-----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, Db4mKZ6RlCURMZ09h7PU+zPBpM+JYBb3AcLjm3ZmBBNlTZ52llCx61zPW+Sha3O7 kaBIG6pn2+Gt9DsuTTfbjw== 0001052809-99-000012.txt : 19990923 0001052809-99-000012.hdr.sgml : 19990923 ACCESSION NUMBER: 0001052809-99-000012 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990923 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990922 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONDOR WEST CORP CENTRAL INDEX KEY: 0000831378 STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799] IRS NUMBER: 760251547 STATE OF INCORPORATION: NV FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 033-20966 FILM NUMBER: 99715030 BUSINESS ADDRESS: STREET 1: 8547 ARAPAHO RD STREET 2: STE 416J CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80112 BUSINESS PHONE: 3037702313 MAIL ADDRESS: STREET 1: 909 FROSTWOOD #261 STREET 2: SUITE 160 CITY: HOUSTON STATE: TX ZIP: 77024 8-K 1 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Date of Report September 23, 1999 ----------------------------------------------------------------- Online International Corporation - -------------------------------------------------------------------------------- (Exact Name of registrant as specified in its charter) NEVADA 33-20966 NO. 760251547 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission File No) (IRS Employer incorporation) Identification No.) 150 LASER COURT HAUPPAUGE, NEW YORK 11788 - -------------------------------------------------------------------------------- (Address of Principal Executive Officers) (Zip Code) Registrant's telephone number, including area code 516-231-7575 ----------------------------- Condor West Corporation 909 Frostwood, Suite 261 Houston, Texas 77024 - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) COPIES OF ALL COMMUNICATIONS TO: Steve Larson-Jackson, Esquire W. Kwame Anthony, Esquire Law Firm of Larson-Jackson, P.C. 1275 K Street, NW, Suite 1101 Washington, D.C. 20005 Tel.: (202) 408-8180 Fax.: (202) 789-2216 ITEM 1: Change in Control of Registrant The Company is a Nevada corporation formerly known as Condor West Corporation. In December 1988, pursuant to a Form S-1 registration statement, the Company's registration statement became effective. From 1989 to 1994 Condor remained inactive. In May 1995 the Company began to develop a business plan for the financing and establishment of a chain of retail brake and installation outlets. The Company operated under the name of Super Brakes, Inc. From May 1996 to the September 1999 the Company had no material assets, liabilities or business activities. In August 1999, the majority of shareholders of Condor approved a plan of merger with Online International Corporation. Online International Corporation controls the company as a result of the merger between the two companies. Control of the company was acquired by Stanley James White, Leslie Nochomovitz and Alex Igelman and Victoria Danseglio through Online. The amount of the consideration was $275,000 and the source of the payment came from Online International Corporation. The payment was made on September 9, 1999 and no part of the consideration was a loan. The transaction is best described as a reverse takeover pursuant to a plan of merger wherein Online was merged into Condor. The officers and directors do not beneficially own, directly or indirectly, any of the common stock of the corporation. The control block of common stock consists of 201,000 shares, which are beneficially owned by the company, Online International Corporation. The officers and directors received rights to receive stock options. The options will not vest until the expiration of one year or after September 9, 2000. The identity of the persons from whom control was acquired is as follows: Carl D. Nation; Dr. Everett Renger: Steven R. Paige; Wade D. Althen; Terrance Rasmussen; David Christman; Berton A. Johnson; Dennis L. Swenson; and Everrett Renger, Sr. ITEM 6: Resignations of Registrant's Directors As a condition of the transaction, the directors tendered their resignations and the resignations were accepted by the Chairman of the Board of Directors on August 4, 1999. On September 9, 1999 three new directors nominated by Online. The new directors are Stanley James White, Leslie Nochomovitz and Alex Igelman. ITEM 7. Exhibits and Financial Statements INDEX TO FINANCIAL STATEMENTS REQUIRED BY ITEM 7 INDEX A. FINANCIAL STATEMENTS Report of independent certified public accountants Balance sheets, January 31, 1999 and 1998 Statement of income for the periods ended January 31, 1999 and 1998 Statement of stockholder's equity for the years ended January 31, 1999, 1998 and 1997 Statement of cash flows for the periods ended January 31, 1999 and 1998 Notes to consolidated statements Exhibits Ex. 2 PLAN OF MERGER Ex. 10 LOCK-UP AGREEMENT Ex. 99 STOCK OPTION PLAN PANETH, HABER & ZIMMERMAN LLP CERTIFIED PUBLIC ACCOUNTANTS [Letterhead] 600 Third Avenue New York, NY 10016-1938 Telephone 212/503-8800 Facsimile 212/370-3759 INDEPENDENT AUDITORS' REPORT Board of Directors Online International Corporation We have audited the accompanying consolidated balance sheet of Online International Corporation and Subsidiaries, as of January 31, 1999 and 1998, and the related consolidated statements of income, stockholders' equity and cash flows for the years ended January 31, 1999 and 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Online International Corporation and Subsidiaries as of January 31, 1999 and 1998, and the consolidated results of their operations and cash flows for the years ended January 31, 1999 and 1998, in conformity with generally accepted accounting principles. /s/ Paneth, Haber & Zimmerman LLP ----------------------------------------- Paneth, Haber & Zimmerman LLP New York, NY March 18, 1999 ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ASSETS
January 31, ------------------- 1999 1998 ---- ---- CURRENT ASSETS Cash $ 605,111 $ 842,134 Accounts receivable, less allowance for doubtful accounts of $55,630 in 1999 and $-0- in 1998 687,673 1,092,720 Inventories 610,846 588,444 Note receivable 5,000 18,750 Prepaid expenses and other current assets 134,740 273,456 Due from employee 82,296 5,000 Deferred income taxes -- 108,300 Total Current Assets 2,125,666 2,928,804 ----------- ----------- PROPERTY AND EQUIPMENT, at cost, less accumulated depreciation 867,913 1,069,554 ----------- ----------- OTHER ASSETS Investment in foreign lottery operation 100,000 -- Due from former subsidiary 206,673 276,081 Deferred income taxes 174,600 -- Deferred compensation trusts 128,083 29,750 Note receivable, less current portion 30,000 30,000 Deposits 27,762 27,762 ----------- ----------- Total Other Assets 667,118 363,593 ----------- ----------- $ 3,660,697 $ 4,361,951 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank line-of-credit $ 530,000 $ -- Current portion of obligations under capital leases 45,878 41,359 Accounts payable 429,851 564,224 Accrued expenses and other current liabilities 176,363 106,053 Deferred income taxes -- 69,500 ----------- ----------- Total Current Liabilities 1,182,092 781,136 OBLIGATIONS UNDER CAPITAL LEASES, less current portion 153,689 199,567 DEFERRED COMPENSATION 128,083 29,750 ----------- ----------- Total Liabilities 1,463,864 1,010,453 ----------- ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY 5% preferred stock, no par value; 7,800,156 shares issued in 1999 and 1998 ($23,400,000 liquidation preference) 1,584,855 1,584,855 Common stock, $.001 par value; 100,000,000 shares authorized, 5,507,244 shares issued in 1999 and 1998 5,507 2,754 Additional paid-in capital 1,436,870 1,439,623 Retained earnings (accumulated deficit) (830,399) 324,266 ----------- ----------- Total Stockholders' Equity 2,196,833 3,351,498 ----------- ----------- $ 3,660,697 $ 4,361,951 =========== ===========
See notes to consolidated financial statements. - 2 - ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME
Year Ended January 31, ------------------------------ 1999 1998 -------------- ------------- NET SALES $ 8,376,075 $ 10,066,262 COST OF GOODS SOLD 6,925,092 8,452,131 ------------ ------------ GROSS PROFIT 1,450,983 1,614,131 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (2,033,640) (1,886,377) LOSS ON INVESTMENT IN FOREIGN LOTTERY OPERATION (705,000) -- ------------ ------------ LOSS FROM OPERATIONS (1,287,657) (272,246) ------------ ------------ OTHER INCOME (EXPENSE) Miscellaneous income 19,652 17,104 Gain on sale of assets -- 106,141 Interest expense (36,584) (42,365) Gain on sale of unconsolidated subsidiaries -- 223,033 Gain on investment in deferred compensation trusts 23,083 -- ------------ ------------ Total Other Income 6,151 303,913 ------------ ------------ (LOSS) INCOME BEFORE INCOME TAXES (1,281,506) 31,667 INCOME TAX BENEFIT (126,841) (36,360) ------------ ------------ NET (LOSS) INCOME $ (1,154,665) $ 68,027 ============ ============
See notes to consolidated financial statements. - 3 - ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Preferred Stock ------------------------- ----------------------- Additional Number of Par Number Par Paid-in Shares Value of Shares Value Capital ------------- ---------- ------------ -------- ---------- Balance at January 31, 1997, as previously reported 2,486,950 $ 2,487 250 $ 1,693,223 $ 1,331,522 2-for-1 common stock split effective July 14, 1998 2,486,950 -- -- -- -- 33,334-for-1 preferred stock split effective July 14, 1998 -- -- 8,333,250 -- -- ----------- ----------- ----------- ----------- ----------- Balance at January 31, 1997, as restated 4,973,900 2,487 8,333,500 1,693,223 1,331,522 Conversion of preferred stock 533,344 267 (533,344) (108,368) 108,101 Net Income for Year Ended January 31, 1998 -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Balance at January 31, 1998 5,507,244 2,754 7,800,156 1,584,855 1,439,623 Change in par value resulting from July 14, 1998 stock split -- 2,753 -- -- (2,753) Net Loss for Year Ended January 31, 1999 -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total Stockholders' Equity at January 31, 1999 5,507,244 $ 5,507 7,800,156 $ 1,584,855 $ 1,436,870 =========== =========== =========== =========== ===========
Retained Earnings Total -------- ----- Balance at January 31, 1997, as previously reported $ 256,239 $ 3,283,471 2-for-1 common stock split effective July 14, 1998 2,486,950 -- 33,334-for-1 preferred stock split effective July 14, 1998 -- -- ----------- ----------- Balance at January 31, 1997, as restated 256,239 3,283,471 Conversion of preferred stock -- -- Net Income for Year Ended January 31, 1998 68,027 68,027 ----------- ----------- Balance at January 31, 1998 324,266 3,351,498 Change in par value resulting from July 14, 1998 stock split -- -- Net Loss for Year Ended January 31, 1999 (1,154,665) (1,154,665) ----------- ----------- Total Stockholders' Equity at January 31, 1999 $ (830,399) $ 2,196,833 =========== ===========
See notes to consolidated financial statements. - 4 - ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended January 31, ----------------------------- 1999 1998 -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income $(1,154,665) $ 68,027 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Gain on sale of property and equipment -- (106,141) Depreciation and amortization 272,029 266,258 Gain on sale of subsidiaries -- (223,032) Loss on investment in foreign lottery operation 705,000 -- Deferred taxes (135,800) (93,508) Change in: Accounts receivable 405,047 (7,467) Inventories (22,402) 190,287 Prepaid expenses and other current assets 61,420 (222,297) Deferred compensation trust (98,333) (29,750) Accounts payable (134,373) (796,565) Accrued expenses and other current liabilities 70,310 54,976 Deposits -- 14,135 Deferred compensation 98,333 29,750 ----------- ----------- Net Cash Provided by (Used in) Operating Activities 66,566 (855,327) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Collection of (additions to) notes receivable 13,750 (10,000) Investment in foreign lottery operation (805,000) -- Acquisitions of property and equipment (70,388) (153,234) Proceeds from sale of property and equipment -- 137,490 Proceeds from sale of unconsolidated subsidiary 69,408 453,592 ----------- ----------- Net Cash (Used in) Provided by Investing Activities (792,230) 427,848 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from bank line-of-credit 530,000 -- Payments of long-term debt -- (22,686) Payments of obligations under capital leases (41,359) (301,397) ----------- ----------- Net Cash Provided by (Used in) Financing Activities 488,641 (324,083) ----------- ----------- NET DECREASE IN CASH (237,023) (751,562) CASH Beginning of year 842,134 1,593,696 ----------- ----------- End of year $ 605,111 $ 842,134 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Income taxes $ 50,827 $ 69,773 =========== =========== Interest $ 34,352 $ 42,365 =========== ===========
