COMTECH CONSOLIDATION GROUP, INC.
EXHIBIT 2 TO FORM 8-K
SHARE EXCHANGE AGREEMENT AND
PLAN OF REORGANIZATION, JUNE 5, 1997
SHARE EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT, made and entered into this 5th day of June, 1997, by
and between Solutions, Incorporated ( also known as Suarro Communications, Inc.,
a Nevada corporation)("Public Company"), a publicly held Nevada corporation, and
Internet Consolidation Group, Inc. a privately held Texas corporation
("Company") and the individuals listed on Exhibit "A" attached hereto and
specifically incorporated herein by this reference (the "Company Shareholders").
WITNESSETH:
WHEREAS, Public Company desires to acquire all of the issued and
outstanding capital stock of Company and to its wholly owned subsidiaries (ICOM
Communications, Inc., and Networks On- Line); and
WHEREAS, the Company Shareholders are the sole holders of all Company's
capital stock outstanding and they desire to transfer the same to Public Company
in exchange for such consideration as is set forth herein; and
WHEREAS, it is the intention of the parties to this Agreement that the
transactions evidenced hereby qualify as a reorganization pursuant to such
sections of the Internal Revenue Code of 1954, as amended (the "Code"), as are
applicable, including, without limitation, Section 368(a)(1)(b) thereof, and
that there not be a taxable gain or loss recognized by Public Company, Company
or the Company Shareholders upon consummation of the transactions evidenced
hereby; and
WHEREAS, the transactions evidenced hereby are to be submitted for
approval at a special meeting of the Board of Directors of Public Company and
Company and by the Company Shareholders by unanimous consent, dated on even date
herewith;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants, terms and conditions set forth herein, and such other and
further consideration, the receipt and sufficiency of which is hereby
acknowledged, this Agreement is adopted as a reorganization pursuant to the Code
and THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF PUBLIC COMPANY
Public Company represents and warrants to Company and the Company
Shareholders as follows:
1.1 Public Company Profile; Assets and Liabilities. Public Company is
not currently conducting, and has engaged in any business operations which
generated any revenues and have conducted no business operations other than
those described herein and other than set forth in the definitive prospectus for
its initial public offering dated July 7, 1994 (the "Prospectus"). Other than
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the costs associated with the transaction proposed herein, Public Company has no
liabilities of any nature, whether accrued, absolute, contingent, known or
otherwise, except as described in its financial statements. Public Company has
no assets except as disclosed on its audited financial statements for the year
ended April 30, 1997.
1.2 Financial Statements. Public Company has delivered a draft of its
audited financial statements dated, and for the period ended April 30, 1997,
together with all notes thereto, prepared in reasonable detail in accordance
with generally accepted accounting principles applied on a consistent basis,
which financial statements contain a Balance Sheet, dated April 30, 1997, a
Statement of Operations for the years ended April 30, 1997 and 1996, a Statement
of Stockholder's Equity for the years ended April 30, 1997 and 1996 and a
Statement of Cash Flows, for the years ended April 30, 1997 and 1996.
1.3 Absence of Certain Changes. Since the date of the most recent
financial statements delivered hereunder, Public Company has not:
(a) Suffered any material and adverse change in its financial
condition, working capital, assets, liabilities, reserves, business, operations
or prospects;
(b) Suffered any loss, damage, destruction or other casualty materially
and adversely affecting any of its properties, assets or business (whether or
not covered by insurance);
(c) Borrowed or agreed to borrow any funds or incurred, or assumed or
become subject to, whether directly or by way of guarantee or otherwise, any
obligation or liability, except as related to the costs associated with the
proposed transaction herein and to its transfer agent;
(d) Paid, discharged or satisfied any claims, liabilities or
obligations, other than in the normal course of its business;
(e) Permitted or allowed any of its property or assets (real, personal
or mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind;
(f) Canceled any debts or waived any claims or rights of substantial
value, or sold, transferred, or otherwise disposed of any of its properties or
assets (real, personal or mixed, tangible or intangible) other than described
herein regarding the rescission of the share exchange agreement with Suarro
Communications, Inc., Texas;
(g) Granted any increase in the compensation of directors, officers or
employees (including any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment), or any increase in the compensation
payable or to become payable to any director, officer or employee;
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(h) Made any capital expenditure or commitment outside of its normal
course of business;
(i) Declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or, directly or indirectly,
redeemed, purchased or otherwise acquired any shares of its capital stock or
other securities, other than as required hereunder;
(j) Made any change in any method of accounting or accounting practice;
(k) Paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible), to, or entered into any affiliate or associate of any of its
directors or officers, except for directors' fees and compensation to officers
at rates set forth in any Form 10-K or 10-KSB of Public Company filed with the
Securities and Exchange Commission, none of which shall result in any liability
or indebtedness which shall survive this closing;
(l) Entered into any transaction, contract or commitment with any other
party;
(m) Been subject to any other event or condition of any character that
has or might reasonably have a material and adverse effect upon the financial
condition, business, assets or properties of Public Company, except the
rescission of the reorganization with Suarro Communications, Inc., Texas;
(n) Agreed, whether in writing or otherwise, to take any action
described in this paragraph of the Agreement.
