-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UD9APwcrBAs4OqPLmNZNIWCIavJo6tNBwz3yGJVfuPVzSo5fK17RnmuxtRVzGFIK c8Aoo8/laP6Tb/GS4Vhu/Q== 0000950129-95-001431.txt : 19951119 0000950129-95-001431.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950129-95-001431 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANDMARK GRAPHICS CORP CENTRAL INDEX KEY: 0000749510 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 760029459 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17195 FILM NUMBER: 95591022 BUSINESS ADDRESS: STREET 1: 15150 MEMORIAL DRIVE CITY: HOUSTON STATE: TX ZIP: 77079-4304 BUSINESS PHONE: 7135601000 MAIL ADDRESS: STREET 1: 15150 MEMORIAL DRIVE CITY: HOUSTON STATE: TX ZIP: 77079-4304 10-Q 1 LANDMARK GRAPHICS CORPORATION DATED 09/30/95 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 COMMISSION FILE NUMBER 0-17195 LANDMARK GRAPHICS CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 76-0029459 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 15150 MEMORIAL DRIVE 77079-4304 HOUSTON, TEXAS (Zip Code) (Address of Principal executive office) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 560-1000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------- ------- The number of shares outstanding of the Registrant's common stock, $0.05 par value, as of November 1, 1995 was 17,427,889. =============================================================================== 2 INDEX Page ---- PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets - As of September 30, 1995 and June 30, 1995 . . . . . . . . . . 1 Consolidated Statements of Operations - For the Three Months Ended September 30, 1995 and 1994 . . . . 2 Consolidated Statements of Cash Flows - For the Three Months Ended September 30, 1995 and 1994 . . . . 3 Notes to Consolidated Financial Statements . . . . . . . . . . . . 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF . . . . . . . . . . 9 PART II: OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 13 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3 LANDMARK GRAPHICS CORPORATION CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT PAR VALUE DATA)
September 30, June 30, 1995 1995 ------------- ---------- (Unaudited) ASSETS Current assets: Cash and cash equivalents. . . . . . . . . . . . . . . . . . . $ 73,475 $ 64,099 Receivables: Trade accounts, net. . . . . . . . . . . . . . . . . . . . 41,934 51,984 Current income tax receivable. . . . . . . . . . . . . . . 1,003 1,003 Accrued revenue and other receivables. . . . . . . . . . . 9,032 7,838 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 4,747 4,340 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 4,146 3,004 Deferred income taxes, net of valuation allowance . . . . . . 3,847 3,847 --------- ---------- Total current assets . . . . . . . . . . . . . . . . . . . 138,184 136,115 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 857 857 Property and equipment, net. . . . . . . . . . . . . . . . . . 46,511 47,503 Software development costs, net . . . . . . . . . . . . . . . 8,641 7,932 Goodwill, net. . . . . . . . . . . . . . . . . . . . . . . . . 13,532 11,949 Other assets, net. . . . . . . . . . . . . . . . . . . . . . . 7,035 6,795 --------- ---------- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 214,760 $ 211,151 ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . $ 10,904 $ 9,488 Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . 11,506 10,823 Deferred maintenance fees. . . . . . . . . . . . . . . . . . . 13,558 14,597 Income taxes payable . . . . . . . . . . . . . . . . . . . . . 426 2,683 Current maturities of long-term debt . . . . . . . . . . . . . 1,000 1,007 --------- ---------- Total current liabilities . . . . . . . . . . . . . . . . 37,394 38,598 Deferred income taxes, net of current portion . . . . . . . . 2,590 2,590 Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . 10,756 11,000 Other long-term liabilities. . . . . . . . . . . . . . . . . . 66 65 --------- ---------- Total liabilities . . . . . . . . . . . . . . . . . . . . . . 50,806 52,253 Stockholders' equity: Common stock, $0.05 par value; 17,427 and 17,086 shares issued, respectively . . . . . . . . . . . . . . . 871 854 Paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . 127,351 122,407 Retained earnings. . . . . . . . . . . . . . . . . . . . . . . 35,732 35,637 --------- ---------- Total common stockholders' equity . . . . . . . . . . . . 163,954 158,898 --------- ---------- Total liabilities and stockholders' equity . . . . . . . . . . $ 214,760 $ 211,151 ========= ==========
The accompanying notes are an integral part of these financial statements. 1 4 LANDMARK GRAPHICS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
Three Months Ended September 30, ----------------------------- 1995 1994 ------------ ------------ (Restated) Revenue: Software product sales . . . . . . . . . . . . . . . . $ 16,174 $ 14,819 Hardware product sales . . . . . . . . . . . . . . . . 6,674 5,984 Maintenance and other. . . . . . . . . . . . . . . . . 16,962 10,964 ------------ ------------ Total revenue . . . . . . . . . . . . . . . . . . . 39,810 31,767 Cost of revenue: Cost of software product sales . . . . . . . . . . . . 2,268 1,884 Cost of hardware product sales . . . . . . . . . . . . 5,761 4,988 Cost of maintenance and other. . . . . . . . . . . . . 8,656 6,911 ------------ ------------ Total cost of revenue. . . . . . . . . . . . . . . . 16,685 13,783 ------------ ------------ Gross profit . . . . . . . . . . . . . . . . . . . 23,125 17,984 ------------ ------------ Operating expenses: Research and development . . . . . . . . . . . . . . . 4,906 4,318 Selling, marketing and administrative . . . . . . . . 15,633 12,464 Merger costs . . . . . . . . . . . . . . . . . . . . . 66 1,153 Restructuring and other non-recurring charges. . . . . 3,106 1,809 ------------ ------------ Total operating expenses . . . . . . . . . . . . . . 23,711 19,744 ------------ ------------ Loss from operations . . . . . . . . . . . . . . . . . . (586) (1,760) Other, net . . . . . . . . . . . . . . . . . . . . . . . 1,006 885 ------------ ------------ Income (loss) before income taxes . . . . . . . . . . . 420 (875) Provision for income taxes . . . . . . . . . . . . . . . 126 97 ------------ ------------ Net income (loss) . . . . . . . . . . . . . . . . . . . $ 294 $ (972) ============ ============ Income (loss) per common and common equivalent share . . . . . . . . . . . . . . . . . . . $ 0.02 $ (0.06) Weighted average number of common and common equivalent shares outstanding. . . . . . . . . . . . . 17,932 16,947
