategy to select
technology vendors and suppliers that provide products that are represented
by such vendors and suppliers to be Year 2000 Ready. In negotiating its
vendor and supplier contracts, LMCI secures Year 2000 representations and
warranties that address the Year 2000 Readiness of the applicable product(s).
To date, the company has exclusively used equipment from Cisco Systems within
our network backbone, and Customer Premises Equipment (CPE) from both Cisco
Systems and Flowpoint / Cabletron. Both companies have provided the company
with sufficient Year 2000 readiness information and test results for the
equipment that we have purchased from these vendors. The company has tested
and validated the Year 2000 Readiness of the company Network and select
external systems, products, and facilities that are essential components in
the company's delivery of the Services by engaging in a product delivery
system tests. These system tests have been performed in a controlled, defined
laboratory environment utilizing procedures to replicate the end-to-end
delivery of Services. The Company does not separately track internal costs
incurred to assess and remedy deficiencies related to the year 2000 problem,
however, such costs are principally the payroll costs for its information
systems group. The Company does not have and is not developing a contingency
plan in the event its systems fail as a result of year 2000 related problems.
However, despite testing by the Company and its vendors, the Company's
products, services and systems may contain undetected errors or defects
associated with year 2000 date functions. In the event any material errors or
defects are not detected and fixed or third parties cannot timely provide the
Company with products, services or systems that meet the year 2000
requirements, the Company's operating results could be materially adversely
affected. Known or unknown errors or defects that affect the operation of the
Company's products, services or systems could result in delay or loss of
revenue, interruption of network services, cancellation of customer
contracts, diversion of development resources, damage to the Company's
reputation, and litigation costs. There can be no assurance that these or
other factors relating to year 2000 compliance issues will not have a
material adverse effect on the Company's business, operating results or
financial condition.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On June 1, 1999, the Company entered into a letter of intent to acquire
Mobilenetics Corporation ("Mobilenetics"), a supplier of communications
equipment, through the exchange of shares of newly issued Company common
stock for all of the outstanding shares of Mobilenetics. (See Notes to
Financial Statements).
June 30, 1999, the Company executed an investment banking agreement with
Haggerty-Stewart, a NASD broker/dealer. Under the terms of this agreement,
Haggerty-Steward is to be the exclusive Placement Agent for 120 days in
raising capital for the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Table:
2 Merger Agreement - Acquisition of Mobilenetics
10.3 Investment Banking Agreement
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter.
[Signatures]
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
LANDMARK INTERNATIONAL, INC.
(Registrant)
Date: 9/14/99
By:/s/_______________________________
William J. Kettle
Chairman and Chief Executive Officer
Date: 9/14/99
By:/s/_______________________________
John W. Diehl, Jr.
Chief Financial Officer and Treasurer
MERGER AGREEMENT
PREAMBLE
This Merger Agreement is made as of June 1, 1999, between Landmark
International, Inc. ("Buyer"), and MobileNetics Corporation a California
corporation ("Target").
[AGREEMENT
THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE ONE
MERGER AGREEMENT: EFFECT OF THE TRANSACTION; TERM
1. On the Effective Date, as defined in this Agreement, a merger shall take
place ("the Merger") whereby Target shall be merged with and into Buyer, and
Buyer shall be the Surviving Corporation. (The term "Surviving Corporation"
appearing in this Agreement denotes Buyer after consummation of the Merger.)
Buyer's corporate name, existence, and all its purposes, powers, and
objectives shall continue unaffected and unimpaired by the Merger, and as the
Surviving Corporation it shall be governed by the laws of the State of
California and succeed to all of Target's rights, assets, liabilities, and
obligations in accordance with the California General Corporation Law.
2. Consummation of the Merger shall be effected as soon as practicable after
all the conditions established in this Agreement have been satisfied, but in
no event later than June 1, 1999. The closing shall be held at 9:00 am., at
the offices of Landmark International, Inc., at 1720 E. Garry Street, Suite
201, Santa Ana, CA 92705, or at such other time and place as the parties may
agree. The time and date of closing are called the "Closing Date," and will
be the same day as the Effective Date.
3. The articles of incorporation of Buyer in effect on the Effective Date of
the Merger shall become the articles of incorporation of the Surviving
Corporation. From and after the Effective Date of the Merger, said articles
of incorporation, as they may be amended from time to time as provided by
law, shall be, and may be separately certified as, the articles of
incorporation of the Surviving Corporation.
4. The bylaws of Buyer in effect on the Effective Date of the Merger shall
be the bylaws of the Surviving Corporation until they are thereafter duly
altered, amended, or repealed.
5. The directors of Buyer on the Effective Date of the Merger shall be the
directors of the Surviving Corporation. They shall hold office until their
successors have been elected and qualified. The officers of Buyer on the
Effective Date of the Merger shall be the officers of Surviving Corporation.
Each shall hold office subject to the bylaws and the pleasure of the
directors of Surviving Corporation.