See notes to consolidated financial statements. - 5 - ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 1999 1. DESCRIPTION OF BUSINESS AND ORGANIZATION Description of Business and Revenue Recognition The Company's operations consist of the design and manufacture of lottery tickets and play slips for automated on-line contractors and parimutuels (on track and off track betting), as well as lottery management consultation and operation. Sales are recorded on the date of shipment of the merchandise. Revenue from lottery management consultation and operation is recognized as services are rendered. Recapitalization On January 31, 1997, Online International, Inc. (Online) issued 250 shares of Series A convertible preferred stock in exchange for all issued and outstanding shares of Printing Associates, Inc. (PAI). A change in control of PAI to Online shareholders did not occur as a result of this transaction, due to the rights retained by the former common shareholder through its ownership of the preferred stock. This transaction was accounted for as a recapitalization (similar to a reverse acquisition) of the Company's equity in accordance with the consensus of the Emerging Issues Task Force No. 88-16. The application of the consensus under 88-16 requires that the historic basis of PAI's assets and liabilities be used, since there was no change in control to Online's shareholders. As a result, PAI is recording the issuance of Common stock for the $1,320,000 of net monetary assets of Online at January 31, 1997. The common stock owned by the former shareholder is recorded as if it was converted to preferred stock. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Online International Corporation, its wholly- owned subsidiaries, Printing Associates, Inc. and Printing Associates of Florida, Inc. for the years ended January 31, 1999 and 1998 collectively referred to as "The Company". All material intercompany transactions and balances have been eliminated in consolidation. Unconsolidated Subsidiaries During 1998, the Company sold two of its subsidiaries, PAP Security Printing, Inc. (PAP), which is located in Pennsylvania, and Wintex International, Inc., which is located in Texas, in which it owned 49% and 60%, respectively. The sale of PAP was for $268,608, all of which was collected by the Company in 1998. The sale of Wintex International, Inc. includes an agreement in which the former subsidiary is required to pay the Company 3.5% of gross sales for each of the next five years, as well as other charges such as consideration of stock, debt, and unpaid dividends. The Company has estimated the total as $493,000. The five-year receivable was discounted to present value to total $461,065 as the sale price of the subsidiary. As of January 31, 1999, the Company has a receivable of $206,673. Due to the inherent uncertainties in estimating the future gross sales of Wintex International, Inc., it is at least reasonably possible that the estimate of the amount to be collected, and therefore, the fair value of the receivable, will change in the near term. The January 31, 1999 fair values that are reasonably possible range from $100,000 to $300,000. During the year ended January 31, 1999, Online common stock split on a two for one basis and Online preferred stock split on a 33,334 for one basis. Such stock split has been reflected on the financial statements. - 6 - ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JANUARY 31, 1999 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Inventories Inventories are stated at the lower of cost or market with cost determined by the first-in, first-out method. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed by both the straight-line and declining balance methods over the estimated useful lives of the assets indicated in Note 6. Leasehold improvements are amortized on a straight-line basis over the life of the lease. Maintenance and repairs are charged to income as incurred. Renewals and replacements of a routine nature are charged to income, while those which significantly improve or extend the life of existing property are capitalized. Upon sale or retirement of property and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the related gain or loss is included in current income. Stock Options Stock based compensation is recognized using the intrinsic value method under which compensation cost for stock options is measured as the excess, if any, of market value of the Company's stock at the measurement date over the exercise price. For disclosure purposes, pro-forma net income is provided as if the fair value method had been applied. Reclassifications Certain 1998 amounts have been reclassified to conform with 1999 classifications. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. 3. MAJOR CUSTOMERS The lottery and pari-mutuel products industry is controlled by a limited number of contractors. The Company's sales to its three significant contractors were:
Year Ended January 31, ---------------------- 1999 1998 ---- ---- Significant contractor No. 1 59% 40% Significant contractor No. 2 16% 32% Significant contractor No. 3 11% 11% ----- ----- 86% 83% ===== =====
- 7 - ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JANUARY 31, 1999 3. MAJOR CUSTOMERS (Continued) The Company's accounts receivable from one significant contractor amounted to approximately $343,000 and $402,000 at January 31, 1999 and 1998, respectively. 4. CASH Included in cash at January 31, 1999 are funds on deposit at two banks in New York totaling $625,341 (including outstanding checks of $32,002 against such funds). Of these funds, $200,000 is insured by the FDIC. Included in cash at January 31, 1998 are funds on deposit at three banks in New York totaling $1,062,948 (including outstanding checks of $232,090 against such funds). Of these funds, $300,000 is insured by FDIC. 5. INVENTORIES Inventories consist of the following:
January 31, -------------------- 1999 1998 --------- -------- Raw materials $172,111 $278,159 Work-in-process 68,192 99,175 Finished goods 370,543 211,110 -------- -------- $610,846 $588,444 ======== ========
6. PROPERTY AND EQUIPMENT Property and equipment consist of the following:
Estimated Useful January 31 Life In Years ------------------------- ---------------- 1999 1998 ---- ---- Machinery and equipment $ 2,477,303 $ 2,422,902 7 Furniture and office equipment 271,307 255,320 5-7 Leasehold improvements 204,512 204,512 7-13 ------------- ------------ 2,953,122 2,882,734 Less: Accumulated depreciation and amortization 2,085,209 1,813,180 ------------- ------------ $ 867,913 $ 1,069,554 ============= ============
- 8 - ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JANUARY 31, 1999 7. DEFERRED COMPENSATION The Company has a deferred compensation plan for key employees of the Company. Contributions to the Plan are at the discretion of the Board of Directors. Annual contributions for each beneficiary are placed in a trust with a third party fiduciary. At a predetermined date, the beneficiary is entitled to receive the assets of the trust, including investment earnings and appreciation. The Company has access to the assets of each trust in certain limited circumstances but should still be liable to the beneficiary for the assets removed. The investment earnings of the trusts are recorded as income to the Company and the Company's income is reduced by deferred compensation expense, which equals the contributions to the trust plus the earnings of the trust. The securities held by the trust are considered trading securities and carried at fair value. Deferred compensation expense amounted to $98,333 and $29,750 for the years ended January 31, 1999 and 1998, respectively. Following is a summary of marketable securities held in the above deferred compensation trusts:
1999 1998 ---- ---- Aggregate cost $105,000 $ 29,750 Realized and unrealized gains 23,083 -- -------- -------- Aggregate Fair Value $128,083 $ 29,750 ======== ========
8. INVESTMENT IN FOREIGN LOTTERY OPERATION During the year ended January 31, 1999, the Company entered into an agreement with a company that holds a license to the Cambodian Lottery (partly owned by an entity affiliated with a director of the Company). The Company advanced $805,000 to this foreign corporation in the form of a non-interest bearing loan which is payable as cash flow is available and prior to the payment of certain fees by the foreign corporation. The agreement also calls for the Company to receive a management fee for managing the lottery. This management fee is not payable until the Company first recovers its loan. Despite the legal form of a loan, the transaction is being recorded as an equity investment as the payments are first to be recouped out of the investee's cash flow. Management now believes that the $805,000 investment will not be completely recovered. The Company has recorded a charge to income to reduce the investment to its estimated fair value at January 31, 1999 of $100,000. This fair value represents management's current estimate of what it would be willing to pay for the same rights with their current knowledge. Because of the inherent uncertainties in making such an estimate, it is at least reasonably possible that it will change in the near term. 9. BANK LINE-OF-CREDIT Printing Associates, Inc. has an agreement with a bank that provides for a $750,000 line-of-credit for short- term loans, of which $220,000 is unused. The above commitment bears interest at the bank's prime rate (the prime rate was 7.75% at January 31, 1999). The agreement is secured by all existing and future accounts receivable of Printing Associates, Inc. - 9 - ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JANUARY 31, 1999 10. PREFERRED STOCK The 5% non-cumulative preferred stock is convertible into 1 share of common stock for each share of preferred. Dividends, when declared, are payable semi-annually and commence July 31, 1999. Upon conversion, the holder of these shares is limited to retaining a maximum of twenty percent of the then issued and outstanding common stock. The preferred shareholders are entitled to a liquidation preference, upon which the 5% non-cumulative preferred dividend is calculated, of $3 per preferred share. 11. STOCK OPTIONS In July 1998, the Company granted 900,000 options to certain officers and employees. Each option gives the holder the right to purchase one share of common stock at $1.10. The options expire in July 2008. 20% of the options granted become exercisable on each of the first, second, third, fourth and fifth anniversaries of the grant. Each recipient will forfeit any options that are unexercised when employment with the Company ceases. As described in Note 2, the Company accounted for the granting of stock options under the intrinsic value method and accordingly, no compensation cost has been recognized for stock options in these financial statements. There would not, however, have been any material effect had the Company determined compensation cost, based on fair value at the date of the grant. This was because under the "minimum value" method of determining fair value (which is required for privately held companies) the option would have had no material value at the date of grant. 12. NON-CASH INVESTING AND FINANCING TRANSACTIONS A capital lease obligation was incurred for the acquisition of equipment in the amount of $250,613 in 1998. A stock split in the amount of $2,753 of common stock was converted during 1998 on a two for one basis. A note receivable of $276,081 was received on the sale of subsidiaries during 1998. 13. LEASES The Company is the lessee of certain equipment under operating and capital leases as well as lessee of office and warehouse space in New York. At January 31, 1999, the future minimum lease payments for all leases are as follows:
Operating Obligations under Leases Capital Leases ------ -------------- 2000 $ 198,000 $ 64,512 2001 181,500 64,512 2002 -- 64,512 Remaining years -- 48,384 ------------- ------------ $ 379,500 241,920 ============= ============
- 10 - ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JANUARY 31, 1999 13. LEASES (Continued)
Operating Obligations under Leases Capital Leases --------- ----------------- Less amount representing interest 42,353 ------------- Present value of minimum lease payments 199,567 Less current portion 45,878 ------------- Long-term portion $ 153,689 =============
Rent expense for the year ended January 31, 1999 and 1998 amounted to $253,082 and $224,110. Equipment held under capitalized leases at January 31, 1999 consists of the following: Machinery and equipment $ 257,399 Less: Accumulated amortization 55,157 ------------- $ 202,242 =============
14. INCOME TAXES The provision for income taxes consists of the following components:
January 31, ------------------------------ 1999 1998 ------------ ------------ Current Federal $ (17,698) $ 20,113 State and foreign 26,657 35,968 --------- -------- 8,959 56,081 --------- -------- Deferred Relating to current net operating loss Federal (91,000) -- State (40,000) (91,400) --------- -------- (131,000) (91,400) --------- -------- Other Federal 2,200 4,216 State (7,000) (5,257) --------- -------- (4,800) (1,041) --------- -------- (135,800) (92,441) --------- -------- $ (126,841) $ (36,360) ========= ========
- 11 - ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JANUARY 31, 1999 14. INCOME TAXES (Continued)
Year Ended January 31, --------------------------------- 1999 1998 ------------ ----------- Deferred income taxes consists of the following: Gross deferred tax assets $ 233,800 $ 108,300 ========== =========== Gross deferred tax liabilities $ 59,200 $ 69,500 ========== ===========
The 1999 deferred tax asset balances primarily relate to a consolidated federal net operating loss carryover and a New York State net operating loss carryover for Online International Corp. The 1998 deferred tax asset balances primarily relate to a net operating loss for Online International for New York State. The liabilities in both years are primarily a result of temporary differences in the recognition of the gain on sale of subsidiary. The reconciliation between the actual and expected Federal tax is as follows:
Year Ended January 31, ----------------------------------- 1999 1998 ----------- ------------ Income tax provision at 34% $ (163,652) $ 10,767 State and local income taxes net of Federal income tax effect 17,132 (36,876) Change in estimate of prior year Federal income tax 16,504 (14,659) Effect of nondeductible expenses 3,175 4,408 ----------- ---------- Actual income tax provision $ (126,841) $ (36,360) ============ ===========
15. COMMITMENTS The Company has entered into employment contracts with the president of PAI and other key employees that expire at various dates through October 22, 2001. Future minimum payments, excluding certain fringe benefits, relating to these agreements are as follows: 2000 $ 240,000 2001 240,000 2002 180,000 --------------- $ 660,000 ===============
- 12 - ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JANUARY 31, 1999 16. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments ("SFAS 107") requires entities to disclose the fair values of financial instruments except when it is not practicable to do so. Under SFAS 107, it is not practicable to make this disclosure when the costs of formulating the estimated values exceed the benefit when considering how meaningful the information would be to financial statement users. The Company's financial instruments, and the related amounts recorded on the balance sheet, to which SFAS 107 would be applied include the following:
Carrying Amount --------------------------------- Year Ended January 31, --------------------------------- 1999 1998 ------------ ---------- Assets: Cash $ 605,111 $ 842,134 Notes receivable 35,000 38,750 Due from employees 82,296 5,000 Investment in foreign lottery operation 100,000 -- Due from former subsidiary 206,673 276,081 Deferred compensation trusts 128,083 29,750 Liabilities: Bank line-of-credit 530,000 --
The fair values of cash, notes receivable, due from employees, deferred compensation trusts and bank line-of-credit do not differ materially from their carrying amounts. See Notes 2 and 8, respectively, for more information about the balance due from the former subsidiary and the investment in foreign lottery operation. None of the above are derivative financial instruments and none, except the deferred compensation trusts, are held for trading purposes. 17. NET ASSETS OUTSIDE THE U.S. As of January 31, 1998 and 1999, net assets outside the U.S. were $210,462 and $281,601, respectively. Net assets in Canada were not material at January 31, 1998 and 1999. 18. SEGMENT INFORMATION As described in Note 1, the Company's operations have been classified into two segments, the design and manufacture of lottery tickets and lottery management consultation. Summarized information by business segment for 1999 and 1998 is as follows: - 13 - ONLINE INTERNATIONAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) JANUARY 31, 1999 18. SEGMENT INFORMATION (Continued)
1999 1998 -------------------------------------------- -------------------------------------------- Design and Lottery Design and Lottery Manufacture Management Total Manufacture Management Total ----------- ---------- ----- ----------- ---------- ----- Revenue $ 8,118,659 $ 257,416 $ 8,376,075 $ 10,056,262 $ 10,000 $ 10,066,262 ============ ============ ============ ============ ============ ============ Operating income (loss) $ 517,349 $ (1,805,006) $ (1,287,657) $ 737,278 $ (1,009,524) $ (272,246) Gain on sale of assets -- -- -- 106,141 -- 106,141 Gain on sale of subsidiary -- -- -- 223,033 -- 223,033 Interest expense (23,805) (12,779) (36,584) (42,365) -- (42,365) Miscellaneous income 33,404 9,331 42,735 17,104 -- 17,104 ------------ ------------ ------------ ------------ ------------ ------------ Pre-tax income (loss) 526,948 (1,808,454) (1,281,506) 1,041,191 (1,009,524) 31,667 Income tax expense (benefit) (48,106) (78,735) (126,841) 8,040 (44,400) (36,360) ------------ ------------ ------------ ------------ ------------ ------------ Net income (loss) $ 575,054 $ (1,729,719) $ (1,154,665) $ 1,033,151 $ (965,124) $ 68,027 ============ ============ ============ ============ ============ ============ Total Assets $ 3,317,796 $ 342,901 $ 3,660,697 $ 4,075,794 $ 286,157 $ 4,361,951 ============ ============ ============ ============ ============ ============ Depreciation and amortization $ 270,519 $ 1,510 $ 272,029 $ 264,748 $ 1,510 $ 266,258 ============ ============ ============ ============ ============ ============ Capital expenditures $ 70,388 $ -- $ 70,388 $ 396,297 $ 7,550 $ 403,847 ============ ============ ============ ============ ============ ============
19. SUBSEQUENT EVENT As of March 18, 1999, Printing Associates, Inc. has borrowed an additional $90,000 against the line-of-credit mentioned in Note 9. - 14 - 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 hereunto duly authorized. Date: 9/23/99 Online International Corporation (Registrant) /s/ Stanley James White --------------------------------------- Stanley James White Chief Executive Officer, President & Secretary EX-2 2 PLAN OF MERGER This Agreement and Plan of Merger, dated September 9, 1999 by and between Online International Corporation (hereinafter referred to as "Online"), and Condor West Corporation (hereinafter referred to as "Condor"). Online International Corporation is duly organized and existing under the laws of the State of Nevada, having an authorized capital stock of 100,000,000 shares, par value $.001, of which 5,507, 244 shares of common stock are issued and outstanding, and 7,800,156 shares of Series A preferred stock are issued and outstanding; and Condor West is a corporation duly organized and existing under the laws of the State of Nevada, having an authorized capital stock consisting of 35,000,000 shares of common stock, par value$.001, of which 311,238 shares are issued and outstanding. Condor has 5,000,000 preferred shares authorized, of which none are issued or outstanding. Whereas, the board of directors of each of the constituent corporations deems it advisable, for the general welfare and advantage of the corporations and their respective shareholders, that Online merge with and into Condor; and The board of directors of each of the constituent corporations has approved this Agreement of Merger. The parties agree, in accordance with the provisions of the Nevada Revised Statutes Annotated, that Online and Condor shall be, and they hereby are, merged into a single corporation. The terms and conditions of the merger and the mode of carrying the merger into effect and the manner of converting the shares of each of the constituent corporations into shares of the surviving corporation, shall be as set forth in this Plan of Merger. The Amended Articles of Incorporation of Condor West, upon the effective date of this agreement shall be duly filed with the Secretary of State of Nevada. ARTICLE I CORPORATE EXISTENCE OF SURVIVING CORPORATION Except as otherwise specifically set forth in this agreement, the identity, existence, purposes, powers, franchises, rights and immunities of Condor shall continue unaffected and unimpaired by the merger, and the corporate identity, existence, purposes, powers, franchises, rights and immunities of Online. Online shall cease to exist and will be merged into Condor. The separate corporate existence of Online shall be extinguished as soon as this agreement becomes effective, and Condor and Online shall become a single corporation ("Surviving Corporation"). Condor and Online are sometimes referred to as the "Constituent Corporations," and the time at which the Constituent Corporations become a single corporation is referred to as the "effective date of this agreement." The parties hereto agree, any stock option plan in existence for a period greater than one month prior to the execution of the instant agreement shall and hereby is canceled forthwith. As soon as practicable on or following the effective date of this Agreement, Condor and Online will cause the Articles of Merger to be delivered to the Secretary of State of Nevada. ARTICLE II AMENDMENT OF ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION The Amended Articles of Incorporation of the Surviving Corporation, as amended, shall, upon the effective date of this agreement, be and be deemed to be further amended to read as follows the term "Corporation" (as used in this article referring to the "Surviving Corporation"); First: The name of the Corporation is Online International Corporation. Second: The principal office of the Corporation is located at 150 Laser Court, Hauppauge, New York. Third: The Corporation is formed for the purpose of the design and manufacture of lottery tickets and play slips for automated on-line contractors and parimutuels (on track and off track betting) as well as lottery management, investments in the lottery business, consultation and operation and for doing all things of every kind incident to the business, including but not limited to: Engage in any lawful activity and to manufacture, purchase or otherwise acquire, invest in, own mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description; To hold, purchase and convey real and personal estate and to mortgage or lease any such real and personal estate with its franchises and to take the same devise or bequest; To acquire, and pay for in cash, stocks, bonds or any other security of this Company, the good will, rights assets and property and to undertake or assume the whole or any part of the obligations or liabilities for any person, firm, association or corporation; To acquire, hold use, sell, lease, grant license in respect of, mortgage or otherwise dispose of letters of patents of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvement and processes, copyright , trade marks and trade names relating to our useful in connection with any business in this Corporation; To borrow money and contract debts when necessary for the transaction of its business, or for the exercise of its corporate rights, privileges or franchises, or for any other lawful purpose of its incorporation ; to issue bonds, promissory notes, bills of exchange, debentures and other obligations and evidence of indebtedness, payable at specified time or times or payable upon the 2 happening of a specified event or events, whether secured by mortgage, pledge or otherwise, or unsecured for money borrowed, or in payment for property purchased, or acquired, or for any other lawful objects; To do all and everything necessary and proper for the accomplishment of the objects enumerated in this plan or necessary or incidental to the protection and benefit of the Corporation and, in general, to carry on any lawful business necessary or incidental to the attainment of the objects of the Corporation, whether or not such business is similar in nature to the objects herein set forth above. Fourth: Section 1. The maximum number of shares which the Corporation is authorized to have outstanding is 100,000,000 shares, which shall be classified as common stock. Section 2. The express terms and provisions of the shares of preferred stock are as follows Subject to the limitations and restrictions set forth in this Article Fourth, the board of directors is authorized and empowered at one time or from time to time. (1) To create one or more series of preferred stock and to authorize the issuance of preferred stock in such series, and to fix or alter in respect of any particular series, the following express terms and provisions of any authorized and unissued shares of preferred stock (whether or not such shares shall have been previously designated as shares of a particular series): (a) The designation of the series; (b) The number of shares of the series, which number may at any time or from time to time be increased or decreased by the board of directors, notwithstanding that shares of the series may be outstanding at the time of such increase or decrease, unless the board of directors shall have otherwise provided in creating such series; (c) The dividend rate, not exceeding, however, 5% per annum; (d) The dates at which dividends, if declared, shall be payable; (e) The redemption price if any, may be fixed by the board of directors, plus accrued dividends to the date of redemption; (f) The liquidation price, in the case of voluntary dissolution, liquidation or winding up, shall be, if any, fixed for redemption, plus accrued dividends to the date of distribution, and in the case of involuntary dissolution, liquidation or winding up shall be $5.00 per share plus accrued dividends to the date of distribution; (2) To make the preferred stock of any one or more series convertible into or exchangeable for common stock of the Corporation, and in any such event, prior to the issuance, to fix or alter the conversion price or prices or the rate or rates of exchange and adjustments, if any, at which such conversion or exchange may be made, including provisions for protection against dilution or 3 impairment of the rights of conversion or exchange, and any other terms and provisions in respect to conversion or exchange, not repugnant to law; and (3) To adopt amendments to the Articles of Incorporation as may be required or permitted by law to accomplish the foregoing purposes. In connection with the subject merger, the parties hereto acknowledge the following representations related to the preferred share structure and obligations within the capital structure of Online International Corporation to the consummation of the subject merger. The parties hereto further acknowledge, the preferred share structure shall continue as an integral part of