The accompanying notes are an integral part of these financial statements. 2 5 LANDMARK GRAPHICS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS) (UNAUDITED)
Three Months Ended September 30, ----------------------- 1995 1994 -------- --------- (Restated) Cash flows from operating activities: Net income (loss) $ 294 $ (972) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,547 1,956 Amortization of goodwill/other assets . . . . . . . . . . . . . . . . . . . 476 50 Amortization of capitalized software development costs . . . . . . . . . . . 975 716 Restructuring charges/asset write-downs . . . . . . . . . . . . . . . . . . 463 - Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549 569 Changes in assets and liabilities, net of the effects of purchased business: Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,526 9,133 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (502) (2,118) Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,052) 71 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 618 Accounts payable/accrued liabilities . . . . . . . . . . . . . . . . . . . . 1,764 1,153 Deferred maintenance fees . . . . . . . . . . . . . . . . . . . . . . . . . . (1,052) (906) Deferred income taxes/income taxes payable . . . . . . . . . . . . . . . . . (1,243) (1,329) -------- --------- Net cash provided by operating activities. . . . . . . . . . . . . . . . . . 11,785 8,941 Cash flows from investing activities: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,028) (2,171) Payment for business acquisitions, net of cash acquired . . . . . . . . . . (945) (12,064) Capitalized software development costs . . . . . . . . . . . . . . . . . . . (1,334) (808) Payment of contingent earn-out agreement . . . . . . . . . . . . . . . . . . (1,808) - Proceeds from sale of property and equipment . . . . . . . . . . . . . . . . 21 160 -------- --------- Net cash used in investing activities . . . . . . . . . . . . . . . . . . . (6,094) (14,883) Cash flows from financing activities: Reductions of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (251) (305) Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . . . 3,936 453 Issuance costs related to stock-based financing activities . . . . . . . . . - (90) -------- --------- Net cash provided by financing activities. . . . . . . . . . . . . . . . . . 3,685 58 Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . 9,376 (5,884) Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . 64,099 74,695 -------- --------- Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . $ 73,475 $ 68,811 ======== =========
The accompanying notes are an integral part of these financial statements. 3 6 LANDMARK GRAPHICS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements of Landmark Graphics Corporation and subsidiaries (the "Company") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with the audited financial statements and accompanying notes included in the Company's 1995 Annual Report on Form 10-K. The consolidated financial statements for the three-month period ended September 30, 1994 have been restated to give effect to acquisitions which have been accounted for as poolings of interests (see "Acquisitions" below). The unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for a fair presentation of the interim periods. Results for the interim periods are not necessarily indicative of results for the year. All significant intercompany balances and transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the current year presentation. ACQUISITIONS Tech Logic, Inc. On September 20, 1995, the Company acquired all of the outstanding common stock of Tech Logic, Inc. ("Tech Logic"), a Woodinville, Washington based company. Tech Logic has developed an interactive, integrated 3D geological modeling system known as IREX. In connection with the acquisition, the Company issued a total of 74,637 shares of its Common Stock in exchange for all of the outstanding common stock of Tech Logic in a transaction accounted for as a pooling of interests. Due to the immateriality of this transaction and its effect on the historical consolidated financial statements for prior periods, those statements have not been restated to include the amounts of Tech Logic. The total revenue and net income (does not include the $3.1 restructuring charge) amounts for the 30 days of post merger combined operations approximated $26.5 million and $5.7 million, respectively. GeoGraphix, Inc. On June 5, 1995, the Company acquired all of the outstanding common stock of GeoGraphix, Inc. ("GeoGraphix"), a Denver, Colorado based company, in a transaction accounted for as a pooling of interests and, accordingly, the consolidated financial statements for the three-month period ended September 30, 1994 have been restated to include the accounts of GeoGraphix. 4 7 DRD Corporation On February 28, 1995 the Company purchased certain assets and assumed certain liabilities of DRD Corporation ("DRD") of Tulsa, Oklahoma in exchange for cash consideration of approximately $5.8 million. The Company also incurred accounting, legal and investment banking costs of approximately $600,000 related to the acquisition. The assets acquired primarily consisted of drilling and completion engineering software applications as well as in-process research and development activities. The acquisition was recorded using the purchase method of accounting and, accordingly, the acquired operations have been included in the results of operations since the date of acquisition. MGI Associates, Inc. On September 29, 1994, the Company purchased all the issued and outstanding capital stock of MGI Associates, Inc., ("MGA), a Company based in Dallas, Texas, which develops personal computer-based economics and reservoir engineering software products designed to aid asset teams, including production and drilling engineers, in oil and gas exploration. The Company acquired MGA for consideration of approximately $13.3 million which consisted of cash of $10.5 million paid to acquire the stock, $1.2 million paid to retire certain related party debt and approximately $1.6 million of acquisition related costs. The acquisition was recorded using the purchase method of accounting and, accordingly, the acquired operations have been included in the results of operations since the date of acquisition. Stratamodel, Inc. On September 28, 1994, the Company acquired all of the equity interests of Stratamodel, Inc. ("Stratamodel"), a Houston, Texas based company, in a transaction accounted for as a pooling of interests and, accordingly, the financial statements for the three-month period ended September 30, 1994 have been restated to include the amounts of Stratamodel. Stratamodel's reservoir characterization and modeling software products are designed to aid geoscientists in oil and gas exploration and production. In connection with the acquisition, the Company issued a total of 413,911 shares of its Common Stock, in exchange for all of the equity interests of Stratamodel, which included common stock, stock options and warrants. In addition, the Company retired all of Stratamodel's outstanding debt of approximately $510,000 and paid certain acquisition-related expenses of Stratamodel of approximately $293,000. 