ARTICLE TWO
CONVERSION OF SHARES
1. On the Effective Date:
(a) Target's common stock, no par value, issued and outstanding immediately
before the Effective Date shall be converted into 10,000,000 shares of common
stock , .001 per value, of the Surviving Corporation;
(b) Each share of Buyer's common stock, .001 par value, issued and
outstanding immediately before the Effective Date (the "Buyer Common Stock"),
other than "dissenting shares" as defined in California Corporations Code
sections 1300-1312, shall by virtue of the Merger and without action on the
part of the shareholder be converted into the right to receive from and to be
paid by Buyer the following amounts per share:
2. On the Effective Date, the stock transfer books of Target shall be
closed, and thereafter no transfers of shares of Target Common Stock shall be
made or consummated.
3. Prior to or on the Effective Date:
(a) Target shall pay in cash to each holder of an outstanding option to
purchase shares of Target's stock, whether or not such option is then
exercisable, an amount equal to the excess, if any, of the per-share purchase
price under this Agreement over the per-share exercise price under each such
stock option, multiplied by the number of unexercised shares remaining
subject to such stock option; and
(b) Target shall thereupon cancel all stock options.
4. Notwithstanding anything in this Agreement to the contrary, a "dissenting
shareholder" who holds any of Target's "dissenting shares" (as those terms
are defined in California Corporations Code section 1300) outstanding
immediately prior to the Effective Date, and who has made and perfected a
demand for payment of the value of the shares ("Payment") in accordance with
California Corporations Code sections 1300-1312 ("dissenters' rights
statutes"), and who has not effectively withdrawn or lost the right to such
Payment, shall have, by virtue of the Merger and without further action on
the dissenting shareholder's part, the right to receive and be paid the
Payment and no further rights other than those provided by the dissenters'
rights statutes. Target shall give Buyer prompt written notice of all written
demands for payment, withdrawals of demand, and other written communications
received by Target pursuant to the dissenters' rights statutes. After the
amount of the Payment has been agreed upon or finally determined pursuant to
the dissenters' rights statutes, all dissenting shareholders entitled to the
Payment pursuant to the dissenters' rights statutes shall receive such
Payment from Target, and the dissenting shares shall thereupon be cancelled.
/ / / / /
ARTICLE THREE
TARGET'S REPRESENTATIONS AND WARRANTIES
1. Target represents and warrants to Buyer as follows:
2. Target is duly organized, validly existing, and in good standing under
the laws of California, and has the corporate power to own all of its
properties and assets and to carry on its business as it is now being
conducted. Target's board of directors has authorized the execution of this
Agreement, and Target has the corporate power and is duly authorized, subject
to the approval of this Agreement by its shareholders, to merge Buyer
Subsidiary into Target pursuant to this Agreement.
3. Target's authorized capital stock consists of _____________ shares of
common stock, without par value, of which _________________ shares are
issued and outstanding. All issued and outstanding shares have been validly
issued in full compliance with all federal and state securities laws, are
fully paid and nonassessable, and have voting rights. There are no
outstanding subscriptions, options, rights, warrants, convertible securities,
or other agreements or commitments obligating Target to issue or to transfer
from treasury any additional shares of its capital stock of any class.
4. The balance sheet ("Balance Sheet") of Target as of April 30, 1999
("Balance Sheet Date") and the related statement of profits and losses for
the year then ended, copies of which have been delivered by Target to Buyer,
fairly present the financial position of Target as of that date and the
results of operations for that year, and have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent
with that of preceding years.
5. Except as may be disclosed in the Schedules to be furnished pursuant to
this Agreement, and except for the lien for any current taxes or assessments
not yet delinquent, Target owns free and clear of any liens, claims, charges,
options, or encumbrances all of the property reflected on its books at the
Balance Sheet Date and all property acquired since that date, except such
property as has been disposed of in the ordinary course of business
consistent with prior practices of Target or with Buyer's written consent.
For purposes of this paragraph, a disposition of any single asset (other than
inventories) carried on the books of Target at more than $ 2,500.00 shall be
deemed to be a disposition not in the ordinary course of business.
6. The inventories of Target reflected on the Balance Sheet, as well as all
inventory items acquired since the Balance Sheet Date that are now the
property of Target, consist of materials, supplies, finished goods, of such
quality and in such quantities as are being used and will be usable or are
being sold and will be saleable in the ordinary course of the business of
Target. These inventories exclude scrap, slow-moving items, and obsolete
items, and are valued at the lower of cost or market value, determined in
accordance with generally accepted accounting principles consistently
applied. Since the Balance Sheet Date, Target has continued to replenish
these inventories in a normal and customary manner consistent with prudent
practice prevailing in the business.
7. No officer, director, or shareholder of Target has any interest in any
property, real or personal, tangible or intangible, including copyrights,
trademarks, or trade names, used in or pertaining to the business of Target.
8. There are no liabilities of Target other than the following:
(a) Liabilities disclosed or provided for in the Balance Sheet, including the
notes to the Balance Sheet;
(b) Liabilities disclosed in the Schedules furnished; or
(c) Liabilities incurred in the ordinary course of business since the Balance
Sheet Date, none of which has been adverse to the business of Target, and
none of which is attributable to any period prior to the Balance Sheet Date.