1.4 Affirmative Representations Regarding Action of Public Company
between Date of Financial Statements Delivered and Closing. Between the date of
the most recent financial statements delivered hereunder and the date of this
Agreement, Public Company has conducted its business in the same manner as
conducted before the date of such financials. Public Company will continue to
conduct its business in the same manner as conducted before the date of the
financial statements through the date of closing, as defined hereinbelow.
1.5 Employment Agreements; Benefit Plans. There is not currently any
employment or severance agreement to which Public Company was or is subject, or
by which it was or is bound. Further, no such agreements will arise in the
future as a result of acts which have occurred previous to, or concurrent with,
the date hereof. Further, Public Company is not subject to, nor has it
established, a benefit plan, whether pursuant to the Code or otherwise, other
than disclosed in Public Company's Prospectus. No shares of common stock,
options to acquire common stock or other benefits have been issued under, or
pursuant to, any such plan or arrangement.
1.6 Permits and Licenses. The business of Public Company has complied
and currently complies in all material respects with all applicable laws and
regulations and with its Prospectus. Further, the business of Public Company
does not currently require, and has not in the past required, application to
procure any license, permit, franchise, order or approval.
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1.7 Litigation. There is no litigation or proceeding pending or
threatened against or relating to Public Company or its business. There is some
reason to believe that the shareholders of Suarro Communications, Inc., Messrs.
XxXxxxxxx and Xxxxxx may assert a claim that the rescission was improper or
invalid, however, even if such a claim were to be brought, the value of any
shares belonging to Messrs. XxXxxxxxx or Xxxxxx as of the date of the
rescission, does not exceed $113. Other than this potential claim which current
management believes is without merit, no other claims exist and there is no
factual basis, whether known or unknown, for any claim or action to be
threatened or asserted against Public Company.
1.8 Contracts, Agreements and Leases. Other than its agreement with its
legal counsel , auditor, and transfer agent, Public Company is not a party to
any contracts, agreements, permits, licenses, plans, leases or similar
arrangements. The obligations of Public Company owed to its legal counsel and
transfer agent will be paid in full through closing by Public Company, without
exception.
1.9 Principal Shareholders. Public Company has previously provided to
Company or its counsel a current list of its shareholders and as of the date of
this Agreement and affirmatively states that other than the 5,200, 000 shares of
common stock issued to Messrs. XxXxxxxxx and Xxxxxx in a share exchange
agreement which has been rescinded and these shares canceled, no additional
shares have been issued by the Board of Directors of Public Company, nor is
issuance of such additional shares contemplated as of the date of this
Agreement, other than as described herein. The shareholder list delivered to
Company is accurate and complete as of the Closing Date herein.
1.10 Authorization. Public Company has duly taken all corporate action
necessary to authorize the execution and delivery of this Agreement, the
consummation of the transactions evidenced hereby and the performance of its
obligations hereunder.
1.11 Enforceable Obligations. This Agreement is a legal and binding
obligation of Public Company, enforceable in accordance with the terms hereof,
except as limited by bankruptcy, insolvency or other laws of general application
relating to the enforcement of creditors' rights and general equitable
principles.
1.12 No Conflicts or Consents. The execution and delivery by Public
Company of this Agreement and the performance of its obligations have not
conflicted and will not conflict with any provision of law, statute, rule or
regulation or any judgment applicable to or binding upon Public Company, nor
will it result in the creation of any lien, charge or encumbrance. No consent,
approval, authorization or order of any court or governmental authority or third
party has been or is required in connection with the execution and delivery by
Public Company of this Agreement or the consummation of the transactions
evidenced hereby. Neither the execution nor the consummation of this Agreement
in accordance with the terms and conditions set forth herein has conflicted or
will conflict with or constitute a default under or a breach or violation or
grounds for termination of or an event which with the lapse of time or notice
and the lapse of time could or would constitute a default under the Articles of
Incorporation or bylaws of Public Company.