5 8 The revenues and net income (loss) amounts included in the accompanying results of operations are disclosed in the following table with Stratamodel's and GeoGraphix's amounts for the periods prior to the acquisitions presented separately (in thousands) (unaudited):
Three Months Ended September 30, ------------------------------ 1995 1994 ----------- ---------- (Restated) Revenues Company. . . . . . . . . . . . . $ 39,810 $ 28,404 Stratamodel. . . . . . . . . . . - 1,790 GeoGraphix . . . . . . . . . . . - 1,573 ----------- ---------- Combined . . . . . . . . . . . $ 39,810 $ 31,767 =========== ========== Net income (loss) Company. . . . . . . . . . . . . $ 294 $ (639) Stratamodel. . . . . . . . . . . - (441) GeoGraphix . . . . . . . . . . . - 108 ----------- ---------- Combined . . . . . . . . . . . $ 294 $ (972) =========== ==========
MERGER COSTS Merger costs for the three months ended September 30, 1995 include the accounting and legal costs related to the acquisition of Tech Logic. Merger costs for the three months ended September 30, 1994 consisted primarily of the accounting, legal and investment banking costs related to the completion of the Stratamodel acquisition. RESTRUCTURING CHARGES AND OTHER NON-RECURRING CHARGES In July 1995, the Company completed a five-year strategic planning process which concluded with the decision to proactively realign resources. A restructuring charge of $3.1 million was recorded in the three months ended September 30, 1995 to reflect severance costs for terminated employees, facility consolidation and write-down of certain assets of the Company. In connection with the Stratamodel acquisition in the first quarter of fiscal 1995, the Company adopted a restructuring plan in the three months ended three months ended September 30, 1994 designed to eliminate redundancies and consolidate operations. Under the plan, the Company recorded approximately $1.2 million in restructuring charges consisting of severance costs for terminated employees and lease costs associated with duplicate facilities. Additionally, non-recurring charges of approximately $600,000 were incurred in connection with the acquisition including relocation and other acquisition-related costs. 6 9 INCOME PER COMMON AND COMMON EQUIVALENT SHARE Income per common and common equivalent share is computed using the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Common stock equivalents include the number of shares issuable upon exercise of stock options, less the number of shares that could have been repurchased with the exercise proceeds using the treasury stock method. In the case of a net loss, no shares are assumed to be issued upon exercise of stock options because such shares would be antidilutive. For purposes of the income per share computation, the shares issued in exchange for the equity interests of pooled entities have been treated as if they had been issued and outstanding for all periods presented. CASH FLOW INFORMATION Net cash provided by operating activities reflects cash payments for interest and income taxes as follows (in thousands) (unaudited):
Three Months Ended September 30, ----------------------- 1995 1994 --------- --------- (Restated) Income taxes . . . . . . . . . . . . . . . . . $ 1,154 $ 1,251 Interest . . . . . . . . . . . . . . . . . . . 271 249
During the three month periods ended September 30, 1995 and 1994, there were non-cash financing activities of $1,014,000 and $159,000, respectively, relating to tax benefits received from the exercise of non-qualified stock options by employees. CONTINGENCIES Under the terms of the original MGA acquisition agreement, the Company was obligated to make earn-out payments, based upon the financial performance of MGA, over a period of four years with a net present value (as of July 1, 1994) of up to $6.0 million. On September 29, 1995, the stock purchase agreement was amended to guarantee a total earn-out of $6.9 million, conditional upon the results of an independent audit, and, payable over a three-year period starting September 30, 1995. Additionally, in connection with the MGA transaction, the Company acquired an option to purchase the equity interests of a related party in exchange for a line of credit guarantee. The option is exercisable no later than October 31, 1997 at an exercise price which is based upon the related party's financial results. In no event will the net present value of the option price be less than $8.0 million. 7 10 SUBSEQUENT EVENTS On November 6, 1995, Landmark's Board of Directors approved a plan for the Company to repurchase shares of its Common Stock on the open market. The repurchase program is intended to minimize the dilutive effects of the Company's employee stock option program on the Company's earnings per share. The Company anticipates purchasing approximately 320,000 shares during the next twelve months. The actual number of shares repurchased will depend upon several factors, including the number of employee stock options exercised as well as general market conditions and the Company's overall cash requirements. On October 19, 1995, Landmark's Board of Directors approved employment contracts for ten of Landmark's officers that would be invoked upon a change in control of the Company. It is anticipated that these agreements will be executed in December 1995. 