9. Since the Balance Sheet Date there has not been:
(a) Any change in the business, results of operations, assets, financial
condition, or manner of conducting the business of Target other than changes
in the ordinary course of business, none of which has had an adverse effect
on the business, results of operations, assets, financial condition, or
prospects of Target;
(b) Any damage, destruction, or loss (whether or not covered by insurance)
adversely affecting any aspect of the business or operations of Target;
(c) Any direct or indirect redemption or other acquisition by Target of any
of Target's shares of capital stock of any class, or any declaration, setting
aside, or payment of any dividend or other distribution in respect of
Target's capital stock of any class;
(d) Any increase in the compensation payable or to become payable by Target
or any Target Subsidiary to any of its officers, employees, or agents, other
than the normal increases granted in the ordinary course of business;
(e) Any option to purchase, or other right to acquire, stock of any class of
Target or granted by Target to any person;
(f) Any employment, bonus, or deferred compensation agreement entered into
between Target or any of its directors, officers, or other employees or
consultants;
(g) Any issuance of capital stock of any class by Target;
(h) Any indebtedness incurred by Target for borrowed money or any commitment
to borrow money entered into by Target or any guaranty given by Target; or
(i) Any amendment to Target's articles of incorporation or bylaws.
10. Target has obtained all necessary permits, licenses, franchises, and
other authorizations and have complied with all laws applicable to the
conduct of their business in the manner and in the areas in which business is
presently being conducted; and all such permits, licenses, franchises, and
authorizations are valid and in full force and effect. Target has not engaged
in any activity that would cause revocation or suspension of any such
permits, licenses, franchises, or authorizations; no action or proceeding
looking to or contemplating the revocation or suspension of any of them is
pending or threatened; and no approvals or authorizations will be required
after the consummation of the Merger to permit Surviving Corporation to
continue Target's business as presently conducted.
11. Target is not a party to or subject to any judgment, decree, or order
entered in any suit or proceeding brought by any governmental agency or by
any other person, enjoining Target with respect to any business practice, the
acquisition of any property, or the conduct of business in any area.
12. During each of the past five (5) fiscal years, Target has been
adequately insured by financially sound and reputable insurers with respect
to risks normally insured against and in amounts normally carried by
companies similarly situated; all such policies are in full force and effect;
all premiums due on such policies have been fully paid; and no notice of
cancellation or termination has been received with respect to any policy.
13. No work stoppage or other labor dispute in respect to Target is pending
or threatened, and no application for certification of a collective
bargaining agent is pending or threatened.
14. Target has complied in all material respects with, and have not been
cited for any violation of, federal, state, and local environmental
protection laws and regulations; and no material capital expenditures will be
required for compliance with any federal, state, or local laws or regulations
now in force relating to the protection of the environment. As used in this
paragraph, "Hazardous Material" means any hazardous or toxic substance,
material, or waste that is regulated by any federal authority or by any state
or local authority where the substance, material, or waste is located. There
are no underground storage tanks located on any real property described in
this Agreement in which any Hazardous Material has been or is being stored,
nor has there been any spill, disposal, discharge, or release of any
Hazardous Material into, upon, or over that real property or into or upon
ground or surface water on that real property. There are no asbestos-
containing materials incorporated into the buildings or interior improvements
that are part of that real property or into other assets of Target, nor is
there any electrical transformer, fluorescent light fixture with ballasts or
other equipment containing PCBs on that real property.
15. No representation or warranty by Target in this Agreement and no
statement by Target, by any executive officer or other person or contained
in any document, certificate, or other writing furnished by or on behalf of
Target to Buyer in connection with this transaction, contains or will contain
any untrue statement of material fact, or omits or will omit to state any
material fact necessary to make it not misleading or necessary to fully
provide the information required to be provided in the document, certificate,
or other writing.
16. Target has no powers of attorney outstanding other than those issued in
the ordinary course of business with respect to insurance, tax, and customs
matters.
17. The execution and delivery of this Agreement do not, and the
consummation of the Merger will not, (1) violate any provision of Target's
articles of incorporation or bylaws; (2) violate any provision of, or result
in the acceleration of any obligation under, or result in the imposition of
any lien or encumbrance on any asset of Target pursuant to the terms of any
mortgage, note, lien, lease, franchise, license, permit, agreement,
instrument, order, arbitration award, judgment, or decree; (3) result in the
termination of any license, franchise, lease, or permit to which Target is a
party or by which Target is bound; or (4) violate or conflict with any other
restriction of any kind or character to which Target is subject. After
Target's shareholders have adopted the plan of merger as set forth in this
Agreement, Target's board of directors and shareholders will take all actions
required by law or by Target's articles of incorporation or bylaws, or
otherwise required or necessary to authorize the execution and delivery of
this Agreement and to authorize the Merger of Target with Buyer pursuant to
this Agreement.
ARTICLE FOUR
BUYER'S REPRESENTATIONS AND WARRANTIES
1. Buyer represents and warrants to Target as follows:
2. Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Nevada, and is duly organized,
validly existing, and in good standing under the laws of the State of Nevada
and California.