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1.13 Organization and Good Standing. Public Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has all corporate powers required to carry on its business
and enter into and carry out the transactions evidenced herein. Public Company
is qualified to do business and is in good standing as a foreign corporation in
all jurisdictions wherein the character of the properties owned or held by it or
the nature of the business transacted makes such qualification necessary. As of
the closing date hereof, Public Company will not have any subsidiaries or
interests in any corporation, partnership, limited partnership or other business
entity.
1.14 Capitalization. As of the date hereof, Prior to execution of this
Agreement, the authorized capital stock of Public Company consists of 20,000,000
shares of common stock, $.001 par value, of which 1,000,000 of such shares are
issued and outstanding (the 5,200,000 previously issued to Messrs. XxXxxxxxx and
Xxxxxx have been canceled at shareholders and directors meetings), all of the
then issued and outstanding shares will be fully paid for and nonassessable, and
1,000,000 shares of preferred stock, no par value per share, for which no such
shares are issued or otherwise outstanding.
Public Company has no other outstanding rights, options, warrants,
contracts, commitments or demands of any character which would require the
issuance (or transfer out of treasury), by Public Company of any shares of its
capital stock. All outstanding securities were issued in accordance with
applicable federal and state securities laws or exemptions therefrom. The Public
Company Prospectus was duly registered with the U.S. Securities and Exchange
Commission ("SEC") and all applicable state securities departments (collectively
referred to as "State Registrations"). All SEC and State Registrations complied
with all applicable laws, rules and regulations. No claims or actions have been
threatened or asserted arising out of, or concerning, the Prospectus, SEC
Registrations, State Registrations or the sale of securities of Public Company.
1.15 Filing of Reports. Public Company is presently current in the
requirement to file all Form 10-Q.B., 10-KSB and 8- K reports required to be
filed pursuant to the Securities Exchange Act of 1934, as amended. Further,
Public Company has filed all required reports of application of proceeds with
all applicable state securities departments on the appropriate forms and will,
prior to or at Closing, file the final Form SR with the SEC. All forms, filings
and reports, including but not limited to the Prospectus, filed by Public
Company with the SEC and each state securities department were complete and
accurate and contained no material misstatements or omissions of a material
fact.
1.16 Tax Filings. Public Company has or is in the process of duly
filing all federal, state, local and foreign tax reports and returns as required
to be filed by it and has duly paid all taxes and other charges due or claimed
to be due from it by any federal, state, local or foreign tax authorities.
Further, the reserve for taxes, if any, reflected in the balance sheet delivered
hereunder is adequate and there are no tax liens upon any property or assets of
Public Company. Further, no state of facts exists or has existed which would
constitute grounds for the assessment of any tax liability. All deficiencies and
assessments resulting from an examination of state, local, federal and foreign
tax returns and reports have been paid. There are no outstanding agreements or
waivers extending the
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statutory period of limitation applicable to any federal, state, local, or
foreign tax return or report for any period. Public Company is not a "consenting
corporation" within the meaning of Section 341(f)(1) of the Code.
1.17 Compliance With Law. Public Company is in compliance with all
laws, regulations and orders applicable to its business, including but not
limited to, all applicable laws, rules and regulations of the U.S. Securities
and Exchange Commission and all applicable state securities departments.
Further, Public Company has not received any notification that it is in
violation of any laws, regulations or orders and, to the best knowledge of
management of Public Company, no such violations exist. Neither Public Company
nor any employee or agent of Public Company has made any payment to any person
which violates any statutes or law required to be disclosed under applicable
disclosure policies of the Securities and Exchange Commission.
1.18 Disclosure. No representations or warranties by Public Company in
this Agreement and no statement contained in any document (including, without
limitation, financial statements), certificate or other writing furnished or to
be furnished by Public Company to Company or the Company Shareholder pursuant to
the provisions hereof or in connection with the transactions contemplated
hereby, contained or will contain any untrue statement of material facts or
omits or will omit to state any material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. There are no facts known to Public Company which,
either individually or in the aggregate, could or would materially and adversely
affect or involve any substantial possibility of having a material and adverse
effect on the condition (financial or otherwise), results of operations, assets,
liabilities or business of Public Company.
1.19 Officers' Certificates. At closing, the President of Public
Company shall provide a Certificate, dated as of the closing date and certified
by the Secretary of Public Company, to the effect that:
(a) Public Company is not currently conducting, and has never been
engaged in, any business other than set forth in its Prospectus, with the
exception of the merger with Suarro Communications, Inc., a Texas corporation on
August 16, 1996, together with all its assets including Annual Reports On-Line,
have been returned to Suarro Communications, Inc. by virtue of the return of the
stock certificates representing such assets which were delivered to Public
Company in the share exchange agreement on August 16, 1996. All of the 5,200,000
shares issued in that merger transaction have been canceled.