8 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Management's Discussion and Analysis of Financial Condition and Results of Operations is the Company's analysis of its financial performance and of significant trends which may impact future performance. It should be read in conjunction with the consolidated financial statements of the Company and the related notes thereto. On September 20, 1995, the Company acquired all of the outstanding common stock of Tech Logic, Inc. ("Tech Logic") in an acquisition accounted for as a pooling of interests. On June 5, 1995, the Company acquired all of the outstanding common stock of GeoGraphix, Inc. ("GeoGraphix"), in an acquisition accounted for as a pooling of interests. On February 28, 1995, the Company purchased certain assets and assumed related liabilities of DRD Corporation ("DRD") in an acquisition accounted for as a purchase. On September 29, 1994, the Company acquired all of the outstanding common stock of MGI Associates, Inc. ("MGA") in an acquisition accounted for as a purchase. On September 28, 1994, the Company acquired all of the equity interests of Stratamodel, Inc. ("Stratamodel") in an acquisition accounted for as a pooling of interests. Accordingly, the Company's consolidated financial statements included elsewhere herein give effect to the acquisitions accounted for as pooling of interests for all periods presented and include the results of acquired operations accounted for as purchases and Tech Logic since dates of acquisition. The following discussion should be read in conjunction with the consolidated financial statements and related notes thereto. The Company, incorporated in 1982, designs, markets and supports software and systems which facilitate the exploration and production efforts of oil and gas companies. The Company derives revenues from licensing software products, providing related services and reselling hardware. Customers pay the Company an initial license fee for the software, which is generally recognized by the Company upon shipment. Customers have the option to pay an annual maintenance fee, calculated as a percentage of current list price, which entitles them to routine support and product updates. The Company generally recognizes revenue related to customer support agreements ratably over the contract period. Many of the Company's customers are shifting from functional organizations to interdisciplinary teams, which is creating the need for integrated products and service sales. Accordingly, the Company's sales, marketing and support organizations are currently being reconfigured to better address the emerging solutions market. These solution sales have the longer term potential of generating more recurring revenues, however, it can also lengthen customers' decision-making processes. The transition of the Company's sales organization will continue throughout the current fiscal year. This transition may diminish the Company's growth prospects for the fiscal year 1996 but will position the Company with the ongoing prospects that the market has to offer over the longer term. 9 12 RESULTS OF OPERATIONS Total revenue. Total revenue for the first quarter of fiscal 1996 increased approximately $8.0 million, or 25 percent, as compared with the first quarter of fiscal 1995. The increase is primarily due to a 55 percent growth in maintenance and other sales. Software product sales. Software product sales consist of licensing fees for the Company's proprietary and third party software. Total software product sales increased approximately $1.4 million, or 9 percent from the first quarter of fiscal 1995. Software product revenue as a percentage of total revenue decreased from the same period in the prior year; however, this revenue will continue to be a significant portion of total revenue. Future growth in software product sales is, in part, dependent upon the Company's ability to bring innovative software products to the market ahead of its competitors. Although the Company intends to introduce several new products during the remainder of the fiscal year, there can be no assurance that these new products will result in significant product revenue growth. Hardware product sales. Hardware product sales relate to the resale of third party computer hardware. Hardware product sales increased $690,000 from the first quarter of fiscal 1995. The increase in hardware product sales was due primarily to a large international order which occurred in the current quarter. Maintenance and other. Maintenance and other revenue relate to maintenance and support of the Company's hardware and software products as well as revenue from other services, including consulting, offered to customers. Maintenance and other revenue increased approximately $6.0 million, or 55 percent, in the first quarter of fiscal 1996 from the comparable period in fiscal 1995. This increase is primarily attributable to increased software support sales, which continue to increase due to the growth in Landmark's installed base and the resulting growth in maintenance contracts. Cost of software product sales. Cost of software product sales as a percentage of software product sales increased from 13 percent in the first quarter of fiscal 1995 to 14 percent in the current quarter. As the Company develops and releases new products, software development costs and the related amortization has and may continue to increase. This increased amortization has negatively impacted the software product margin in the current quarter. Cost of hardware product sales. Cost of hardware product sales as a percentage of hardware product sales increased to 86 percent in the current quarter compared to 83 percent in the prior year first quarter. The increase is due to the Company's offering of sales discounts to customers in response to competitive pressures, particularly in the United States market. As price competitiveness in the computer hardware industry persists, discounts and the resulting impact on hardware product margins may continue. Although hardware contributes a lower margin, the Company plans to continue to offer hardware to accommodate sales of software and services to customers who desire comprehensive solutions. 