3. Buyer has the corporate power to execute and deliver this Agreement and
have taken (or by the Closing Date will have taken) all actions required by
law, their articles of incorporation, their bylaws, or otherwise, to
authorize the execution and delivery of this Agreement. This Agreement is a
valid and binding agreement of Buyer in accordance with its terms.
4. The execution and delivery of this Agreement do not, and the consummation
of the Merger will not, (1) violate any provision of the articles of
incorporation or bylaws of Buyer; (2) violate any provision of or result in
the acceleration of any obligation under any mortgage, note, lien, lease,
franchise, license, permit, agreement, instrument, order, arbitration award,
judgment, or decree to which Buyer is a party or by which either is bound;
(3) result in the termination of any license, franchise, lease, or permit to
which Buyer is a party or by which either is bound; or (4) violate or
conflict with any other restriction of any kind or character to which Buyer
is subject. After the boards of directors of Buyer and the shareholder(s) of
Buyer has adopted the plan of merger as set forth in this Agreement, said
boards of directors and shareholder(s) will take or will have taken all
actions required by law, their respective articles of incorporation, their
bylaws, or otherwise, to authorize the execution and delivery of this
Agreement and to authorize the Merger.
/ / / / /
ARTICLE FIVE
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
1. Buyer's obligation to consummate the Merger is subject to the
satisfaction, on or before the Closing Date, of the following conditions:
2. Each of the acts and undertakings of Buyer to be performed on or before
the Closing Date pursuant to the terms of this Agreement shall have been duly
performed.
[3. Buyer shall have furnished Target with a copy, certified by Buyer's
secretary, of (1) a resolution or resolutions duly adopted by Buyer's board
of directors authorizing and approving this Merger Agreement and directing
that it be submitted to a vote of Buyer's shareholders; and (2) a resolution
or resolutions adopting this Merger Agreement, duly approved by the holders
of at least a majority of the total number of outstanding shares of common
stock of Buyer.
4. All of the material representations and warranties of Buyer contained in
this Agreement and in the Schedules furnished shall be true in every respect
on and as of the Closing Date, with the same effect as though such
representations and warranties had been made on and as of that date; and
Target shall have received at the closing a certificate, dated the Closing
Date and executed by the president or a vice president of Buyer, containing a
representation and warranty to that effect.
5. Target shall have received the opinion of its counsel to the effect that
the transactions contemplated by this Agreement will not violate any federal
statute or any court decree or order, and that all legal matters relating to
the consummation of the transactions contemplated by this Agreement have been
or will be completed to the satisfaction of Buyer's counsel in all material
respects.
6. Target shall have received, or shall have satisfied itself that it will
receive, in form satisfactory to Target, all necessary approvals of the
transactions contemplated by this Agreement from authorities having any
jurisdiction over the business of Buyer, so that Buyer may continue to carry
on it's business as presently conducted after consummation of the Merger; and
no such approval and no license or permit granted to Buyer shall have been
withdrawn or suspended.
7. All consents of other parties to the mortgages, notes, leases,
franchises, agreements, licenses, and permits of Buyer necessary to permit
consummation of the Merger shall have been obtained.
8. At least a majority of the outstanding shares of Buyer Common Stock shall
have been voted for the adoption of the Merger set forth in this Agreement.
9. Not more than ten (10) percent of the outstanding shares of Buyer Common
Stock shall be "dissenting shares" within the definition of California
Corporations Code section 1300.
10. The Merger Agreement shall have been filed in the office of the
Secretary of State or other office of each jurisdiction in which such filings
are required in order for the Merger to become effective, or Buyer shall have
satisfied itself that all such filings will be or are capable of being made
effective as of the Closing Date.
11. Target shall have delivered the Schedules, updated through the Closing
Date.
12. In its sole and absolute discretion, Buyer shall be satisfied with any
matter reflected, listed, or disclosed in the updated Schedules which was not
reflected, listed, or disclosed in the original Schedules.
13. Each of Mr. William Kettle, Adela Maria Kettle, and Bryan Turbow shall
have entered into Employment Agreements with Landmark International, Inc.
upon terms and conditions acceptable to the parties in their sole and
absolute discretion.
ARTICLE SIX
CONDITIONS PRECEDENT TO TARGET'S OBLIGATION TO CLOSE
1. Target's obligation to consummate the Merger is subject to the
satisfaction on or prior to the Closing Date of the following conditions:
2. Each of Buyer's acts and undertakings to be performed on or before the
Closing Date pursuant to this Agreement shall have been performed.
3. Buyer shall have furnished Target with certified copies of (1)
resolutions duly adopted by the board of directors of Buyer authorizing and
approving the execution and delivery of this Merger Agreement and authorizing
the consummation of the transactions contemplated by this Agreement, and
adopting the plan of merger set forth in this Agreement.
4. The representations and warranties of Buyer contained in this Agreement
shall be true on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of that date; and
Target shall have received at the closing a certificate, dated the Closing
Date and executed on behalf of Buyer by its president or any vice president,
containing a representation and warranty to that effect.