the surviving company. DIVIDENDS TO PREFERRED Online has issued Series A Preferred Shares. The Series A Preferred Shares carry a fixed preferential non-cumulative cash dividend rate of 5% payable semi-annually. RIGHTS ON DISSOLUTION The rights of the preferred shareholders upon dissolution or winding up is the preferential right to participate in any distribution or liquidation or dissolution of the Company. VOTING RIGHTS The Series A Preferred Shareholders have the right to vote in the same manner and on the same matters as do the holders common stock, except in circumstance where the Company is deemed to be in default of its obligations to the holders of the Series A Preferred Shareholders. See paragraph 6 of this article for the additional voting rights associated with the holders of preferred shares. DEFAULT The Company is deemed to be in default of its obligations to the holders of the Series A Preferred Shares if it fails to: (I) provide such preferred shares with (i) all regularly prepared annual and quarterly financial statements of the Company; (ii) reasonable access to the books and records of the Company; (II) obtain prior written approval of the preferred shareholders of 51% of the then issued and outstanding Series A Preferred Shareholders for any: (i) appointment or compensation of all executive, management and supervisory personnel; (ii) capital expenditures in excess of $100,000; (iii) acquisition(s) or merger(s); and (iv) issuance of securities or non-trade debt, declaration of dividends or adjustment to the Company's capital structure; or 4 (III) maintain at all time a positive shareholder equity and working capital. CONVERSION Upon written notice to the Company of the intent to exercise such conversion rights, a holder of Series A Preferred Shares may convert all or any portion thereof into common shares of the surviving company at the rate of one common share for each Series A Preferred Share held. However, this limitation does will not apply in circumstances where the Company is deemed to be in default of its obligations to the holders of the Series A Preferred Shares, as set forth above. SUBDIVISION B. GENERAL PROVISIONS APPLICABLE TO ALL SERIES. The following general provisions shall apply to the preferred stock of the Corporation, with the exception of the above described Seris A Preferred shares. 1. Dividends. The holders of preferred stock of each series shall be entitled to receive dividends, payable quarterly or annually on such dates as may be fixed for such series, when and as declared by the board of directors, at the rate fixed for such series and no more. Dividends on each share of each series shall commence to accrue and be cumulative from the first day of the current dividend period within which such share was issued. A "dividend period" in respect of any share is the period between any two consecutive dividend payment dates, including the first of these dates, as fixed for the series to which the share shall belong. If for any past or current dividend period or periods, dividends shall not have been paid or declared and set apart for payment upon all outstanding shares of any series at the rate fixed for such series, the deficiency shall be fully paid, or dividends in the amount of such deficiency shall be declared and set apart for payment before, any dividend shall be declared and paid upon common stock of the Corporation or upon any other shares ranking junior to the preferred stock; provided, however, that dividends in full shall not be declared and set apart for payment or paid on preferred stock of any one series for any dividend period unless dividends in full have been or are contemporaneously declared and set apart for payment or paid on preferred stock of all series for the dividend periods terminating on the same or an earlier date when dividends on preferred stock of any one or more series are not paid in full at the stated rate, the preferred stock of all series shall share ratably in any payments of dividends in accordance with the sums which would be payable on the preferred stock if dividends for all dividend periods terminating on the same or an earlier date were declared and paid in full. Accumulations of dividends shall not bear interest. After full cumulative dividends upon the preferred stock of all series then outstanding for all past dividend periods and for the current dividend period shall have been paid or declared and set apart for payment, then, and not otherwise, dividends may be declared and paid upon shares ranking junior to the preferred stock subject, however, to the restrictions set forth in paragraph 4 of this subdivision B. "Accrued dividends" shall mean, in respect to each share of preferred stock of any series, an amount equal to simple interest upon the par value of such share at an annual rate equal to the rate fixed for such series from the date from which dividends on such share became cumulative to the date of computation, less the aggregate amount of dividends paid. 5 2. Dissolution, Liquidation and Winding Up. Upon any voluntary dissolution, liquidation or winding up of the Corporation, the holders of preferred stock of each series shall be entitled to receive out of the assets of the Corporation, whether capital or surplus, the liquidation price per share fixed for the respective series and payable upon such voluntary dissolution, liquidation or winding up, before any distribution of the assets to be distributed shall be made to holders of common stock of the Corporation or of any other shares ranking junior to the preferred stock. If the assets distributable on such dissolution, liquidation or winding up, whether voluntary or involuntary, shall be insufficient to permit the payment to holders of preferred stock of the full amounts, then the assets shall be distributed ratably among the holders of preferred stock of the respective series in accordance with the sums which would be payable in respect of such shares upon such dissolution, liquidation or winding up if all sums payable were discharged in full. After payment to holders of preferred stock of the full preferential amounts, the holders of preferred stock as such shall have no right or claim to any of the remaining assets of the Corporation, which remaining assets shall be distributed among the holders of shares ranking junior to the preferred stock in accordance with their respective rights thereto. The sale of all the property and assets of the Corporation to, or the merger or consolidation of the Corporation into or with, any other corporation shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this paragraph. 3. Redemption. At the option of the board of directors of the Corporation, the Corporation may redeem any series of preferred stock, or any part of any series, at any time at the redemption price fixed for such series; provided, however, that not less than 30 days prior to the date fixed for redemption a notice of the time and place shall be given to the holders of record of the preferred stock, by mailing a copy of the notice to the holders at their respective addresses as the same appear upon the books of the Corporation, and, if the board of directors shall so determine, by publication of notice in such manner as may be prescribed by resolution of the board of directors. In case of redemption of less than all of the outstanding preferred stock of any one series such redemption shall be made pro rata, or the shares of such series to be redeemed shall be chosen by lot, in such manner as may be prescribed by resolution of the board of directors. If at any time the Corporation shall have failed to pay dividends in full on preferred stock of any one or more series, thereafter, and until dividends in full, including accumulations, on preferred stock of every series shall have been paid or declared and set apart for payment, the Corporation shall not redeem preferred stock except as a whole, or directly or indirectly purchase any preferred stock. Subject to the foregoing, any preferred stock may be purchased by the Corporation and, if purchased for the purpose or in anticipation of redemption, may be redeemed by action of the board of directors. Preferred stock which shall have been acquired by the Corporation through conversion into or exchange for common stock shall have the same status as shares which have been redeemed. Preferred stock which shall have been redeemed shall not be reissued. 4. Restrictions on Payment of Dividends Upon Shares Ranking Junior to the Preferred Stock. So long as any preferred stock is outstanding the Corporation shall not pay or declare and set apart for payment any dividend, or make any other distribution out of earnings, surplus or capital, on its common stock or on any shares ranking junior to the preferred stock, or purchase or acquire any of 6 its common stock or any shares ranking junior to the preferred stock, if any such action will result in any of the following: (a) Reducing consolidated current assets below an amount equal to twice consolidated current liabilities; (b) Reducing consolidated surplus below an amount equal to two years dividend requirements on outstanding preferred stock and any outstanding shares ranking equally with or prior thereto and any outstanding preferred stocks of subsidiaries, owned by others than the Corporation and its subsidiaries; (c) Reducing consolidated net tangible assets to less than 200% of the sum of an amount equal to $3.00 per share on outstanding preferred stock and the amount received as consideration upon the issuance of any outstanding shares ranking equally with or prior to the preferred stock and of any outstanding preferred stocks of subsidiaries, owned by others than the Corporation and its subsidiaries; (d) Reducing consolidated net tangible assets plus consolidated long-term debt to less than 175% of the sum of the consolidated long-term debt and an amount equal to $5.00 per share on outstanding preferred stock and the amount received as consideration upon the issuance of any outstanding shares ranking equally with or prior to the preferred stock and of any outstanding preferred stocks of subsidiaries, owned by others than the Corporation and its subsidiaries. A determination by the board of directors that the conditions of this paragraph 4 have been complied with shall be binding and conclusive with respect to all shareholders of the Corporation if, in making such determination, the board of directors rely and act in good faith upon the books of the Corporation, or upon any balance sheet, profit and loss statement and statement of assets of the Corporation represented to the board of directors to be correct by the president or the officer of the Corporation having charge of or supervision of its accounts. 5. Action by Corporation Requiring Approval of a Majority of Preferred Stock. The Corporation shall not, without the affirmative vote at a meeting, or the written consent with or without a meeting, of the holders of at least a majority of the then outstanding preferred stock as a class: (a) Change the express terms and provisions of the preferred stock in any manner substantially prejudicial to the holders thereof; (b) Increase the authorized number of shares of preferred stock or create any class of shares which shall rank equally with or prior to the preferred stock; (c) Sell, lease, exchange or otherwise dispose of all or substantially all of its property and assets; (d) Merge or consolidate into another corporation, or merge or consolidate into itself any other corporation when such merger or consolidation would involve any of the acts referred to in (a) or 7 (b) of this paragraph 5; (e) Create, assume or guarantee any mortgage on fixed assets, or permit any subsidiary of the Corporation to do so, unless all the indebtedness secured thereby be acquired and held by the Corporation or its subsidiaries; provided, however, that the Corporation or any subsidiary may create purchase money mortgages or other purchase money liens on fixed assets hereafter acquired, or acquire fixed assets which at the time of acquisition are subject to existing mortgages or other liens (and assume the same) and extend the time for payment of such purchase money or existing mortgages or other liens, or renew the same, or replace the same with other mortgages or liens upon the same fixed assets solely for the purpose of providing funds for the payment of the obligations secured by the mortgages or other liens thus replaced. 6. Voting Rights. The holders of preferred stock shall be entitled at all times to one vote for each share of preferred stock held by them respectively; provided, however, that if the Corporation shall be in default in the payment of dividends on the preferred stock or any series thereof in an amount equal to four quarterly dividends, the holders of preferred stock shall be entitled, at all elections of directors, voting concurrently with the holders of common stock and not as a separate class, to three votes for each share of preferred stock so held. Upon the payment, or the declaration and setting apart for payment, at any time of dividends in full on preferred stock of every series outstanding, the right then vested in the holders of preferred stock to three votes at all elections of directors shall cease and determine (subject to revesting in the event of any subsequent default of the character and extent above specified), and the holders of preferred stock shall thereafter be entitled at all times to one vote for each share of preferred stock held by them, respectively. If notice in writing shall be given by any stockholder to the president or a vice president of the Corporation not less than 24 hours before the time fixed for holding a meeting for the election of directors that such stockholder intends to cumulate his or her votes at such election, and if an announcement of the giving of such notice is made upon the convening of the meeting, each stockholder shall have the right to cumulate his or her votes and to give one candidate as many votes as the number of directors to be elected multiplied by the number of votes to which he is entitled equals, or to distribute them on the same principle among as many candidates as such holder sees fit. 7. Preemptive Rights. No holder of preferred stock of any series shall as such holder, have any preemptive right in, or preemptive right to subscribe to any additional preferred stock of any series, or any shares of any other class of stock, or any bonds, debentures or other securities convertible into or exchangeable for shares of stock of any class or series. 