Armada Mercantile Ltd. Signs Letter of Intent to Acquire a Control Position In AVO Media Corp.

Business Editors

SACRAMENTO, Calif.--(BUSINESS WIRE)--July 5, 2000

Armada Mercantile Ltd. ("Armada") (CDNX:AAR) is pleased to announce that it has entered into a Letter of Intent (the "Agreement") for the acquisition of a control position in AVO Media Corp. ("AVO Media") and will be making application to the Canadian Venture Exchange to formally change its business.

AVO Media, based in Scottsdale, Arizona, is a unique and creative new media interactive marketing company, which uses the Internet as a platform and combines the talent of a multimedia house with exclusive cutting edge corporate communication and product delivery capabilities. AVO Media is working to become one of the largest new media companies in the world within the next five years. AVO Media will achieve this through a closely defined strategy by building its infrastructure, cash reserves, strategic alliances and reputation, and by rolling up new media agencies that fit its criteria. AVO Media has a world-class design team developing cutting edge television style corporate media, an existing proven sales force, and is licensed to market several media related products such as the AVO-Card(R) to gain revenues. On September 17, 1999, AVO Media and its management team, Peter Ashworth, Robert Chernick and Markus Almer, acquired the exclusive distribution rights to market and distribute the AVO-Card(R) for the United States, Canada and Mexico.

The AVO-Card(R) gives AVO Media a proven advantage over its competitors while providing an advantageous "foot in the door" at Fortune 100 companies such as Merrill Lynch, Wal-Mart and State Farm Insurance. AVO Media already has, in addition to the above, a stable of recognizable household name clients. The AVO-Card(R) provides the opportunity to build other new media business revenues within these companies such as websites, web hosting, interactive CD's, kiosks, corporate presentations, digital catalogues, and more. The AVO-Card(R) is a CD-ROM card the same size and shape as a business or credit card. The AVO-Card(R) can be carried in any wallet or purse, and can be sent in a postcard-sized mailer for cost effective bulk mailing. It is molded from an alternate material than standard CDs allowing ultra flexibility and durability differentiating the Card from inferior competitors' cards, which are router cut from a standard 5" CD. The AVO-Card(R) fits into a computer's CD tray on standard CD or DVD players, including both PC and MAC. The AVO-Card(R) contains up to 32MB (150MB using specialized DVD or compression techniques) of multimedia style information to tell an interactive story involving sounds, graphics, 3D animation, voiceover narrative, video, still images, etc. At 32MB, it can hold up to 11,000 pages of information, 4 minutes of video, or 32 minutes of pure audio. In addition to a dynamic presentation of a client's product or service, the AVO-Card(R) presents a private gateway to the client's website, in fact, to specific locations or pages on the website without having to type any address and without the requirement of any keystrokes by the user.

AVO Media has the sole and exclusive authority to sell and distribute the AVO-Card(R) through an agreement with Avomedia GmbH of Switzerland, the inventor of the Card and owner of the worldwide proprietary rights. Avomedia has its patents recorded or pending in every country participating in the International Patent Cooperation Treaty, including the United States. Avomedia GmbH of Switzerland has retained the law firm of Paul, Hastings, Janofsky & Walker, and the intellectual property firm of Christie, Parker & Hale to aggressively pursue any patent infringements. Avomedia will continue to develop proprietary technology that will bring additional advantages in the marketplace. In the near future, the AVO-Card(R) will be able to conduct transactional business through microchip technology being developed by Avomedia GmbH of Switzerland.

Peter Ashworth, as CEO, heads AVO Media. Mr. Ashworth is a graduate of The University of Otago, New Zealand, and The University of California, San Diego. Mr. Ashworth subsequently spent 20 years working for many well-known hotel and entertainment companies including Loews Hotels and Resorts, Virgin (UK Clubs) DeBretts Hotel Group, Hyatt Hotels Corporation, and Hyatt International Hotels Corporation where he was responsible for creating concepts, developing efficient internal systems for communications between departments, building an effective sales force, and insuring the quality of customer service to the four and five-star level. Mr. Ashworth's hands-on experience with a diverse sales group, and his focus on quality through The Axxis Group for multimedia digital Internet production makes him ideally suited to brand the AVO-Card(R) into mainstream corporate America.