5. At least a majority of the outstanding shares of common stock of Target
shall have been voted for the adoption of the Merger and Plan of
Reorganization contemplated by this Agreement.
ARTICLE SEVEN
SCHEDULES
As soon as practicable, but in no event later than Ten (10) days after the
date of this Agreement, Target shall deliver to Buyer Schedules as required
by this Agreement. Each such Schedule shall have been executed by or on
behalf of Target and shall be accompanied by a copy of each document referred
to in the Schedule. All Schedules shall be updated through the Closing Date;
however, the updating of the Schedules shall not relieve Target of its
responsibility to indemnify Buyer, with respect to any information not
disclosed in the original Schedules. Each matter disclosed in a Schedule
shall be taken as relating only to that specific Schedule.
ARTICLE EIGHT
BUYER'S INVESTIGATION
Prior to the Closing Date, Buyer may directly or through its representatives
make such investigation of the assets and business of Target (including,
without limitation, confirmation of its cash, inventories, accounts, accounts
receivable and liabilities, and investigation of its titles to and the
condition of its property and equipment) as Buyer deems necessary or
advisable. The investigation shall not affect (1) Target's representations
and warranties contained or provided for in this Agreement, (2) Buyer's right
to rely on those representations and warranties, or (3) Buyer's right to
terminate this Agreement as provided in this Agreement. Target shall allow
Buyer and its representatives full access, at reasonable times after the date
of execution of this Agreement, to the premises and to all the books,
records, and assets of Target, and Target's officers shall furnish to Buyer
such financial and operating data and other information with respect to the
business and properties of Target as Buyer shall from time to time reasonably
request. Buyer agrees not to disclose any confidential information obtained
in the course of its investigation or use it for any purposes other than
evaluation of Target with respect to the contemplated merger.
As soon as practicable, and in any event within Ten (10) days after the
receipt of (1) the last Schedule required to be delivered to Buyer by Target
and (2) any supporting documentation requested by Buyer, Buyer shall give
Target notice if Buyer has decided that it wishes to terminate this Agreement
based on any information contained in any of the Schedules or obtained during
the course of its investigation. The notice shall specify the information
contained in the Schedules or obtained during the investigation on which
Buyer's decision to terminate is based. Target shall have 10 days after the
receipt of the notice to review that information with Buyer. If Buyer does
not withdraw its notice within this 10-day period, then all further
obligations of Buyer and of Target under this Agreement shall terminate
without further liability of Buyer to Target or of Target to Buyer, except
their respective obligations to return documents as provided in this
Agreement. If Buyer does not advise Target within the Ten (10) day period
specified in the first sentence above that it wishes to terminate this
Agreement, Buyer shall be deemed to be satisfied with the information
relating to Target and its Subsidiaries contained in the Schedules and/or
obtained during the course of its investigation, subject to Buyer's rights
concerning the continued accuracy of Target's warranties and representations
set forth in this Agreement.
ARTICLE NINE
SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND INDEMNITIES
1. The representations, warranties, and indemnities included or provided for
in this Agreement or in any Schedule or certificate or other document
delivered pursuant to this Agreement shall survive the Closing Date for a
period of Three (3) years. No claim may be made under this Article unless
written notice of the claim is given within that three-year period.
2. Notwithstanding Buyer's investigations of Target before the Closing Date,
and notwithstanding the fact that Buyer may be deemed satisfied as to certain
matters investigated by Buyer, all as provided in this Agreement, Target
shall indemnify, defend, and hold Buyer harmless, to the maximum extent, from
and against any and all losses, liabilities, costs, expenses, judgments,
assessments, penalties, damages, deficiencies, suits, actions, claims,
proceedings, demands, and causes of action, including but not limited to
reasonable attorney fees, court costs, and related expenses, that were caused
by, arose as a result of, or arose with respect to any of the following:
(a) Any inaccuracy in any representation or warranty or any breach of any
warranty of Target under this Agreement or any Schedule, certificate,
instrument, or other document delivered pursuant to this Agreement;
(b) Any failure of Target duly to perform or observe any term, provision,
covenant, or agreement to be performed or observed by Target pursuant to this
Agreement, and any Schedule, certificate, agreement, or other document
entered into or delivered pursuant to this Agreement; or
(c) Any inaccuracy whatsoever in the Balance Sheet;
Whether such losses were known or unknown to Target provided, however, that
Buyer shall not be indemnified and held harmless unless and until such
damages, losses, and expenses exceed $10,000.00, in which event Buyer shall
be indemnified and held harmless in full. All claims under this provision
for indemnity shall be made within the time period and in the manner provided
for in this Agreement and the Escrow Agreement attached hereto as Appendix F.