(b) Public Company has delivered a draft of its audited financial
statements dated, and for the fiscal year ended, April 30, 1997, together with
all Notes thereto, prepared in reasonable detail in accordance with generally
accepted accounting principles applied on a consistent basis, which financial
statements contain a balance sheet dated April 30, 1997, and the following
statements for the period then ended: a statement of operations, a statement of
stockholders' equity, and a statement of cash flows. Further, Public Company has
delivered, or will deliver upon request of Company, all books and records, as
well as all required substantiating documentation, to Company, which are
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necessary to compile financial statements for periods subsequent to the date of,
and the periods covered by, the most recent financial statements delivered
hereunder. Further, Public Company has delivered, or otherwise made available,
true and correct copies of the Articles of Incorporation and bylaws of Public
Company, minutes of all meetings of its directors and shareholders, true and
correct copies of all filings made in respect of Public Company's initial public
offering and such other and further material as has been requested, including
audited financial statements as of Closing Date..
(c) Since the date of the most recent financial statements delivered
hereunder, Public Company has not (unless otherwise described herein):
(1) Suffered any material and adverse change in its financial
condition, working capital, assets, liabilities, reserves, business, operations
or prospects;
(2) Suffered any loss, damage, destruction or other casualty
materially and adversely affecting any of its properties, assets or business
(whether or not covered by insurance);
(3) Borrowed or agreed to borrow any funds or incurred, or
assumed or become subject to, whether directly or by way of guarantee or
otherwise, any obligation or liability other than in the ordinary course of
business ;
(4) Paid, discharged or satisfied any claims, liabilities or
obligations, other than in the ordinary course of its business;
(5) Permitted or allowed any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of any kind;
(6) Canceled any debts or waived any claims or rights of
substantial value, or sold, transferred, or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible) other
than as previously described herein;
(7) Granted any increase in the compensation of directors,
officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any director, officer or employee;
(8) Made any capital expenditure or commitment other than in
the normal course of its business or as disclosed herein;
(9) Declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock or, directly or indirectly,
redeemed, purchased or otherwise acquired any shares of its capital stock or
other securities, other than as required hereunder to consummate the transaction
proposed herein;
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(10) Made any change in any method of accounting or accounting
practice;
(11) Paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of its directors or officers or any affiliate or associate of any of its
directors or officers, other than the return of Suarro Communications, Inc, of
Texas back to the original shareholders;
(12) Entered into any transaction, contract or commitment
other than as described in the Public Company Prospectus, or as otherwise
previously described to Company;
(13) Been subject to any other event or condition of any
character that has or might reasonably have a material and adverse effect upon
the financial condition, business, assets or properties of Public Company;
(14) Agreed, whether in writing or otherwise, to take any
action described in this paragraph of the Agreement;
(d) Between the date of the most recent financial statements delivered
hereunder and the date of this Agreement, Public Company has conducted its
business in the same manner as conducted before the date of such financials and
in accordance with the Public Company Business Plan described in its Prospectus.
(e) There is not currently any employment or severance agreement to
which Public Company was or is subject, or by which it was or is bound. Further,
no such agreements will arise in the future as a result of acts which have
occurred previous to, or concurrent with, the date hereof.
(f) There is no litigation or proceeding pending or threatened against
or relating to Public Company, or its business other than as previously
described herein.
(g) Public Company is not a party to any contract, agreement, permit,
license, plan, lease or similar arrangement which will survive closing, other
than its existing agreement with its transfer agent, legal counsel and auditor.
(h) The execution and delivery by Public Company of this Agreement and
the performance of its obligations have not conflicted and will not conflict
with any provisions of law, statute, rule or regulation or any judgment
applicable to or binding upon Public Company, nor will it result in the creation
of any lien, charge or encumbrance. No consent, approval, authorization or order
of any court or governmental authority or third party has been or is required in
connection with the execution and delivery by Public Company of this Agreement
or the consummation of the transactions evidenced hereby. Neither the execution
nor the consummation of this Agreement in accordance with the terms and
conditions set forth herein, has conflicted or will conflict with or constitute
a default under or a breach or violation or grounds for termination of or an
event which with the lapse of time
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or notice and the lapse of time could or would constitute a default under the
Articles of Incorporation, as amended, or bylaws of Public Company.