10 13 Cost of maintenance and other. Cost of maintenance and other has decreased as a percentage of the related revenue from 63 percent in the first quarter of fiscal 1995 to 51 percent in the current quarter. The favorable impact on the maintenance and other margins was mainly attributable to the increase in software support sales. Research and development. Research and development costs increased $588,000, or 14 percent, in the first quarter of fiscal 1996 compared to the prior year first quarter. As a percentage of revenue, research and development costs were 12 percent and 14 percent in the three months ended September 30, 1995 and 1994, respectively. Selling, marketing and administrative. Selling, marketing and administrative expenses increased approximately $3.2 million, or 25 percent, for the first quarter of fiscal 1996 from the comparable period in the prior year. The increase is primarily a result of increased costs associated from the acquisitions accounted for as purchases and with expanding the scope of the sales and distribution function, which included higher salary and other personnel costs and commissions. Amortization of goodwill increased $426,000 in the first quarter of fiscal 1996 compared to the prior year fiscal quarter. As a percentage of total revenue, these costs were 39 percent both in the current quarter and in the comparable quarter in fiscal 1995. Merger costs. Merger costs for the three months ended September 30, 1995, include the accounting and legal costs related to the acquisition of Tech Logic. Merger costs for the three months ended September 30, 1994 consisted of accounting, legal and investment banking costs related to the acquisition of Stratamodel. Restructuring and other non-recurring charges. In July 1995, the Company completed a five-year strategic planning process which concluded with the decision to proactively realign its resources. A restructuring charge of $3.1 million was recorded in the three months ended September 30, 1995 to reflect severance costs for terminated employees, facility consolidation and write-down of certain assets of the Company. In connection with the Stratamodel acquisition in the first quarter of fiscal 1995, the Company adopted a restructuring plan designed to eliminate redundancies and consolidate operations. Under the plan, the Company accrued approximately $1.2 million of severance costs for terminated employees and lease costs for duplicate facilities. Additionally, $600,000 of non-recurring costs were recorded for relocation costs and other acquisition related charges. Other, net. Other, net increased approximately $121,000 from the first quarter of fiscal 1995 to the current quarter. This increase is primarily attributable to foreign currency translation gains and interest income from higher interest rates earned on invested cash balances. Taxes. Provisions for income taxes of $126,000 and $97,000 were recorded in the three months ended September 30, 1995 and 1994, respectively. FINANCIAL CONDITION AND LIQUIDITY Cash and cash equivalents increased approximately $9.4 million from June 30, 1995. This increase is mainly attributable to net cash provided by operating activities of $11.8 million for the three months ended September 30, 1995. 11 14 Trade accounts receivable decreased by $10.1 million due primarily to the lower revenue recognized in the first quarter of fiscal 1996 as compared to the fourth quarter of fiscal 1995. Management continues its emphasis on improving collections, which has impacted the trade accounts receivable balance and reduced the significant fluctuations experienced in days sales outstanding. Management intends to focus efforts on maintaining days sales outstanding within a 95 to 100 day range. Goodwill increased approximately $1.6 million from the balance at June 30, 1995. This amount primarily relates to an earn-out payment of $1.8 million for MGA acquisition and represents the cost in excess of fair value of the net assets acquired. The goodwill recorded will be amortized on a straight-line basis over a period of seven years. Accounts payable and accrued liabilities increased approximately $2.1 million from June 30, 1995 due primarily to the timing of the receipt and payment of vendor invoices. Based on the nature of these accounts, period to period fluctuations can be expected to continue. The Company's primary internal source of liquidity is cash flow generated from operations. External sources of liquidity include debt and equity financing. As of September 30, 1995, the Company had $14.0 million available under a line of credit facility. The Company believes funds generated from operations will be sufficient to meet liquidity requirements in the foreseeable future. Management continues to evaluate opportunities to acquire product technologies or businesses complementary to the Company's business. These acquisition opportunities may involve the use of cash or, depending upon the size and terms of the acquisition, may require debt or equity financing. Expenses associated with these potential acquisitions may have an adverse impact on the Company's results of operations in the period the transactions are consummated. Subsequent to September 30, 1995, the Company made payments of approximately $11.8 million to pay off the outstanding amounts of the line of credit facility and other debt. This was done to improve the Company's net interest income position and to allow maximum use of the line of credit for future acquisitions. 12 15 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Sequen- tially (If applicable) Numbered Incorporation by reference from Exhibit number and description Page Form Date File No. Exhibit - ------------------------------ ---- ---- ---- ---- --- -------
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession 2.1 Stock Purchase Agreement by and among the Company, MGI Associates, Inc., Munro Engineering, Inc. and all of the Shareholders of MGI Associates, Inc. N/A 8-K 09/29/04 0-17195 2.3 2.1(a) Addendum No. 1 to Stock Purchase Agreement. ____ N/A N/A N/A N/A 2.1(b) Addendum No. 2 to Stock Purchase Agreement. ____ N/A N/A N/A N/A
(27) Financial Data Schedule 27.1 Financial data schedule as of and for the three months ended September 30, 1995. (99) Additional Exhibits 99.1 Rights Agreement, dated as of September 1, 1995, between the Registrant and Chemical Bank. N/A 10-K 09/21/95 0-17195 99.4