8. Conversion or Exchange Rights. If the board of directors makes the preferred stock of one or more series convertible into or exchangeable for common stock of the Corporation pursuant to the provisions of this Agreement then and in such event the preferred stock of such series shall be convertible into or exchangeable for common stock of the Corporation at such conversion price or prices or rate or rates of exchange, with provisions for protection against dilution or impairment of such rights of conversion or exchange and such other terms in respect of conversion or exchange in a manner not repugnant to law. 8 9. Definitions. As used in subdivision "b" of the above Section 2, the following terms shall have the meanings respectively, stated. (a) "Subsidiary" shall mean any corporation, trust or association of which the Corporation shall own directly or indirectly more than 50% of the capital stock or shares having the right to vote for directors of such corporation, trust or association or persons performing similar functions, except for the happening of a default or other contingency; provided, however, that the term "subsidiary" shall not include any corporate limited liability company, trust or association the accounts of which are not consolidated with the accounts of the Corporation if the omission to consolidate such accounts is approved as sound accounting practice by the independent certified public accountants employed by the Corporation to audit or verify the annual financial statements of the Corporation and its subsidiaries. (b) "Long-term debt" shall mean as to any corporation all indebtedness of whatsoever nature at any time contracted, made, issued, assumed or renewed by such corporation, which shall be payable more than twelve months from the date of the original creation, issuance or assumption. or any renewal thereof, as the case may be, provided; however, that this definition shall not apply to any contracts for service's or construction or for the purchase or sale of commodities or merchandise in the ordinary course of conducting business or to obligations incurred under lease or royalty agreements. (c) "Consolidated long-term debt" shall mean the total long-term debt of the Corporation and its subsidiaries after eliminating any of such debt as is owed to the Corporation or its subsidiaries. (d) "Consolidated net tangible assets shall mean the excess of all assets (except patents trademarks copyrights trade names, goodwill, unamortized discount and expense and other like intangibles) over all liabilities (including contingent liabilities or proper reserves therefor), including all proper reserves not otherwise deducted, but not deducting any interest in preferred stocks of subsidiaries owned by others than the Corporation and its subsidiaries, all as determined in accordance with sound accounting principles approved by the independent accountants referred to above. For the purposes of this definition, fixed assets owned by the Corporation and its subsidiaries as at December 31, 1998, shall be taken at the amount appearing in the consolidated balance sheet as at such date, subsequent additions to fixed assets to be taken at cost to the Corporation or its subsidiaries, if acquired for cash and if acquired for a consideration other than cash, then at the fair value thereof as determined by the board of directors of the Corporation at the time of such acquisition, in each case after deducting therefrom all proper reserves, including reserves for depreciation and depletion and making other proper deductions. e) "Consolidated current assets and consolidated current liabilities shall mean such assets and liabilities (including contingent liabilities or proper reserves therefor) as may be properly so classified in accordance with generally accepted accounting principle approved by the independent accountants for the Corporation. For the purposes of this definition there shall not be included in consolidated current assets any assets which are pledged or deposited as security for, or for the purpose of paying any obligation which is not included in consolidated current liabilities, and there shall not be included in consolidated current liabilities at liabilities for the payment of which cash has been irrevocably deposited in trust. 9 Section 3. The express terms and provisions of the shares of common stock are as follows: 1. Dividends. Out of the assets of the Corporation available for dividends remaining after full dividends on all shares ranking prior to the common stock shall have been paid or declared and set apart for payment, then, and not otherwise, and subject to any restrictions or limitations contained in the express terms and provisions of any shares ranking prior to the common stock, dividends may be declared and paid upon the common stock, but only when and as determined by the board of directors. 2. Dissolution. Liquidation and Winding Up. Upon any dissolution, liquidation, or winding up of the Corporation, or any proceedings resulting in any distribution of all its assets to its stockholders, after there shall have been paid to or set apart for holders of all shares ranking prior to the common stock the full preferential amounts to which they are respectively entitled, the holders of common stock shall be entitled to receive pro rata all of the remaining assets of the Corporation available for distribution to its stockholders. 3. Voting Rights. The holders of common stock shall be entitled at all times to one vote for each share of common stock held. If notice in writing shall be given by any stockholder to the president or a vice president of the Corporation not less than 24 hours before the time fixed for holding a meeting for the election of directors that such stockholder intends to cumulate his votes at such election, and if an announcement of the giving of such notice is made upon the convening of the meeting each stockholder shall have the right to cumulate his votes and to give one candidate as many votes as the number of directors to be elected multiplied by the number of votes to which he is entitled equals, or to distribute them on the same principle among as many candidates as such holder sees fit. 4. Preemptive Rights. No holder of common stock shall, as such holder, have any preemptive right in or preemptive right to subscribe to, any shares of any other class, or any bonds, debentures or other securities convertible into or exchangeable for shares of any other class, or any preferred stock authorized by, and which may be made convertible into or exchangeable for common stock pursuant to, the provisions of this Article Two. ARTICLE III BYLAWS OF SURVIVING CORPORATION The bylaws of Online International Corporation as they shall exist on the effective date of this agreement, shall be and remain the bylaws of the Surviving Corporation until they shall be respectively altered, amended or repealed. ARTICLE IV DIRECTORS AND OFFICERS OF SURVIVING CORPORATION The names and addresses of the first directors of the Surviving Corporation, who shall hold 10 office until the annual meeting of shareholders in the year set opposite their respective names below and until the election and qualification of their successors. In the event of a vacancy, the remaining members of the board of directors are empowered to fill the vacancy until the pending the next annual meting. DIRECTORS
Name Address Term of Office - ---- ------- -------------- Stanley James White 201 Center Street 1 year (August 5, 2000) Pearl River, NY 10965 Leslie Nochomovitz 5 German Mill Road 1 year (August 5, 2000) Thornhill, Ontario l3T4HH Alex Igelman 101 Caines Avenue 1 year (August 5, 2000) Toronto, Ontario M3N 2L6
The names and addresses of the first officers of the Surviving Corporation, who shall hold office until the first meeting of the board of directors following the next annual meeting of shareholders and until their successors are elected and qualified, are as follows: OFFICERS
Office Name Address Term of Office - ------ ---- ------- -------------- President, Stanley James 201 Center Street 1 year (August Secretary White Pearl River, NY 10965 5, 2000) Chief Financial Vicki Danseglio 27 Rocket Drive 1 year (August Officer Islip, NY 11752 5, 2000)
If on the effective date of this agreement or anytime thereafter a vacancy shall exist on the board of directors of the Surviving Corporation or in any of the above specified offices, by reason of the failure or inability of any of the above named persons to accept a directorship in the Surviving Corporation or the office to which he or she is designated, as the case may be, such vacancy may be filled by the appointment of a successor by a majority of the remaining members of the board of directors. ARTICLE V MANNER OF CONVERTING SHARES OF THE CONSTITUENT CORPORATIONS INTO SHARES OF THE SURVIVING CORPORATION The manner of converting the shares of common stock of Online and the shares of common stock of Condor into shares of common stock, of the Surviving Corporation shall be as follows: 11 (a) Each share of common stock of Condor which shall be outstanding (sum total of 311,238) on the effective date of this agreement shall be converted into one share of common stock of the Surviving Corporation. After the effective date of this agreement each holder of outstanding certificate or certificates representing common stock shall be entitled, upon surrender of the same to the Surviving Corporation, to receive in exchange certificates representing the number of shares of common stock of the Surviving Corporation. Until so surrendered for exchange for a certificate or certificates for common stock of the Surviving Corporation, each outstanding certificate which prior to the effective date of this agreement represented shares of common stock of shall be deemed for all corporate purposes, including the payment of dividends, to evidence the ownership of the shares of common stock of the Surviving Corporation. Upon consummation of the merger, the 85,000 shares held by the majority of the shareholders of Condor West shall be subject to the terms and conditions of the lock-up agreement executed contemporaneously with the instant agreement. The Post merger the share distribution shall be as follows: Online's shareholders will own 201,458 shares of the Surviving Corporation; the majority shareholders of the former Condor and their respective financial consultant will beneficially own the sum of 85,000 shares of common stock. The former minority shareholders of Condor will beneficially own the sum of 24,780 shares of the common stock of the Surviving Corporation. The 5,507,244 shares of common stock and the 7,800,156 shares of Series A preferred shares owned by the pre-merger shareholders of Online respectively will be converted into shares of the Surviving Corporation on a one for one share basis. (b) The shareholders of Online represent they are not in possession of their respective stock certificates and such certificates were, in fact, created but not delivered. Counsel for Online will endeavor to secures said certificates. In the absence of securing said certificates, the following steps must be taken. Prior to the issuance of any certificates to the shareholders of Online, each shareholder must warrant and swear he, she or it is in fact a bona fide shareholder of Online and, as such, is entitled to the designated shares of common stock of the Surviving Corporation. Such representation must be made with the understanding that such representations, if false, constitute serious violations of the federal securities laws and could result in imprisonment and or cause the Company to become the subject of an enforcement proceeding by the U.S. Securities and Exchange Commission. (c) Upon satisfaction and compliance with the of the foregoing paragraph, the surviving corporation shall without unnecessary delay issue certificates of stock in a form the board of directors deems advisable and the board shall provide and adopt rules and regulations as may be necessary or proper for the issuing and transfer of the shares of the capital stock of the consolidated corporation. (d) Any and all shares held by the former directors of Online International Corporation and Norla Russell (875,000), James Russell (875,000), and Erik Fisher (750,000) shall be restricted and nontradeable for a period of five years. Legal counsel for the Surviving Company shall hold said stock certificates. ARTICLE VI MISCELLANEOUS PROVISIONS 1. This agreement shall be submitted to the respective majority shareholders of the Constituent 12 Corporations as provided by law, and upon its adoption by a majority of votes of shareholders of Online and Condor representing the total number of shares of its capital stock and by the vote of the holders of shares of entitling them to exercise a majority of the voting power of such corporation, such facts shall be duly certified by the respective presidents and secretaries, and this agreement shall take effect and be deemed and taken to be the agreement and act of merger of the Constituent Corporations and the merger shall be and become effective upon the Articles of Merger being filed with the Secretary of State of Nevada. 