(i) Public Company is in compliance with all laws, regulations and
orders applicable to its business. Further, Public Company has not received any
notification that it is in violation of any laws, regulations or orders and no
such violations exist. Neither Public Company, nor any employee or agent of
Public Company, has made any payment to any person which violates any statutes
or law required to be disclosed under applicable disclosure policies of the
Securities and Exchange Commission.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF COMPANY AND THE COMPANY SHAREHOLDERS
Company and the Company Shareholders represent and warrant to Public Company as
follows:
2.1 Organization and Good Standing. Company and its wholly owned
subsidiaries (herein referred to collectively as "Company") are corporations
duly organized, validly existing and in good standing under the laws of the
State of Texas and have all corporate powers required to carry on its business.
Company is qualified to do business and is in good standing as a foreign
corporation in all jurisdictions wherein the character of its properties or the
nature of its business makes such qualification necessary.
2.2 Authorization. The Company Shareholders have duly taken all action
necessary to authorize the execution and delivery of this Agreement and to
authorize the consummation of the transactions evidenced hereby and the
performance of their obligations and the obligations of Company hereunder.
2.3 No Conflicts or Consents. The execution and delivery by the Company
Shareholders of this Agreement and their performance of those obligations set
forth herein have not conflicted and will not conflict with any provision of
law, statute, rule or regulation or of any agreement or judgment applicable to
or binding upon them or Company, or result in the creation of any lien, charge
or encumbrance upon any of their assets or properties, or upon those of Company.
No consent, approval, authorization or order of any court or governmental
authority or third party is required in connection with the execution and
delivery by Company, or by the Company Shareholders, of this Agreement or the
consummation of the transactions evidenced hereby. Neither the execution of this
Agreement nor its consummation in accordance with its terms has conflicted or
will conflict with or constitute a default under or breach or violation or
grounds for termination of or an event which with the lapse of time or notice
and the lapse of time would or could constitute a default under any note,
indenture, mortgage, deed of trust or other agreement or instrument to which
Company or the Company Shareholders are a party or by which either or all of
them are bound.
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2.4 Enforceable Obligations. This Agreement is a legal and binding
obligation of Company and the Company Shareholders, enforceable in accordance
with its terms, except as limited by bankruptcy, insolvency or other laws of
general application relating to the enforcement of creditor's rights and general
equitable principles.
2.5 Capitalization. The authorized capital stock of Company consists of
1,000,000 shares of common stock, of which 52,000 are issued in outstanding and
fully paid for and nonassessable. Company has no outstanding rights, options,
warrants, contracts, commitments or demands of any character which would require
the issuance (or transfer out of treasury), by Company of any shares of its
capital stock. All outstanding securities were issued in accordance with
applicable federal and state securities laws or exemptions therefrom.
2.6 Financial Statements. Company has provided unaudited proforma
financial statements for the period ending April 30, 1997, and agrees to deliver
audited financial statements for the period ending, as of Closing Date, together
with all notes thereto, prepared in reasonable detail in accordance with
generally accepted accounting principles applied on a consistent basis, to
Public Company within 60 days of Closing Date.
2.7 Other Information and Inspections. Company has made available for
inspection and copying all books and records of Company and has fully and
completely furnished to Public Company such information as has been requested.
2.8 Disclosure. No representations or warranties by Company or the
Company Shareholders in this Agreement and no statement contained in any
document, certificate or other writing furnished or to be furnished by Company
or the Company Shareholders to Public Company pursuant to the provisions hereof,
or in connection with the transaction contemplated hereby, contained or will
contain any untrue statements of material facts or omits or will omit to state
any material fact necessary in order to make the statements herein or therein,
in light of the circumstances under which they were made, not misleading.
Unanimous consents of the Company Shareholders and directors were executed, to
be effective on or before May 30, 1997. Under the respective consents, all
transactions evidenced hereby obtained the requisite approval. Company has been
informed of the details of the potential claims by Messrs. XxXxxxxxx and Xxxxxx
and of the rescission of the share exchange agreement with Suarro
Communications, Inc., a Texas corporation and have had an opportunity to review
the facts and review the issue with its counsel, and are willing to engage in
the share exchange despite the potential claims which may exist by Messrs.
XxXxxxxxx and Xxxxxx.