Robert Chernick presides as Chairman. Mr. Chernick is a Canadian Chartered Accountant (CA) and a member of the Institute of Certified Public Accountants of New York (CPA). Mr. Chernick has extensive experience in start-up ventures, including Marketdisc Corporation, a southern California company involved in high-tech interactive touch screen technology incorporating the use of Pioneer videodiscs and dedicated computers. Prior to selling his position, the company achieved the two largest sales contracts for their industry in the world, to that date, to Builders Emporium and Levi's Strauss Corporation. Mr. Chernick's direct experience with IPO's, public issues, Securities Exchange matters, and the venture capital world, in combination with his former hands-on experience as President and senior management of a public company makes him ideally suited to the challenges presented by the AVO-Card(R) project.

Mr. Markus Almer presides as Executive Vice President Production. Mr. Almer is a graduate of the University of Zurich with an MBA in marketing, trade, organization and finance. From 1988 through 1995, Mr. Almer was employed by the Union Bank of Switzerland in Zurich, with responsibilities ranging from Assistant Manager for Marketing and Promotions, to developing and implementing new products and promotional strategies. Mr. Almer negotiated the American rights to the AVO-Card(R), and early in 1999 founded Avomedia USA, LLC, and moved from Switzerland to California to pursue the opportunity. Mr. Almer oversees the production of the AVO-Cards(R) and interfaces with Avomedia Switzerland to ensure the timely delivery and quality of the product to its customers.

Patrick Cole, President of Armada, is at arm's length to the principles and employees of AVO Media.

AVO Media is projecting sales of $4.9 million for the year 2000 and $30 million for the year 2001 while yielding profits of $407,866 and $4.5 million respectively. AVO Media currently has nineteen full time employees, which comprises internal legal, internal operations, programmers, controller and a full time sales staff. Visit the AVO Media website at www.avomedia.com for additional information regarding the company.

The terms of the Agreement can be summarized as follows:

Armada will acquire, on a fully diluted basis, 50% of the issued and outstanding shares of AVO Media (the "Avo Shares") for consideration of US$1,000,000 and the issuance of 1,900,000 common shares of Armada (the "Performance Shares"). The Performance Shares will be held in escrow and are subject to the escrow release provisions of the Canadian Venture Exchange. Upon closing, the board of directors of AVO Media will be comprised of five persons, three of whom will be nominated by Armada and thereby constitute a control position. AVO Media will grant a right of first refusal to Armada as it pertains to stock sales from any current AVO Media shareholder, further recapitalization of AVO Media, the sale or merger of AVO Media, or future financing of AVO Media.

Armada has agreed to provide a US$50,000 refundable deposit within 5 days and a bridge loan to AVO Media in the amount of US$150,000 within 60 days hereof. The loan will bear interest at 12% annually, calculated and compounded quarterly and will be secured by a general security agreement granting a security interest over all of AVO Media's present and after acquired property. On Closing, the amounts outstanding under the bridge loan will be set-off against the US$1,000,000 payment referred to above. If set-off against such closing payment does not occur, the full amount of principal and interest will be due and payable on June 30, 2001. Additional amounts advanced by Armada to AVO Media will carry the same terms and will be secured by a pledge of the AVO Shares. As security for repayment of its advances under the Agreement, on receipt of the cash payment, AVO Media will provide or cause to be provided to Armada, share certificates for the AVO Shares, in transferable form, together with a share pledge and hypothecation agreement executed by AVO Media.

If AVO Media breaches a material term of the Agreement, Armada will have the right to terminate its obligations under the Agreement, and on notice of such termination, all amounts advanced by Armada to AVO Media will become immediately due and payable, and if unpaid, Armada will be entitled to execute on its security over the AVO Shares on the terms of the share pledge and hypothecation agreement.

Vision of Armada: Armada, through its initial purchase of AVO Media, will vertically grow and integrate itself as a new economy company. Armada will use the skills of its board of directors, advisory board and AVO Media principals to stimulate and fulfill each goal set forth in the AVO Media business plan. Armada will provide the needed resources such as mentoring, strategic planning and funding for expansion. Armada will properly position itself for synergistic growth through mergers and acquisitions that harmonize with AVO Media. Armada and AVO Media, working together, will create shareholder value to substantiate further funding and therefore additional growth in its target market.

Armada has retained Global Securities Corporation as Sponsor for this change of business.

On October 22, 1999, Armada announced the grant of 500,000 two-year stock options at $0.54 for certain members of its advisory board. These shares will be cancelled effective immediately.

Completion of this transaction is subject to a number of conditions, including but not limited to Exchange acceptance and disinterested shareholder approval. The transaction cannot close until the required shareholder approval is obtained. There can be no assurances that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Management Information Circular and or Filing Statement to be prepared in connection with the transaction, any information released or received with respect to the change of business may not be accurate or complete and should not be relied upon. Trading in the securities of Armada should be considered highly speculative.

On behalf of the Board of Directors Patrick Cole, President

The Canadian Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.