2. At the first meeting of the board of directors of the Surviving Corporation, which shall be held as soon as practicable thereafter the merger, the directors or their successors shall elect or appoint the officers of the surviving corporation. 3. Online International shall pay the expenses of carrying this agreement of merger into effect and of accomplishing the merger. 4. On the effective date of this agreement the Surviving Corporation shall without other transfer, succeed to all the rights, capacity, privileges powers, franchises and immunities, as well of a public as of a private nature, and be subject to all the restrictions, disabilities. liabilities, obligations and duties of each of the Constituent Corporations, and all and singular the rights, privileges, powers, franchises and immunities of each of the Constituent Corporations and all property real, personal and mixed, and all debts, obligations and liabilities due to either of the Constituent Corporations on whatever account, as well for stock subscriptions as all other things in action or belonging to each of the Constituent Corporations shall be vested in the Surviving Corporation, and all property, rights, privileges, powers, franchises and immunities, and all and every other interest shall be thereafter the property of the Surviving Corporation and the title to any real estate in either of the Constituent Corporations, shall not revert or be in any way impaired by reason of the merger; provided that all rights of creditors and all liens upon any property of each of the Constituent Corporations shall be preserved unimpaired limited to the property affected by such liens at the time of the merger, and all debts, liabilities and duties of the respective Constituent Corporations shall then attach to the Surviving Corporation and may be enforced against it to thesame extent as if said debts liabilities and duties had been incurred or contracted by it. 5. If at any time the Surviving Corporation shall deem or be advised that any further assignments or assurances in law or things are necessary or desirable to vest or to perfect or confirm, of record or otherwise in the Surviving Corporation the title to any property of Condor acquired or to be acquired by reason of or as a result of the merger provided for by this agreement, Condor and its proper officers and directors shall and will execute and deliver any and all such proper documents as necessary in law and do all things necessary or proper so to vest, perfect or confirm title to such property in the Surviving Corporation and otherwise to carry out the purposes of this agreement. 13 CONDOR WEST CORPORATION By: /s/ Carl D. Nation ------------------------------------- Carl D. Nation Title: Chief Executive Officer, President Secretary Online International Corporation By: /s/ Stanley James White ------------------------------------- Stanley James White Title: Chief Executive Officer, President Secretary 14 EX-10 3 LOCK-UP AGREEMENT This agreement (the "Agreement") sets out the terms and conditions upon which Online International Corporation shall cause the common stock controlled by the shareholders of Condor West, to be locked-up, untradeable and restricted in accordance with the terms and conditions of this agreement. The subject of this agreement shall be the common stock held by certain officers and directors after the merger between Online International Corporation and Condor West Corporation. This Agreement also sets out the terms and conditions of the agreement for each of the persons listed on Schedule "A" attached hereto (each a "Shareholder" and collectively, the "Shareholders") to deposit irrevocably and unconditionally under the terms of this Agreement 286,000 common shares presently owned beneficially and of record by such shareholders. THE OFFER Online offers the subject shareholders an opportunity to remain shareholders of the surviving corporation following the subject merger. Online shall tender to the shareholders or shareholders duly authorized representative $275,000.00 (Two Hundred and Seventy Five-Thousand Dollars) for the opportunity to merge the two corporations. The shareholders will be permitted to retain 85,000 shares of the surviving corporation. TIMING The merger partner, Online, agrees to offer cash to certain shareholders of Condor West AS an incentive to effect the merger between the two companies. In exchange, Online will be permitted to merge and control 90% of the issued and outstanding shares of Condor. The closing of the subject transaction is on or before September 9, 1999. CONDITIONS PRECEDENT 4. Condor West must be current with all required filing with the U.S. Securities and Exchange Commission; and all state and federal tax returns must be filed and taxes, if any, due must be paid in full to any and all taxing authorities. The officers and directors have represented that Condor West has no assets or liabilities. However, if there is a change in financial condition prior to the close of the contemplated merger, the officers and directors of Condor West shall inform Online. The foregoing conditions are for the sole benefit of Online and may be waived by Online in whole or in part. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS Each shareholder hereby severally, and not on a joint or a joint and several basis, represents and warrants to Online that: it is a corporation duly incorporated and validly existing under the laws of Nevada, its jurisdiction of incorporation. The sellers represent, the Condor has all the necessary corporate power, authority, capacity and right, and has received all requisite approvals, including the majority of its respective shareholders, to enter into this Agreement and to complete the contemplated transactions. Upon the due execution and delivery of this Agreement by the parties hereto, this Agreement shall be a legally valid and binding agreement enforceable by Online against the shareholders in accordance with its terms, subject, however, to the usual limitations with respect to enforcement imposed by law in connection with similar proceedings and the availability of equitable remedies. The shareholders are, at the time of deposit of the securities under this agreement, the sole beneficial owner of the shareholder securities listed opposite their names in Schedule "A" attached hereto and have the unfettered ability, authorization, capacity and the exclusive right to dispose of all such securities under the contemplated merger. The shareholders are not a party to, bound or affected by or subject to, any agreement, charter or by-law provision, statute, regulation, judgment, order, decree or law which would be violated, contravened, breached by, or under which default would occur as a result of, the execution and delivery or performance of this Agreement. The common shares listed in Schedule "A" hereto opposite such shareholder's name constitute 90% of the shares or other securities in the capital of Condor owned beneficially by such shareholders on the date hereof. Condor represents that no stock option plan exists now or heretofore, and to the extent any prior stock option plan have existed in the past, such plan or plans are hereby canceled. There are no stock options unexercised on the date hereof. The shareholders own the securities with good and marketable title, free and clear of any and all mortgages, liens, charges, pledges, encumbrances, claims, security interests, restrictions or rights of others of any nature whatsoever. The shareholders have not previously granted or agreed to grant any proxy or other right to vote in respect of the shareholder's securities or entered into any voting trust, vote pooling or other agreement with respect to the right to vote, call meetings of shareholders or give consents or approvals of any kind as to the shareholders' securities except those which are no longer of any force or effect; there is no claim, action, lawsuit, arbitration, mediation or other proceeding pending or, to the best of the actual knowledge information and belief of the shareholders, threatened against the shareholders or Condor, which relates to this Agreement or otherwise materially or impairs the ability of the shareholders to consummate the transactions contemplated hereby. REPRESENTATIONS AND WARRANTIES OF MERGER CANDIDATE The merger partner hereby represents and warrants that: the Online is a corporation duly incorporated and validly existing under the laws of its jurisdiction of incorporation; the merger partner has all necessary power, authority, capacity and right, and received all requisite approvals from a majority of its shareholders to complete the contemplated merger in accord with this and other Agreements between the companies. Upon the due execution and delivery of this Agreement by each of the respective parties, this Agreement shall be a valid and binding agreement enforceable by the shareholders against Online in accordance with its terms subject however, to the usual limitations with respect to enforcement 2 imposed by law in connection with bankruptcy or similar proceedings and the availability of equitable remedies. 1. Online is not a party to, bound or affected by or subject to, any agreement, charter or by-law provision, statute, regulation, judgment, order, decree or law which would be violated, contravened, breached by, or under which default would occur as a result of, the execution, delivery and performance of the terms and conditions of this Agreement and which default, violation, contravention or breach would materially impair or would prevent the Online from consummating the transactions contemplated hereby. Online has sufficient funds or financing arrangements in place to fulfill its fiscal responsibilities in connection with the contemplated merger. COVENANTS OF THE SHAREHOLDERS 2. GENERAL. Each of the shareholders covered by the instant agreement hereby covenants that once the common shares of the surviving corporation commence to trade on any U.S. Exchange operated by NASDAQ, the individual shareholders will: (i) not sell, transfer, pledge, encumber, grant a security interest in, hypothecate or otherwise convey, directly or indirectly, the shareholder's securities to any person, or agree to any of the foregoing; and, (ii) not grant or agree to grant any proxy or other right to vote in respect of the shareholders' securities, or enter into any voting trust, vote pooling or other agreement with respect to the right to vote the shareholders' securities, other than pursuant to the terms of this Agreement; and (iii) not initiate, solicit or encourage any inquiries, submissions or offers as to or in connection with the making of, or provide information to, or respond to any person making, any offer or proposal with respect to: (a) any other reverse takeover, tender offer or exchange offer, merger, amalgamation, plan of arrangement, reorganization, consolidation, business combination, sale of assets, sale of securities, recapitalization, liquidation, dissolution, winding-up, or similar transaction involving Condor West. The instant lockup agreement expressly covers a period not to exceed twelve (12) consecutive months commencing on the initial date the stock of Online trades. For the duration of the initial six (6) months following the commencement of trading, the individual shareholders who beneficially own 85,000 shares of the common stock of the surviving corporation are expressly prohibited from selling or disposing of said the common stock in the manner set forth above; and 3 Beginning on the seventh (7th) month following the commencement of trading the common stock covered by the instant lockup agreement, the individual shareholders shall be permitted to sell or dispose of their common stock in increments equal to twenty percent (20%) on a monthly basis of the aggregate shares of each individual shareholder until all of the original common stock has been disposed of or until the expiration of the subsequent six (6) month period or the earlier of the two preceding events. At the end of the lockup period, the lock-up becomes null and void. Any and all securities pursuant to this lock-up agreement shall be held in trust by the Law Firm of Larson-Jackson, PC. and shall be released upon request of the owner in the applicable above referenced increments without delay. The Law Firm of Larson-Jackson, P.C. shall absorb the expense associated with sending the certificates to the owners via Federal Express or other overnight delivery service.