ARTICLE III
CLOSING AND EXCHANGE OF SHARES
3.1 Terms of the Exchange. On the Closing Date, or such date as
stated below:
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(a) On or before ten (10) days after the Closing Date, Public
Company shall cause to be delivered to the Company Shareholders, in an
acceptable form, certificates for 5,200,000 "restricted" shares, of its $.001
par value voting common stock (the "Exchange Shares"), free and clear of all
mortgages, pledges, claims, liens and other rights and encumbrances whatsoever,
except as disclosed in 3.1(b), below. The Company Shareholders shall not be
diluted as a result of any debt, lien, encumbrance, action or liability, or any
cost or expense related thereto of Public Company, or any breach of any
representation or warranty of Public Company contained herein ("Subsequent
Liabilities"). Accordingly, in addition to any other remedy, either in law or in
equity, the Company Shareholders shall be issued such additional shares of
Common Stock of Public Company as may be required to off-set any such Subsequent
Liabilities. The number of shares to be issued to the Company Shareholders shall
be determined as follows: (I) in the event shares are sold by Public Company to
pay or satisfy the Subsequent Liabilities, Public Company shall issue such
number of shares as are necessary to maintain the same percentage of ownership
by the Company Shareholders as they had before said issuance; or (ii) in the
event Public Company does not issue additional shares to satisfy the Subsequent
Liabilities, shares equal to the amount of the Subsequent Liabilities, with a
market value at bid price, will be issued to the Company Shareholders.
(b) The Exchange Shares shall not be subject to any preemptive
rights, options or similar rights on the part of any shareholder or creditor of
Public Company, or any other person whatever.
(c) The Company Shareholders shall, in consideration for their
receipt of the Exchange Shares, transfer and deliver to Public Company
certificates representing all 52,000 of the issued and outstanding Company
Shares owned by them. Public Company shall receive good and merchantable title
to the Company Shares, which shall be transferred to Public Company free and
clear of all liens, mortgages, pledges, claims or other rights or encumbrances
whatever.
3.2 Restrictions on Transfer. The Exchange Shares, when issued and
delivered hereunder, will not be registered under the Securities Act of 1933, as
amended, nor will the Company Shareholders be granted any registration rights
under such Act as to such shares. The Company Shareholders shall execute and
deliver to Public Company an investment letter satisfactory in form and
substance to Public Company's counsel which states, among other things, that the
Exchange Shares have been acquired for investment and with no present intent to
make any resale, assignment, transfer or hypothecation of all or any part
thereof and that the certificates representing the Exchange Shares will bear a
restrictive legend which states in effect that such shares have not been
registered under the Securities Act of 1933, as amended, and consequently may
not be resold, assigned, transferred or hypothecated unless registered under
such Act or, in the opinion of Public Company's counsel, an exemption from the
registration requirements of such Act is available for any such transaction.
3.3 Changes in Capitalization of Public Company. If, between the date
of the most recent financial statements of Public Company delivered to Company
and the Company Shareholders and the Closing Date, the outstanding shares of the
capital stock of Public Company are found to have
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been increased, decreased, changed into or exchanged for a different number or
kind of said shares or securities of Public Company through reorganization,
reclassification, stock dividend stock split, reverse stock split or similar
change in the capitalization of Public Company and such has not been disclosed
to the Company Shareholders hereunder, Public Company, at the election of the
Company Shareholders, shall issue and deliver to the Company Shareholders such
number of Public Company shares as will reflect an equitable adjustment of the
Public Company shares specified in Paragraph 1 of this Article III on account of
any such increase, decrease, change or exchange. In the event of any such change
in the capitalization of Public Company, all references to the shares herein
shall refer to the number of Public Company shares as thus adjusted.
3.4 Closing Date/Effective Date. The Closing Date of the transactions
contemplated hereby shall be June 9, 1997, or such later date as the parties may
so choose thereafter. All representations of the parties hereto shall survive
the closing and the representations and warranties shall be made as in effect on
the Closing Date.
The Effective Date shall be the date in which all of the certificates
necessary to effectuate this transaction have been duly issued by the respective
party and all other matters relevant to the closing of the transaction
contemplated herein have been accomplished.
3.5 Closing Documents.
A. To Be Delivered by Public Company:
(1) Certificates representing 5,200,000 shares of"restricted"
common stock to the Company Shareholders;
(2) Certified copy of minutes of shareholders and directors,
authorizing this transaction;
(3) Certificate of Good Standing and Amendment to Articles of
Incorporation, changing name of Suarro Communication, Inc, to COMTECH
Consolidation Group, Inc.;
(4) Letter from legal counsel of Public Company re XxXxxxxxx
and Xxxxxx claims and analysis re rescission;
(5) Certificate of President;
(6) Resignation letters of Xxx R, Xxxxxxxx and Xxxxx
Xxxxxxxxxx as officers and directors, as applicable.