13 16 (b) Reports on Form 8-K. Form 8-K/A dated June 5, 1995 (filed on August 8, 1995) which presented financial statements for the four-month periods ended April 30, 1995 and 1994 and audited financial statements for the years ended December 31, 1994 and 1993 for GeoGraphix, Inc. In addition, Restated and Pro Forma Condensed Financial Statements of the Company related to the ten-month periods ended April 30, 1995 and 1994 and the years ended June 30, 1994, 1993 and 1992 were included to reflect the acquisition of GeoGraphix, Inc. Form 8-K dated August 10, 1995 which presented Restated Selected Financial Data, Restated Management's Discussion and Analysis of Financial Condition and Results of Operations and Restated Consolidated Financial Statements and Schedules of the Company related to the years ended June 30, 1994, 1993 and 1992 to reflect the acquisitions of GeoGraphix, Inc. and Stratamodel, Inc. 14 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LANDMARK GRAPHICS CORPORATION Date: November 10, 1995 By: /s/ Robert P. Peebler ------------------------------------------ Robert P. Peebler President and Chief Executive Officer By: /s/ William H. Seippel ------------------------------------------ William H. Seippel Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer) 15 18 LANDMARK GRAPHICS CORPORATION INDEX TO EXHIBITS 2.1(a) Addendum No. 1 to Stock Purchase Agreement. 2.1(b) Addendum No. 2 to Stock Purchase Agreement. 27.1 Financial data schedule as of and for the three monthe ended September 30, 1995. EX-2.1.A 2 ADDENDUM NO. 1 TO STOCK PURCHASE AGREEMENT 1 EXHIBIT 2.1(a) ADDENDUM NO. 1 TO STOCK PURCHASE AGREEMENT This addendum (the "Addendum"), dated June 30, 1995, by and among Landmark Graphics Corporation, a Delaware corporation ("Landmark"), MGI Associates, Inc., a Texas corporation ("MGA"), and the other persons and entities whose signatures appear upon this Addendum (the "Former Shareholders"), relates to and is intended to amend that certain Stock Purchase Agreement, dated September 29, 1994, by and among Landmark, MGA and the Former Shareholders (the "Master Agreement"), and evidences that, in consideration of the mutual obligations and covenants set forth herein, the parties hereto agree as follows: ARTICLE I GENERAL SECTION 1.1 RELATION TO MASTER AGREEMENT. Capitalized terms used but not defined herein are used as defined in the Master Agreement. Except as modified herein, the Master Agreement will remain in full force and effect in accordance with the terms thereof. In the event of any conflict between the terms and conditions of the Master Agreement and the terms and conditions of this Addendum, the terms and conditions of this Addendum will govern and control. SECTION 1.2 AMENDMENT OF THE MASTER AGREEMENT. The definition of "Actual Operating Income" set forth in Section 3.1 of the Master Agreement is hereby amended by adding the following sub-paragraph: "(d) If for any Earnout Period (hereinafter referred to in this sub-paragraph (d) as the "Current Earnout Period"), other than the Earnout Period ending June 30, 1995, the Actual Operating Income of MGA (calculated without regard to the provisions of this sub-paragraph (d)) is less than its Minimum Operating Income and during the immediately preceding Earnout Period (hereinafter referred to in this sub-paragraph (d) as the "Prior Earnout Period") the Actual Operating Income of MGA (calculated without regard to the provisions of this sub-paragraph (d)) was greater than its Targeted Operating Income for the Prior Earnout Period, the Actual Operating Income of MGA for the Current Earnout Period (calculated without regard to the provisions of this sub-paragraph (d)) will be increased by an amount equal to the result of subtracting the Targeted Operating Income of MGA for the Prior Earnout Period from the Actual Operating Income of MGA for the Prior Earnout Period (calculated without regard to the provisions of this sub-paragraph (d))." 2 ARTICLE II MISCELLANEOUS SECTION 2.1 COUNTERPARTS. This Addendum may be executed in multiple counterparts, each of which will be deemed to be an original and all of which will be deemed to be a single agreement. This Addendum will be considered fully executed when all parties have executed an identical counterpart, notwithstanding that all signatures may not appear on the same counterpart. SECTION 2.2 SEVERABILITY. If any of the provisions of this Addendum are determined to be invalid or unenforceable, such invalidity or unenforceability will not invalidate or render unenforceable the remainder of this Addendum, but rather the entire Addendum will be construed as if not containing the particular invalid or unenforceable provision or provisions, and the rights and obligations of the parties will be construed and enforced accordingly. The parties acknowledge that if any provision of this Addendum is determined to be invalid or unenforceable, it is their desire and intention that such provision be reformed and construed in such manner that it will, to the maximum extent practicable, be deemed to be valid and enforceable. -2- 3 IN WITNESS WHEREOF, Landmark, MGA and the Former Shareholders have executed this Agreement as of the date first written above. LANDMARK GRAPHICS CORPORATION By: WILLIAM H. SEIPPEL __________________________ Its: Vice President, Finance _______________________ MGI ASSOCIATES. INC. By: FRANK D. McCORDIE ____________________________ Name: Frank D. McMordie Title: President MUNRO ENGINEERING INC. By: RODERICK G. MUNRO ____________________________ Name: Roderick G. Munro Title: President /s/ FRANK D. McMORDIE ____________________________ Frank D. McMordie Eppler, Guerin & Turner, Inc. as Custodian for the benefit of Frank D. McMordie By: MAX R. McCASKILL ____________________________ Name: Max R. McCaskill Title: Vice President -3- 4 /s/ ELIZABETH McMORIDE-SCHMIDT Eppler, Guerin & Turner, Inc. as _______________________________ Custodian for the Benefit of Elizabeth McMordie-Schmidt Stephen H. Jaffe /s/ JENNIFER L. McMORDIE _______________________________ Jennifer L. McMordie By: MARK L. McMORDIE ________________________________ Mark L. McMordie Name: Mark L. McMordie /s/ CHRISTOPHER L. McMORDIE Title: Vice President _______________________________ Christopher L. McMordie /s/ THEODORE S. ROZSA _____________________________________ Theodore S. Rozsa /s/ HELEN LINDSLEY _______________________________ Helen Lindsley Vendanges Investments, Inc. /s/ GORDON R. BAYSTROM _______________________________ By: RODERICK G. MUNRO Gordon R. Baystrom _________________________________ Name: Roderick G. Munro Title: President Eppler, Guerin & Turner, Inc. As Custodian for the Benefit of Gordon R. Baystrom Calyx Investments, Ltd. By: MAX L. McMORDIE By: IAN MILLS ___________________________ _________________________________ Name: Max L. McMordie Name: Ian Mills Title: Vice President Title: Vice President /s/ GUY M. HUMPHRIES, JR. /s/ JAMES R. LOVETT _______________________________ _____________________________________ Guy M. Humphries, Jr. James R. Lovett Eppler, Guerin & Turner, Inc. /s/ KIRK D. HANES As Custodian for the Benefit of _____________________________________ Guy M. Humphries, Jr. Kirk D. Hanes By: MAX R. McCASKILL /s/ DEBORAH CLOSE ___________________________ _____________________________________ Name: Max R. McCaskill Deborah Close Title: Vice President /s/ STEPHEN H. JAFFE _______________________________ Stephen H. Jaffe -4- 5 /s/ GRANT GENEREUX /s/ IAN LEITCH _________________________________ _________________________________ Grant Genereux Ian Leitch /s/ DOUG SPACKMAN /s/ ROBERT PATTERSON _________________________________ _________________________________ Doug Spackman Robert Patterson /s/ DAVE SAVELLE /s/ KEVIN ROBINSON _________________________________ _________________________________ Dave Savelle Kevin Robinson /s/ GREG ROY /s/ BRIAN JANZEN _________________________________ _________________________________ Greg Roy Brian Janzen /s/ JIM BURGLIN /s/ PRESTON NALDER _________________________________ _________________________________ Jim Burglin Preston Nalder /s/ DAN BEWS /s/ RICHARD WARD _________________________________ _________________________________ Dan Bews Richard Ward -5- EX-2.1.B 3 ADDENDUM NO. 2 TO STOCK PURCHASE AGREEMENT 1 EXHIBIT 2.1(b) ADDENDUM NO. 2 TO STOCK PURCHASE AGREEMENT This Addendum (the "Addendum"), dated effective as of this 29th day of September 1995, by and between Landmark Graphics Corporation, a Delaware corporation ("Landmark"), and the former owners (the "Earnout Recipients") of the Class A Common Shares, no par value per share, of MGI Associates, Inc., a Texas corporation ("MGA"), evidences that, WHEREAS, Landmark and the Earnout Recipients are parties to that certain Stock Purchase Agreement, dated as of September 29,1994, as amended by Addendum No. 1 to the Stock Purchase Agreement (the "Stock Purchase Agreement"); WHEREAS, Article 4 of the Stock Purchase Agreement contemplated that Landmark would, based upon the financial performance of MGA, make payments of money to the Earnout Recipients; WHEREAS, Landmark and the Earnout Recipients desire to amend the Stock Purchase Agreement to eliminate the financial performance of MGA as a factor in determining when and the extent to which such payments are to be made by Landmark; NOW THEREFORE, in consideration of the premises and other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I GENERAL SECTION 1.1 RELATION TO STOCK PURCHASE AGREEMENT. Capitalized terms used but not defined herein are used as defined in the Stock Purchase Agreement. Except as modified herein, the Stock Purchase Agreement will remain in full force and effect in accordance with the terms thereof. In the event of any conflict between the terms and conditions of the Stock Purchase Agreement and the terms and conditions of this Addendum, the terms and conditions of this Addendum will govern and control. SECTION 1.2 AMENDMENT OF ARTICLES 3 AND 4. Articles 3 and 4 of the Stock Purchase Agreement are hereby amended to read in their entirety as set forth on Exhibit 1.2 attached hereto and incorporated herein by reference. SECTION 1.3 CONTINUATION OF THE STOCK PURCHASE AGREEMENT. Except as amended by this Addendum, the Stock Purchase Agreement will remain in full force and effect, in accordance with its terms. SECTION 1.4 NO DUPLICATE PAYMENTS. Nothing contained in this Addendum will be deemed to obligate Landmark to make more than one (1) payment with respect to the 2 Earnout Period ending June 30, 1995. Such payment will be made on or before September 30, 1995 and will be made in an amount equal to $1,808,095.00. SECTION 1.5 AUDIT OF RESULTS OF OPERATIONS. On or before October 30, 1995, Landmark will cause the revenues of MGA and its subsidiaries for the fiscal year ending June 30, 1995 to be audited by Arthur Andersen LLP. Such audit will be performed in accordance with generally accepted auditing standards, consistently applied. Landmark's obligations pursuant to this Addendum are conditioned upon the results of that audit being in substantial agreement with the unaudited revenues previously reported by MGA and its subsidiaries to Landmark with respect to such period. ARTICLE 11 MISCELLANEOUS SECTION 2.1 ENTIRE AGREEMENT. This Addendum and the agreements, instruments and documents contemplated by this Addendum represent the parties' entire agreement with respect to the subject matter of this Addendum and such other agreements, instruments and documents and supersede and replace any prior agreement or understanding with respect to that subject matter. This Addendum may not be amended or supplemented except pursuant to a written instrument signed by the party against whom such amendment or supplement is to be enforced. SECTION 2.2 COUNTERPARTS. This Addendum may be executed in multiple counterparts, each of which will be deemed to be an original and all of which will be deemed to be a single agreement. This Addendum will be considered fully executed when all parties have executed an identical counterpart, notwithstanding that all signatures may not appear on the same counterpart. SECTION 2.3 SEVERABILITY. If any of the provisions of this Addendum are determined to be invalid or unenforceable, such invalidity or unenforceability will not invalidate or render unenforceable the remainder of this Addendum, but rather the entire Addendum will be construed as if not containing the particular invalid or unenforceable provision or provisions, and the rights and obligations of the parties will be construed and enforced accordingly. The parties acknowledge that if any provision of this Addendum is determined to be invalid or unenforceable, it is their desire and intention that such provision be reformed and construed in such manner that it will, to the maximum extent practicable, be deemed to be valid and enforceable. -2- 3 IN WITNESS WHEREOF, the undersigned have executed this Addendum effective as of the date first above written. LANDMARK GRAPHICS CORPORATION By: /s/ WILLIAM H. SEIPPEL ___________________________________ Name: William H. Seippel Title: VP, Finance & CFO /s/ FRANK D. MCMORDIE _______________________________________ Frank D. McMordie Eppler, Guerin & Turner, Inc. as Custodian for the benefit of Frank D. McMordie By: /s/ MARK R. McCASKILL ____________________________________ Name: Mark R. McCaskill Title: Vice President -3- 4 /s/ ELIZABETH McMORDIE-SCHMIDT /s/ STEPHEN H. JAFFE _______________________________ ____________________________________ Elizabeth McMordie-Schmidt STEPHEN H. JAFFE Eppler, Guerin & Turner, Inc. as Custodian for the Benefit of Stephen H. Jaffe /s/ JENNIFER L. McMORDIE _______________________________ Jennifer L. McMordie By: MAX R. McCASKILL ________________________________ Name: Max R. McCaskill Title: Vice President /s/ CHRISTOPHER L. McMORDIE _______________________________ Christopher L. McMordie /s/ THEODORE S. ROZSA _____________________________________ Theodore S. Rozsa /s/ HELEN