(See Schedule "A" Attached Hereto) ADDITIONAL COVENANTS 3. Each of the shareholders hereby covenants with Online that until the merger occurs, which is scheduled on or before the end of September 9, 1999, the shareholders will: promptly notify the Online orally and in writing of any material adverse effect known to the shareholders; and request the corporation or the transfer agent(s) of the Condor to prepare a list of its shareholders. COVENANTS OF THE PURCHASER GENERAL. Online hereby covenants to its reasonable best efforts to successfully complete the transactions contemplated by this Agreement, including the merger, and shall in all material respects comply with the requirements of applicable law, including the federal securities laws. The terms of the merger agreement are consistent with the terms of this Agreement. ACCEPTANCE OF OFFER DEPOSIT. Each of the shareholders, who owns all or part of the share certificates representing the 85,000 shares, hereby irrevocably and unconditionally agrees to deposit with legal counsel for Online, the securities, together with duly completed and executed letters of transmittal, immediately following the consummation of the merger, on or before the third business day after the date of the merger. NO-WITHDRAWAL Each of the shareholders hereby irrevocably and unconditionally agrees not to withdraw or take any action to withdraw any of his or her securities deposited with legal counsel notwithstanding any statutory rights or other rights under the terms of the merger agreement or otherwise which he or she 4 might have unless this Agreement is terminated by the shareholder due to Online inability or unwillingness to perform in accordance with the terms and conditions of the aforementioned merger agreement. TERMINATION BY SHAREHOLDERS Any of the Shareholders, when not in default in performance of its obligations under this Agreement, may, without prejudice to any other rights, terminate this Agreement by notice to the Online if: the Merger Agreement has been terminated or common shares deposited under the terms of this Agreement have not, for any reason whatsoever been executed and paid for on or before the September 9, 1999. TERMINATION BY PURCHASER The Purchaser, when not in default in performance of its obligations under this Agreement, may, without prejudice to any other rights, terminate this Agreement by notice to the shareholders if: the Merger Agreement has been terminated for any reason whatsoever, or otherwise expires in accordance with its terms. EFFECT OF TERMINATION In the event of the termination of this Agreement, it shall become void forthwith. There shall be no liability on the part of the Online, or the shareholders hereunder except that nothing contained in this Agreement will relieve any party from liability for any breach of any provision of this Agreement which occurred on or before the date of such termination. GENERAL SURVIVAL OF REPRESENTATIONS AND WARRANTIES The representations and warranties of the shareholders and the Online contained herein shall survive the consummation of the Merger for a period of time not to exceed two years. In the event one party has made material misrepresentations to the other, the recourse shall be that provided by the applicable law. No investigations made by or on behalf of the Online or any of their authorized agents at any time shall have the effect of waiving, diminishing the scope of or otherwise affecting any representation or warranty or covenant made by the shareholders in or pursuant to this Agreement. DISCLOSURE Except as required by the federal securities laws or judicial authority, none of the shareholders shall make any public disclosure of, or any announcement of or statement with respect 5 to, this Agreement without the prior written approval of the Online; provided, however, that this section will not restrict any shareholder who is a director or officer of the Condor West from authorizing or participating in any disclosure by the Condor which is in accordance with the mandatory statutory provisions of the State of Nevada. ASSIGNMENT This Agreement shall not otherwise be assignable by any party hereto. TIME All parties understand and agree time is of the essence in connection with this Agreement. CURRENCY All sums of money referred to in this Agreement shall mean U.S. currency. GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada and the federal securities laws. ENTIRE AGREEMENT This Agreement constitutes the entire agreement and understanding between the parties hereto with respect to the lock-up of the securities and supersedes any prior agreement, understanding and representation. AMENDMENTS This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by all of the parties to this Agreement. NOTICES Any notice or other communication which may or is required to be given pursuant to this Agreement shall be in writing and shall be sufficiently given or made if delivered personally 6 or sent by facsimile, in the case of Online, the communication must be addressed as follows: Attention: President Stanley James White 150 Laser Court Hauppauge, New York 11788 Telephone No.: 1-516-231-7575 Telecopier No.: 1-516-231-7601 with a copy of each to: Steve Larson-Jackson LAW FIRM OF LARSON-JACKSON, PC 1275 K Street, NW, Suite 1101 Washington, D.C. 20005 Telephone No.: (202) 408-8180 Telecopier No.: (202) 789-2216 and Condor West Corporation must be addressed as follows: Attention: President Carl D. Nation 8845 Main Street North Richland Hills, Texas 76180 Telecopier No.: 1-817-581-6509 Telephone No.: 1-817-485-0236 with a copy of each to: Mr. Patrick D. West, Esquire 3901 W. Vickery Blvd. Suite 1 Fort Worth, Texas 76107-5672 Telecopier No.: 1-817-923-9550 7 Telephone No.: 1-817-923-9525 or to such other address as the relevant party may from time to time advise by notice in writing given pursuant to this section. Any notice that is delivered will be deemed to be delivered on the date of delivery to such address if delivered on a business day prior to 5:00 p.m. (local time at the place of receipt) or on the next business day if delivered after 5:00 p.m. or on a non-business day. Any notice via facsimile will be deemed to be delivered on the date of transmission (for which confirmed receipt is provided to the sender) if delivered on a business day prior to 5:00 p.m. (local time at the place of receipt) or the next business day if delivered after 5:00 p.m. or on a non-business day. SEVERAL LIABILITY It is understood and agreed that the rights and obligations of each of the shareholders under this Agreement shall be several and not joint or joint and several and in no circumstances shall the action or omission of one of the shareholders arising in connection with this Agreement constitute the action or omission of the other shareholders or create any liability whatsoever on the part of the other shareholders or affect in any respect the right of the other shareholders to rely upon and enforce against Online the provisions of this Agreement. EXPENSES. Each of the parties shall pay its legal, and accounting costs and expenses incurred in connection with the preparation, execution and delivery of this Agreement and all documents and instruments executed or prepared pursuant hereto and any other costs and expenses whatsoever and howsoever incurred. COUNTERPARTS This Agreement may be executed in one or more counterparts which together shall be deemed to constitute one valid and binding agreement and delivery of the counterparts may be effected by means of a faxed transmission. This Agreement may be executed by facsimile signature, and execution thereby will constitute an original hereof. If the terms and conditions of this Agreement are acceptable, please so indicate by signing in the below space. 8 CONDOR WEST CORPORATION By: /s/ Carl D. Nation ------------------------------------- Carl D. Nation Title: Chief Executive Officer, President Secretary ONLINE INTERNATIONAL CORPORATION By: /s/ Stanley James White ------------------------------------- Stanley James White Title: President & Secretary SCHEDULE "A" Disbursement of 85,000 Condor Wst Shares retained by the Shareholder Following the 48-1 reverse split and post merger.
Pre-Reverse Split Shares Post Reverse Split ------------------------ ------------------ Carl D. Nation 5,325,000 26,335 8845 Main Street North Richland Hills, TX 76180 Dr. Everett Renger 5,325,000 26,335 909 Frostwood, Suite 261 Houston, TX 77204 Steven R. Paige 1,000,000 4,945 8547 E. Arapahoe Road Suite J-416 Englewood, CO 80112 Wade D. Althen 1,000,000 4,945 3505 Mc Cord North Little Rock, AZ 72116 Terrance L. Rasmussen 300,000 1,484 3635 Vermilion Court North Eagan, MN 55122 David Christman 200,000 989 645 Praire Dell Lewisville, TX 75067 Berton A. Johnson 200,000 989 848 Decatur Denver, CO 80204 Dennis L. Swenson 200,000 989 2625 Bennington Ct. Grand Prairie, TX 76052 Everret Renger, Sr. 200,000 989 909 Frostwood Suite 261 Houston, TX 77204 Twentieth Century LLC 0 17,000 6521 West Calhoun Place Littleton, CO 80123 ---------- ------ Totals 13,750,000 85,000
EX-99 4 ONLINE INTERNATIONAL CORPORATION EMPLOYEE STOCK PURCHASE PLAN SECTION ONE PURPOSE This Employee Stock Purchase Plan (the "plan") is intended as an incentive and to encourage stock ownership by employees, officers and directors of Online International Corporation (the "Company") so that they may acquire or increase their proprietary interest in the growth and success of the Company, and to encourage them to remain an employee, officer or director of the Company. SECTION TWO ADMINISTRATION The plan shall be administered by a committee appointed by the board of directors of the company and consisting of at least three of its members. Members of the committee shall not be eligible to participate in the plan. The committee shall have authority to make rules and regulations for the administration of the plan; its interpretations and decisions shall be final and conclusive unless otherwise determined by the board of directors. The board of directors may from time to time remove members from, or add members to, the committee. Vacancies on the committee, however caused, shall be filled by the board of directors. The committee shall select one of its members as chairperson, and shall hold meetings at such times and places as it may determine. A majority of the committee at which a quorum is present, or acts reduced to or approved in writing by a majority of the members of the committee, shall be the valid acts of the committee. The committee is vested with the full authority to make, administer, and interpret such equitable rules and regulations regarding the plan as it may deem advisable, subject to the terms of the plan. No member of the board of directors or the committee shall be liable for any action or determination made in good faith with respect to the plan or any option granted under it. The grant of options under the plan will be automatic and nondiscretionary. SECTION THREE SHARES SUBJECT TO PLAN The maxim aggregate number of shares which may be optioned under the Plan is one million (1,000,000) common shares ( the "Pool"). The par value of the common stock is $.001. The shares may be authorized, but unissued, or required common shares. If any option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased shares shall become available for future grant under the Plan. If the shares which were acquired upon exercise of an option are subsequently repurchased by the Company, such shares will not in any event be returned to the plan and shall not become available for future grant under the Plan. SECTION FOUR ELIGIBILITY The full-time key employees, officers and directors (hereinafter "employee or participant") of the Company and its subsidiaries, if any, with one or more years of service to the Company shall be eligible to participate in the plan, in accordance with such rules as may be prescribed from time to time, which rules, however, shall neither permit nor deny participation in the plan contrary to the requirements of the Internal Revenue Code and regulations promulgated under the Code. No employee shall be granted an option if the employee, immediately after the option is granted, owns five per cent (5%) or more of the total combined voting power or value of the stock of the Company or any subsidiary. For purposes of the preceding sentence, the rules of Section 424(d) of the Internal Revenue Code shall apply in determining the stock ownership of an employee, and stock which the employee may purchase under outstanding options shall be treated as stock owned by the employee. Employees of the Company who work less than twenty (20) hours per week shall not be eligible to participate in this stock purchase plan. SECTION FIVE GRANT OF OPTIONS The committee will grant to eligible participants options to purchase such number of shares and at such time or times as it will determine subject to the limitations contained in this Stock Option Plan. (a) All eligible participants shall enjoy equal rights and privileges under the plan. (b) In determining whether the stock ownership of an eligible participants exceeds the five percent threshold limit, the rules of Section 424 (d) of the Internal Revenue Code, as amended, will apply and stock which the eligible employee may purchase under the outstanding options, (whether or not the options qualify for the special tax treatment of Section 421 (a) of the Internal Revenue Code) shall be treated as stock owned by the eligible participant. Of course, if the participant would not own more than five percent (5%) immediately after the grant of the options the stock will not be deemed to be owned by the participant. (c) No eligible participant shall be granted an option which permits his or her rights to purchase stock under the stock option plan which permits his or her right to purchase stock under the plan to exceed One Hundred Thousand Dollars ($100,000) of the fair market