(7) Letter from present independent certified public
accountant, resigning from said position, if Company chooses not to retain such
accountant for further purposes, and further indicating that the basis of their
resignation does not arise from any changes in or disagreements with
17
the management of Public Company on any issue of accounting practices or
procedure.
B. To be delivered by Company or Company Shareholders:
(1) Certificates representing 52,000 shares of Company,
together with an assignment of said shares, separate from said Certificates;
(2) Certified copy of minutes of shareholders and directors of
Company, authorizing this transaction;
(3) Certificate of Good Standing;
(4) Legal opinion of counsel, acceptable to Public Company;
(5) Certificate of President;
(6) Investment letter from Company Shareholders relating to
issuance of Public Company common stock relevant herein.
ARTICLE V
COVENANTS OF COMPANY AND THE COMPANY SHAREHOLDERS
Company and, insofar as they have the power to direct Company by
ownership of voting securities or otherwise, the Company Shareholders (Company
and the Company Shareholders being collectively referred to below as the
"Company Parties"), covenant and agree that, prior to the Effective Date:
5.01 Effectuation of this Agreement. The Company Parties will use their
best efforts to cause this Agreement to become effective, and all transactions
herein contemplated to be consummated, in accordance with their terms, to obtain
all required consents and authorizations of the Company Parties, to make all
filings and give all notices to those regulatory authorities or other third
parties which may be necessary or reasonably required in order to effect the
transactions contemplated in this Agreement, and to comply with all federal and
state securities laws and other laws as may be applicable to the contemplated
transactions.
5.02 Transactions. The Company Parties will carry on Company's business
diligently and substantially in the same manner as heretofore conducted, and
will not enter into any transactions which are not in the ordinary course of
Company's business, or which would singly or in the aggregate be materially
adverse to Company's business, prospects or financial condition, taken as a
whole, or which had not been previously disclosed to Public Company.
18
5.03 Conduct of Business. (a) The Company Parties will not (I) permit
or do or cause to be done anything which Company has represented in Article II
not to have been done, except as otherwise permitted in this Agreement or
consented to by Public Company in advance and in writing; (ii) make or permit
any amendment to Company's Articles of Incorporation or bylaws; (iii) cause or
permit to be declared or paid any dividend, stock split, combination (reverse
split) or other recapitalization or distribution in respect of Company's common
stock, nor cause or permit the issuance of any additional shares of Company's
common stock; (iv) permit the increase of compensation of any type to any
director or officer or other employee of Company; (v) to the best ability of the
Company Parties, permit or do any act or omission to act the effect of which
would be to breach or violate any contract or commitment to which Company is a
party; (vi) to the best ability of the Company Parties, permit or cause the
waiver of the provisions of any statute of limitations applicable to the levy or
assessment of any federal, state, municipal or foreign taxes payable by Company;
or (vii) organize any subsidiary of Company, or acquire or permit the
acquisition of any equity interest in any other business or entity, with the
exception of those proposed transactions presently in negotiations and disclosed
herein in Exhibit "C" (Company Business Plan).
(b) To the best of their ability, the Company Parties will: (I)
maintain Company's books, accounts, and records as now being maintained, on a
consistent basis; (ii) maintain Company's properties in good repair; (iii)
comply with and not violate any law, rule, regulation, or ordinance whatever
applicable to Company or its business or any license or permit issued to
Company; and (iv) take each and every step necessary to preserve the charter
issued by the State of Texas, including timely filing of corporate reports and
current payment of all taxes now and hereafter due and owing.
5.04 Issuance of Additional Securities. Company shall not issue or
permit the issuance of any common stock of Company or of any warrant, option or
other right to subscribe for or acquire common stock or any other securities
whatever of Company, nor shall any stock option or stock purchase plan,
incentive stock option plan or similar plan be adopted whereby persons could
acquire securities of Company, or any option or similar right to acquire such
securities.
5.05 Publicity and Filings. All press releases, shareholder
communications, filings with the Securities and Exchange Commission or other
governmental agency or body and other information and publicity generated by
Company regarding the transactions contemplated in this Agreement shall be
reviewed and approved by Public Company and its counsel before release or
dissemination to the public or filing with any governmental agency or body
whatever.
5.06 Access. The Company Parties agree that they will allow Public
Company's directors, officers, accountants, attorneys and other representatives
full access, during normal business hours throughout the term or applicability
of this Agreement, to all information whatever concerning Company's respective
affairs, operations and properties as Public Company may reasonably request. All
information provided shall be furnished strictly subject to the confidentiality
provisions of this Agreement. The Company Parties may refuse to allow copies or
abstracts to be made of any formula, design plans for machinery or equipment, or
any plans or details as to manufacturing or chemical processes, and the like;
provided that representatives of Public Company shall be allowed access to
19
such things for inspection, in order to satisfy themselves that such things
exist and are substantially as represented to Public Company.