ARTICLE TEN
TERMINATION
1. In addition to the termination rights provided for in this Agreement and
the transactions contemplated under this Agreement may be terminated at any
time prior to the Closing Date, either before or after the meeting of
Target's shareholders:
(a) By mutual consent of Buyer and Target;
(b) By Buyer if there has been a material misrepresentation or a material
breach of warranty in Target's representations and warranties set forth in
this Agreement or in any Schedule or certificate delivered pursuant to this
Agreement;
(c) By Target if there has been a material misrepresentation or a material
breach of warranty in Buyer's representations and warranties set forth in
this Agreement;
(d) By Buyer or Target if either party shall have determined in its sole
discretion that the transactions contemplated by this Agreement have become
inadvisable or impracticable by reason of the institution or threat of
institution, by governmental authorities (local, state, or federal) or by any
other person, of material litigation or proceedings against either or both of
the parties, it being understood and agreed that a written request by
governmental authorities for information with respect to the proposed
transactions, which information could be used in connection with such
litigation or proceedings, may be deemed by Buyer or Target to be a threat of
material litigation or proceedings, whether such request is received before
or after the date of this Agreement;
(e) By Buyer if it has determined that the business, assets, or financial
condition of Target taken as a whole, have been materially and adversely
affected, whether by reason of changes, developments, or operations in the
ordinary course of business or otherwise;
(f) By Target or by Buyer if the Closing Date referred to in this Agreement
has not occurred by June 1, 1999; and
(g) By Target if it has determined that the business, assets, or financial
conditions of Buyer taken as a whole, have been adversely affected, whether
by reason of changes, developments, or operations in the ordinary course of
business or otherwise.
2. In the event that this Agreement is terminated pursuant to this Article
Ten, or because of the failure to satisfy any of the conditions specified in
Article Five; or Article Six; all further obligations of Buyer and of Target
under this Agreement shall terminate without further liability of Buyer to
Target or Target to Buyer, except for the obligations of both parties under
Article Eight and of Buyer under Paragraph 3; of this Article Ten; provided,
however, anything in this Agreement to the contrary notwithstanding, that if
Target fails to furnish any of the Schedules referred to in Article Seven;
or fails to satisfy any of the conditions specified in Article Five, Buyer
shall nonetheless have the right, in its discretion, to proceed with the
transactions contemplated by this Agreement, and if Buyer fails to satisfy
any of the conditions specified in Article Six, Target shall nonetheless have
the right, in its discretion, to proceed with the transactions contemplated
by this Agreement.
3. In the event of the termination of this Agreement for any reason, Buyer
will return to Target all documents, work papers, and other materials
(including copies) relating to the transactions contemplated by this
Agreement, whether obtained before or after execution of this Agreement.
Buyer will not use any information so obtained for any purpose, and will take
all practicable steps to have such information kept confidential.
4. In the event of the termination of this Agreement for any reason, each
party shall bear its own costs and expenses, including attorney fees.
ARTICLE ELEVEN
PUBLIC ANNOUNCEMENT
Neither Buyer nor Target, without the consent of the other, shall make any
public announcement or issue any press release with respect to this Agreement
or the transactions contemplated by it, which consent shall not be
unreasonably withheld.
/ / / / /
ARTICLE TWELVE
MEETING OF TARGET'S SHAREHOLDERS
Target shall take all necessary steps to call a meeting of its shareholders
to be held within Ten (10) days from the date of this Agreement, which number
of days includes adequate time for the preparation and mailing of proxy
statements if applicable. In all proxy statements or other communications
with the shareholders on this subject, Target's board of directors shall
recommend to the shareholders that they adopt the plan of merger and approve
the terms of this Agreement.
ARTICLE THIRTEEN
COVENANT TO OPERATE IN THE ORDINARY COURSE
Between the date of this Agreement and the Closing Date, Target shall operate
its business only in the ordinary course and in a normal manner consistent
with past practice. During this period, Target shall not encumber any asset
or enter into any transaction or make any commitment relating to its assets
or business otherwise than in the ordinary course of its business (consistent
with its prior practices), or take any action that would render inaccurate
any representation or warranty contained in this Agreement or would cause a
breach of any other covenant under this Agreement, without first obtaining
the written consent of Buyer.
ARTICLE FOURTEEN
GOVERNING LAW; SUCCESSORS AND ASSIGNS;
COUNTERPARTS; ENTIRE AGREEMENT
This Agreement (a) shall be construed under and in accordance with the laws
of the State of California; (b) shall be binding on and shall inure to the
benefit of the parties to the Agreement and their respective successors and
assigns; (c) may be executed in one or more counterparts, all of which shall
be considered one and the same agreement, and shall become effective when one
or more counterparts shall have been signed by each of the parties and
delivered to Buyer and Target; and (d) embodies the entire agreement and
understanding, superseding all prior agreements and understandings between
Target and Buyer relating to the subject matter of this Agreement.
ARTICLE FIFTEEN
NOTICES
All notices, requests, demands, and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given on the date
of service if served personally on the party to whom notice is to be given,
or on the second day after mailing if mailed to the party to whom notice is
to be given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
To Target at: 30021 Tomas Street #300, Rancho Santa Margarita, CA 92688
To Buyer at: 1720 E. Garry Street, Suite 201, Santa Ana, CA 92705
Any party may change its address for purposes of this paragraph by giving the
other parties written notice of the new address in the manner set forth
above.