LINDSLEY _______________________________ Helen Lindsley Vendanges Investments, Inc. /s/ GORDON R. BAYSTROM _______________________________ By: RODERICK G. MUNRO Gordon R. Baystrom _________________________________ Name: Roderick G. Munro Title: President Eppler, Guerin & Turner, Inc. As Custodian for the Benefit of Gordon R. Baystrom Calyx Investments, Ltd. By: MAX R. McCASKILL By: JAN MILLS ___________________________ _________________________________ Name: Max R. McCaskill Name: Jan Mills Title: Vice President Title: Vice President /s/ GUY M. HUMPHRIES, JR. /s/ JAMES R. LOVETT _______________________________ _____________________________________ Guy M. Humphries, Jr. James R. Lovett Eppler, Guerin & Turner, Inc. As Custodian for the Benefit of /s/ KIRK D. HANES Guy M. Humphries, Jr. _____________________________________ Kirk D. Hanes By: MAX R. McCASKILL ___________________________ Name: Max R. McCaskill /s/ DEBORAH CLOSE Title: Vice President _____________________________________ Deborah Close -4- 5 /s/ GRANT GENEREUX /s/ IAN LEITCH _________________________________ _________________________________ Grant Genereux Ian Leitch /s/ DOUG SPACKMAN /s/ ROBERT PATTERSON _________________________________ _________________________________ Doug Spackman Robert Patterson /s/ DAVE SAVELLE /s/ KEVIN ROBINSON _________________________________ _________________________________ Dave Savelle Kevin Robinson /s/ GREG ROY /s/ BRIAN JANZEN _________________________________ _________________________________ Greg Roy Brian Janzen /s/ JIM BURGLIN /s/ PRESTON NALDER _________________________________ _________________________________ Jim Burglin Preston Nalder /s/ DAN BEWS /s/ RICHARD WARD _________________________________ _________________________________ Dan Bews Richard Ward -5- 6 EXHIBIT 1.2 ARTICLE 3 CERTAIN DEFINITIONS 3.1 Certain Definitions. For purposes of this Agreement, each capitalized term listed below shall have the meaning set opposite such term below: "Closing" shall mean the consummation of the purchase and sale of the MGA Stock and the ME1 Shares contemplated by this Agreement, the payment of the Class A Shares Cash Consideration, the Class B Shares Purchase Price and the MEI Shares Purchase Price, and the execution and delivery of the other agreements and documents, and the completion, effectuation, and performance of the other acts and actions contemplated by Article 13 hereof. "Closing Date" shall have the meaning specified in Section 13.1 hereof. "Earnout Payments" shall mean, with respect to each Earnout Period, the amount set forth opposite such Earnout Period in the following table: Earnout Period ending June 30 Earnout Payment ----------------------------- --------------- 1995 $ 1,808,095 1996 $ 2,248,150 1997 $ 2,843,755 It is understood and agreed that notwithstanding the use of the term "Earnout Payments" the above-referenced payments are not in any manner dependent upon or to be determined with reference to the financial or other performance of MGA or any other entity. "Eamout Period" shall mean each applicable twelve-month period ending June 30, 1995, 1996 or 1997. "Eamout Recipient" shall mean each Person which was a holder of Class A Shares immediately prior to the Closing Date. "Person" shall mean any individual, or any corporation, partnership, trust, or other entity. EXHIBIT 1.2 - ARTICLES 3 AND 4 - Page 1 7 ARTICLE 4 EARNOUT PAYMENTS 4.1 Payment of Earnout Payments. (a) Payments. The Earnout Payments for each Earnout Period shall be paid by Landmark on the September 30 immediately following the end of such Earnout Period (the "Earnout Payment Date") and shall be accompanied by a Statement of Claim (as hereinafter defined). Earnout Payments shall be made to each of the Earnout Recipients in proportion to the number of Class A Shares each Earnout Recipient owned immediately prior to the Closing Date. Each Earnout Payment shall be made by check or by wire transfer if requested. (b) Adjustments. If a claim is made with respect to the representations and warranties set forth in Article 6 of this Agreement or the covenants of MGA set forth in this Agreement, the remaining Earnout Payments (net of all previous adjustments made pursuant to this Section 4.1 (b)) shall be reduced by the amount of the claim (the "Claim Amount"). If the amount of the remaining Earnout Payments (net of all previous adjustments made pursuant to this Section 4.1 (b)) is greater than the Claim Amount, Landmark shall (after such reduction) have no further rights against the Shareholders with respect to such claim. If the Claim Amount exceeds the amount of the remaining Earnout Payments (net of all previous adjustments made pursuant to this Section 4.1(b)), the Warranting Shareholders shall pay such excess to Landmark pursuant to their respective Indemnity Agreements (as hereinafter defined). 4.2 No Assignment of Earnout Payments. The right to receive Earnout Payments shall not be assignable except by will and the laws of intestate succession, or otherwise by operation of law. 4.3 Statement of Claim. In the event Landmark asserts a claim pursuant to Section 4.1, Landmark shall promptly provide each Earnout Recipient and the Sellers' Representative a statement (a "Statement of Claim") describing its claim and the method of its calculation. Any such Claim Statement shall also set forth the effect of such claim upon the remaining Earnout Payments. If within thirty (30) days after delivery of the Statement of Claim to the Earnout Recipients (including Sellers' Representative), Sellers' Representative or one or more of the Warranting Shareholders has not given written notice to Landmark disputing such Statement of Claim and indicating the basis of such dispute, such Statement of Claim will be deemed to be conclusive with respect to such claim and its effects upon the remaining Earnout Payments. In the event Landmark receives such notice of dispute within such 30-day period, Sellers' Representative and Landmark will use their best efforts to settle the dispute within thirty (30) days after the giving of such notice. EXHIBIT 1.2 - ARTICLES 3 AND 4 - Page 2 EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the quarterly filing on Form 10-Q for the period ended September 30, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS JUN-30-1996 JUL-1-1995 SEP-30-1995 73,475 0 44,229 1,560 4,747 138,184 82,177 35,666 214,760 37,394 10,756 871 0 0 163,083 214,760 22,848 39,810 8,029 16,685 0 389 258 420 (126) 294 0 0 0 294 0.02 0.02
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