value of the stock determined as of the date the option is granted. In that the options are being granted prior to the existence of any trading market or as the Company is currently closely held, no grantee shall be permitted to purchase more than One Hundred Thousand Dollars ($100,000) of Common Stock of the Company pursuant to the instant option plan in any one twelve month period. The exercise price of the per share will be one dollar ($1.00). In the event the company becomes publicly traded, the fair market value will be determined in conjunction with the market price, however, no participant shall be permitted to exercise stock option as a price less than one dollar. (d) In the event of a recapitalization, reclassification or merger affecting common stock, the number of shares which may subsequently issued under the pan, the number of shares under option at that time, and the option price may be appropriately adjusted as determined by the committee. (e) The participant shall be notified by the Company of the grant of an option or options to him or her. In order to participate in the plan, the eligible employee must sign an acceptance of option form provided by the corporation showing the number of shares that he or she elects to purchase and must deliver it within thirty (30) days afer the date appearing on the form to the secretary or other officers of the Company designated in the option. An eligible employee may accept the option to purchase the number of shares specified in his or her option or a less number of shares but in no event less than one thousand (1000) shares of common stock of the Company. SECTION SIX PURCHASE PRICE The purchase price per share will be one dollar ($1.00) per share unless the committee determines otherwise. Once the Company becomes public, the committee may, in its sole discretion, create a formula that corresponds to the fair market value of the stock. SECTION SEVEN METHOD OF PAYMENT Payment for the shares under the option pursuant to the instant plan made at the election of the eligible participant may be either lump sum payments, installments, or a combination of those payments. (a) An eligible participant or employee who elects the lump sum method shall pay by cash, money order or by cashier's check at the time of acceptance of option, an amount equal to the total purchase price of all shares accepted under the option. The participant or employee can elect to pay less than the full lumps sum, but in no event can he or she tender payment for less than one thousand shares. The remaining portion of the purchase price for all of the shares which the eligible participant or employee has accepted may be installment payments. (b) An eligible participant or employee may elect to pay all or part of the purchase price on the installment method shall authorize the withholding and deduction from his or her regular pay on a specified basis not less than monthly, over the option period. Such sums, when 3 accumulated will equal the amount necessary to acquire the shares. The deductions shall be in uniform amounts in conformity with the employer's payroll deduction schedule. Any excess amount shall be returned the participant or employee within thirty (30) days. SECTION EIGHT INTEREST ON PAYMENTS Interest shall be allowed on sums withheld from an eligible employee's pay for purchase of shares under his plan pursuant an election by the employee or participant. The interest shall be credited to each eligible employee's stock purchase account until the date of exercise. For the purpose of computing allowable interest, installment payments will be regarded as received as of the first day of the month in which they are withheld. The rate of interest shall be determined by the committee. The interest shall be compounded annually and shall be paid to each eligible employee or participant as such times or times as the board of directors shall determine. SECTION NINE WITHDRAWAL OF FUNDS An employee may at any time and for any reason permanently withdraw out the balance accumulated in the employee's account, including interest credited on the account, and by that action withdraw from participation in the Stock Option Plan. Partial withdrawals shall not be permitted. SECTION TEN NATURE OF THE GRANT OF THE OPTIONS (a) The options granted pursuant to the instant plan are limited to one million common shares of the Company and this plan must be approved by the shareholders of the corporation within 12 months before or after the date this plan is adopted. (b) By the specific terms of this plan the options shall not be exercisable after ten (10) years from the date the options are granted. (c) The option price is one dollar ($1.00) and the price is not less than the fair market value. SECTION ELEVEN STOCK CERTIFICATES Stock certificates shall only be issued to participating employees on their request or in such number of shares as are credited to an employee's account or upon the participating 4 employee's withdrawal from the plan for any reason. SECTION TWELVE REGISTRATION OF CERTIFICATES Certificates shall be registered in the name of the employee, or, if the employee indicates on the employee's payroll deduction authorization form, in the employee's name jointly with a member of the employee's family, with right of survivorship. An employee who is a resident of a jurisdiction which does not recognize such a joint tenancy may have certificates registered in the employee's name as tenant in common with a member of the employee's family, without right of survivorship. SECTION THIRTEEN PROTECTION FROM LIABILITY Subject to the above, the board of directors and the committee in fixing the option price shall have full authority and discretion and be fully protected from any liability in doing so. SECTION FOURTEEN RIGHTS AS SHAREHOLDER None of the rights or privileges of a shareholder of the company shall exist with respect to shares purchased under this plan unless and until certificates representing the full shares have been credited to the participating employee's account. SECTION FIFTEEN RIGHTS ON RETIREMENT, DEATH, OR TERMINATION OF EMPLOYMENT In the event of a participating employee's retirement, death, or termination of employment, no payroll deduction shall be taken from any pay due and owing to the employee at that time and the balance in the employee's account shall be paid to the employee or, in the event of the employee's death, to the employee's estate. Whether authorized leave of absence or absence for military or governmental service shall constitute termination of employment, for the purposes of the plan, shall, unless otherwise required by law, be determined by the committee, which determination, unless overruled by the board of directors, shall be final and conclusive. If, prior to one year of employment, an officer, director, or employee's relationship with the corporation terminates, by the employee or the corporation, with or without cause, or in the event of death, incapacity or retirement of the participant, the participant's right to exercise the option shall immediately terminate and all rights under this agreement shall immediately cease. Notwithstanding the foregoing sentence, in the sole discretion of the board of directors by an affirmative act thereof, the options and the rights hereof can be extended after termination or separation from the Company. 5 SECTION SIXTEEN RIGHTS NOT TRANSFERABLE Rights under this plan are not transferable by participating employees and are exercisable during the employee's lifetime only by the employee. Transfer of the option by the employee by will or by the laws of descent and distribution shall be effective to bind the corporation where the corporation has been furnished with written notice of the transfer and a copy of the will or such other evidence the corporation's board of directors deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions of the option. SECTION SEVENTEEN CANCELLATION OF ACCEPTANCE OF OPTION At any time prior to, but in not event following, his or her date of exercise, the eligible employee or participant who has elected to purchase shares may cancel his or her acceptance of Option as to any or all of the shares by written notice of cancellation delivered to the officer designated to received his or her Acceptance of Option. If an employee cancels an Acceptance of Option as to only apart of the shares, he or she shall continue to make the required installments pay or shall make a lump sum payment as set forth above with respect to the number shares for which the Acceptance of Option is not cancelled. (a) He or she may receive in one lump sum payment as soon as practicable after delivery of the notice of cancellation, the amount credited to his or her account with respect to the shares (including interest, as computed under this agreement); or (b) He or she may have the amount which is credited to his or her account with respect to the shares at the time the cancellation becomes effective applied to the purchase of the number of shares that amount will purchase, not exceeding, however, the number of shares by which for the Acceptance of Option is cancelled and receive the balance of the account in one lump sum payment. (c) The date on which payment for the share is completed shall be the date of exercise with respect to the shares not cancelled. SECTION EIGHTEEN APPLICATION OF FUNDS All funds received or held by the company under this plan may be used for any corporate purpose. 6 SECTION NINETEEN ADJUSTMENT IN CASE OF CHANGES AFFECTING COMMON STOCK In the event of a subdivision of outstanding shares of common stock, ($.001) par value, or the payment of a stock dividend on the shares, the number of shares approved for this plan, and the share limitation, shall be increased or decreased proportionately, and such other adjustment shall be made as may be deemed equitable by the board of directors. In the event of any other change affecting the common stock, such adjustment shall be made as may be deemed equitable by the board of directors to give proper effect to that event. SECTION TWENTY PLAN AMENDMENT The committee may, at any time, or from time to time, amend this plan in any respect, except that, without the approval of the holders of a majority of the shares of common stock of the Company then issued and outstanding and entitled to vote, no amendment shall be made (i) increasing or decreasing the number of shares approved for this plan (other than as provided in Section Three), (ii) decreasing the purchase price per share, (iii) withdrawing the administration of this plan from the committee, or (iv) changing the designation of eligible participants in the plan. SECTION TWENTY-ONE PLAN TERMINATION This plan and all rights of employees or participants under this plan shall terminate: (a) On the day that accumulated payroll deductions of participating employees are sufficient to purchase a number of shares equal to or greater than the number of shares remaining available for purchases. If the number of shares so purchasable is greater than the shares remaining available, the available shares shall be allocated by the committee among such participating employees in the a manner it deems equitable; or (b) Notwithstanding the foregoing, the Stock Option Plan shall terminate at 5:00 p.m., Eastern Time, on August 30, 2010. (c) At any time, at the discretion of the board of directors. 7 DEFINITIONS As used herein, the following definitions will apply: (a) "Board" shall mean the Board of Directors of the Company. (b) "Common Shares" shall mean the commons shares of the Company. (c) "Company" shall mean Online International Corporation, a Nevada corporation. (d) "Director" shall mean a member of the Board of Director. (e) "Employee" shall mean any person including officers and Directors, employed by the Company or any current future subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient in and of itself to constitute employment by the Company. (f) "Option" shall man a stock option granted pursuant to the instant Plan. (g) "Optionee" shall mean any grantee of an option pursuant to the terms of this Stock Option Plan. (h) "Parent" shall mean a "parent corporation "whether now or hereafter existing, as defined in Section 424 (g) of the Internal Revenue Code of 1999. (i) "Plan" means this Stock Option Plan. (j) "Share" means the common stock of the Company, as adjusted, if necessary. (k) The phrase "average market price" means the average of the bid and asked prices of the company's common stock as reported by the National Association of Securities Dealers, Inc. on the last business day of a participating employee's pay period or, if there were no bid and asked prices on that day, the average of the bid and asked prices of the stock on the next preceding business day on which quotations were available. If the stock is subsequently listed on an established stock exchange or exchanges the fair market value shall be deemed to be the highest closing price of the common stock on the stock exchange or exchanges on the day the option is granted or if no sale of the company's common stock is made on any stock exchange on that day, on the next preceding day on which there was a sale of the stock 8 PLAN QUALIFICATION This plan is intended to quality as an Employee Stock Purchase Plan as defined in Section 422 (b) of the Internal Revenue Code. Online International Corporation By: /s/ Stanley James White ------------------------------------- Stanley James White Chief Executive Officer, President 9 -----END PRIVACY-ENHANCED MESSAGE-----