ARTICLE SIXTEEN
AMENDMENTS
This Agreement may be amended only by the written agreement of all parties
hereto; provided, however, that if amended after the meeting of the
shareholders of Target, the terms regarding the conversion and per-share
price of Target's stock contained in Subparagraph (b) of Paragraph 1 of
Article Two; shall not be amended without the further approval of Target's
shareholders as required by law.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its duly authorized officers, all as of the day and
year first above written.
MobileNetics Corporation
a California corporation
By: _________________________________
Bryan Turbow, President
By:__________________________________
Landmark International, Inc.
a Nevada corporation
By:__________________________________
William Kettle, President
By:__________________________________
ENGAGEMENT AGREEMENT
LMKI Communications and Hagerty Stewart
This Agreement is made on the 30th day of June 1999 between Hagerty Stewart,
an NASD broker/ dealer with its headquarters at 2600 Michelson Drive, Suite
1500, Irvine, CA 92612 (hereinafter referred to as "Hagerty" or "Agent") and
LMCI Communications, 1720 E. Garry, Suite 201, CA 92705 and/or any of its
affiliates or commonly controlled entities (hereinafter referred to as
"LMCI").
In consideration of the mutual covenants and obligations and upon the term
and conditions, all as set forth below, the parties agree as follows:
1. Engagement of Hagerty
LMCI hereby irrevocably engages Hagerty as its exclusive
Placement Agent. Hagerty will introduce LMCI to potential financing sources
on a best efforts basis for the placement of debt and/or equity financing
(the "Financing"). For the purposes of this Agreement, a strategic
investment or acquisition of a non-controlling or a controlling interest in
the Company shall also constitute a Financing, as defined herein. Hagerty
does not guarantee a successful conclusion to the negotiations with any
financing source, and if after 120 days either party is dissatisfied with the
performance of the other for any reason, either party without cause may
terminate this Agreement.
2. Terms Acceptable to Buyer
LMCI will have the right to accept or reject any Financing
presented to it by a financing source introduced by Hagerty. The terms of
any Financing shall be as negotiated solely between LMCI and the financing
source.
3. Hagerty's Fees
LMCI hereby agrees to pay fees in such amount and upon such terms
and conditions as follows:
(a) Engagement/Retainer Fees. Hagerty will charge a monthly
retainer fee of $5,000 for its efforts on behalf of LMCI. This retainer will
be paid in advance at the first of each month.
(b) Hagerty shall be entitled to a Success Fee upon the Closing
(as hereinafter defined) of a Financing with a financing source introduced,
either directly or indirectly, by Hagerty. Said Success Fee shall be payable
to Hagerty upon the occurrence of any of the following: (i) Hagerty, during
the term hereof, identifies or introduces a prospective financing source and
LMCI obtains Financing from this source (ii) LMCI, within 24 months after
the term of this Agreement, obtains capital from a Financing source who has
negotiated with LMCI during the term of this Agreement or whose identity was
disclosed by Hagerty during the term of this Agreement.
(c) Computation of Hagerty's Success Fee. Upon the happening of
any occurrence
described in subparagraphs 3 (b) (i) or 3 (b) (ii) above, Hagerty shall be
paid a success fee based on the following formula:
Eight percent (8.0%) of the financing obtained for LMCI in the form of equity
or unsecured debt. The fee will be three percent (3.0%) for secured debt and
one percent (1.0%) for any short term financing. For purposes of the
foregoing, the Financing shall be the maximum (or gross) amount, which the
financing source commits to make available to LMCI, and is accepted by LMCI.
Additionally, Hagerty will also be granted warrants equal to eight percent
(8.0%) of the equity purchased or granted to the Financing Source except in
the event the Financing Source acquires 100% of the Company's shares. For
example; if the Financing Source purchases 30% of the equity of LMCI, Hagerty
will be granted 2.4% of the outstanding equity of LMCI. The Warrants will be
as follows:
Number of Shares: Equal to 8.0 % of the Financing raised
Exercise Price: Same as offered to Financing Source
Exercise Period: Five (5) years from the date of the Closing
Restrictions: None, other than State & Federal Securities Laws
Anti- Dilution: Standard for Financing Warrants
Registration Rights: Standard or otherwise as reasonably mutually agreed
upon
Co-Sale: Standard or otherwise as reasonably mutually agreed upon
Registration Rights, co-sale and similar provisions shall be conformed to any
such provisions given to the Financing Source.
Hagerty's Success Fee is to be paid in full in certified funds concurrently
at Closing. For purposes of the above, "Closing" shall mean the first time at
which any part of the Financing is either funded or available for funding by
the Financing Source to LMCI. In addition, in the event of a sale of all or
part of the capital stock or business, Hagerty shall be paid on the total
consideration paid to LMCI. Consideration hereby being defined as the
purchase price including any monies paid to LMCI or its shareholders
resulting form the sale, including shares of the acquiring company (to be
valued at the average 10 day price prior to closing), Consulting Agreements,
Covenants Not to Compete Payments, and any Seller's liabilities assumed or
paid for by the Buyer. LMCI hereby irrevocably authorizes and instructs the
Financing Source to pay directly to Hagerty the cash sums provided for in
item C in section 3 above.
4. Hagerty's Expense Reimbursement
(a) Hagerty shall be paid expenses as incurred and billed monthly.
(b) LMCI shall reimburse Hagerty for its expenses relating to the publishing
of any Tombstone or announcement of financing as published in the Orange
County and Orange County Business Journals. Said announcement of financing
shall comply with all required regulatory provisions concerning advertising,
and, shall be limited to $3,000.
(c) Hagerty shall be reimbursed for any extraordinary expenses, such as
travel over 100 miles as incurred.
5. Miscellaneous Provisions
(a) LMCI shall indemnify and hold harmless Hagerty to the full
extent permitted by law from and against all claims, damages, losses and
liabilities (including, without limitation, reasonable attorneys' fees and
expenses) arising out of or based upon this engagement or any financial
information, including without limitation, any misstatement or omission, or
alleged misstatement or omission, in an offering memorandum or any other
materials supplied or approved by LMCI, except LMCI shall not be liable for
any claim, damage, or loss or liability which is finally determined to have
resulted from Hagerty's gross negligence, bad faith or willful misconduct.
(b) Hagerty is authorized to release to a qualified financing
source, all pertinent financial information concerning the business as
Hagerty deems appropriate. LMCI hereby represents and warrants that all
information given to Hagerty regarding the business shall be true, accurate
and current in all material respect at the date given (and thereafter
updated by LMCI to the extent necessary, for continued accuracy).
(c) Continuation and Termination of Agreement. Upon the
successful closing of a Financing, this Agreement will automatically apply to
LMCI's next project unless mutually terminated.
(d) Arbitration. Any controversy, dispute or claim relating to
this Agreement between the parties shall be resolved by binding arbitration
in Orange County, California in accordance with the rules of the National
Association of Securities Dealers (NASD). In any arbitration or other such
action to enforce any of the provisions or rights under the terms of this
Agreement, the unsuccessful party to such arbitration or action, as
determined by the arbitrator or the Court in a final judgment or decree,
shall pay the prevailing party or parties reasonable attorney's fee incurred
by the successful party or parties (including any appeals).
(e) Assignment. This Agreement shall not be assignable by any
part except upon the consent, expressed in writing, of the other party(ies).
(f) Applicable Law. This Agreement shall be governed as to all
matters of interpretation and performance by the laws of the State of
California.
(g) Entire Agreement and Modifications. The making, execution
and delivery of this Agreement by the parties has been induced by no
representations, statements, warranties or agreements other than those
expressed herein. This Agreement embodies the entire understanding of the
parties and there are no further or other agreements or understandings,
written or oral, in effect between the parties relating to the subject matter
hereof unless expressly referred to by effect between the parties relating to
the subject matter herein. Modification of this Agreement by the parties may
only be made in writing.
(h) Severability. In the event that any part of this Agreement
is deemed unenforceable for any reason whatsoever, that fact shall not render
any other part unenforceable so long as enforcement of the latter part will
fairly effectuate the parties' intent as expressed herein.
(i) Successor-In-Interest. This Agreement shall bind and shall
inure to the benefit of the parties hereto and their respective heirs,
legatees, devisees, administrators, legal representatives, grantees,
successors and assigns.
(j) Authority of Signatories. By their respective signatures
below, each party hereto represents and warrants that he is fully authorized
to act on behalf and otherwise bind LMCI and Hagerty, respectively, to the
terms and provisions of the Agreement.
6. Additional Financing(s)
In the event Hagerty is successful in obtaining financing for LMCI, Hagerty
shall have for a period of 12 months, a first right of refusal on any public
or private placements of the Company's debt or equity securities.
IN WITNESS WHEREOF, this Agreement has been executed on the day and year
first mentioned above.
For: HAGERTY STEWART for: LMCI
By: Nicholas Mosich By: William J. Kettle
_______________________ ________________________
Its: Managing Director Its: President and Chairman
Investment Banking
By: Victor N. Lee
_______________________
Its: Managing Director
Investment Banking
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
May 31, 1999 consolidated financial statements] and is qualified in its
entirety by reference to such financial statements and the notes thereto.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> MAR-01-1999
<PERIOD-END> MAY-31-1999
<CASH> 10,168
<SECURITIES> 0
<RECEIVABLES> 78,372
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 91,285
<PP&E> 147,058
<DEPRECIATION> 12,663
<TOTAL-ASSETS> 235,680
<CURRENT-LIABILITIES> 205,516
<BONDS> 0
0
0
<COMMON> 128,942
<OTHER-SE> (163,226)
<TOTAL-LIABILITY-AND-EQUITY> 225,680
<SALES> 308,556
<TOTAL-REVENUES> 308,556
<CGS> 141,932
<TOTAL-COSTS> 141,932
<OTHER-EXPENSES> 172,499
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,926
<INCOME-PRETAX> (9,801)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,801)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,801)
<EPS-BASIC> (.0)
<EPS-DILUTED> (.0)
</TABLE>