5.07 Stand-Still Agreement. Other than those potential acquisitions
which have previously been disclosed to Public Company, the Company Parties
agree not to solicit from any third party an offer or expression of interest in
or with respect to any acquisition, combination or similar transaction involving
Company, or substantially all of its assets or securities (whether outstanding
or authorized but unissued) and further agree that they will promptly inform
Public Company of the existence of any such unsolicited offer or expression of
interest.
5.08 Release and Indemnification of Officers, Directors and
Shareholders of Public Company. The Company and the Company Parties hereby
release and waive all claims against the current officers, directors and
shareholders of the Public Company and hereby agree to indemnify such officers,
directors and shareholders (including attorney's fees and costs) from any and
all claims, litigation, adversary proceedings or any other matter whatsoever,
resulting from the potential claims by Suarro Communications, Inc, a Texas
corporation, Xxxxxxx XxXxxxxxx and/or Xxxxxxxxx Xxxxxx against them, arising out
of the share exchange agreement transaction dated August 16, 1996, subsequent
rescission in June 1997 of the share exchange agreement, and all acts by such
officers, directors and shareholders to review and approve this Agreement with
Company and the Company Parties.
ARTICLE VI
COVENANTS OF PUBLIC COMPANY
Public Company covenants and agrees that, prior to the Effective Date:
6.01 Effectuation of this Agreement. Public Company will use its best
efforts to cause this Agreement to become effective, and all transactions herein
contemplated to be consummated, in accordance with their terms, to obtain all
required consents and authorizations of third parties, to make all filings and
give all notices to those regulatory authorities or other third parties which
may be necessary or reasonably required in order to effect the transactions
contemplated in this Agreement, and to comply with all federal and state
securities laws and other laws as may be applicable to the contemplated
transactions.
6.02 Conduct. (a) Public Company will not (I) permit or do or cause to
be done anything which Public Company has represented in Article I not to have
been done, except as otherwise permitted in this Agreement, or consented to by
Company in advance and in writing; (ii) make or permit any amendment to the
Public Company Articles of Incorporation or bylaws, other than those matters
included in Exhibit "B" hereto; (iii) cause or permit to be declared or paid any
dividend, stock split, combination (reverse split) or other recapitalization or
distribution in respect of Public Company's capital stock, other than as
disclosed in the aforesaid Proxy documents; (iv) to Public Company's best
ability, permit or cause the waiver of the provisions of any statute of
limitations
20
applicable to the levy or assessment of any federal, state, municipal or foreign
taxes payable by Public Company.
(b) To the best of its ability, Public Company will: (I)
maintain its books, accounts and records as now being maintained, on a
consistent basis; (ii) comply with and not violate any law, rule, regulation or
ordinance whatsoever applicable to Public Company; and (iii) take each and every
step necessary to preserve the charter issued by the State of Nevada, including
timely filing of corporate reports and current payment of all taxes now and
hereafter due and owing.
6.03 Access. Public Company agrees that it will allow Company's
directors, officers, accountants, attorneys and other representatives full
access, during normal business hours throughout the term or applicability of
this Agreement, to all information whatever concerning its affairs as the
Company Parties may reasonably request. All information provided shall be
furnished strictly subject to the confidentiality provisions of this Agreement.
ARTICLE VII
GENERAL PROVISIONS
7.1 Further Assurances. At any time and from time to time after the
date of this Agreement, each and every party hereto shall execute such
additional instruments and take such other and further action as may be
reasonably requested by any other party to carry out the intent and purpose of
this Agreement.
7.2 Waiver. Any failure on the part of any party hereunder to comply
with any of their obligations, agreements or conditions may be waived in writing
by the party to whom such compliance is owed; however, waiver on one occasion
does not operate to effectuate a waiver on any other occasion.
7.3 Brokers. Each party represents to every other party that no brokers
or finders have acted for it in connection with this Agreement and that no
obligations of Public Company, Company and the Company Shareholders need to be
satisfied as of the date of this Agreement.
7.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid, first class, registered or certified mail, return receipt requested, as
first set forth above; and for the Company Shareholders as set forth under their
names on Exhibit A.
7.5 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any other agreement,
representation or communication, whether oral or written, between the parties
and relating to the transactions evidenced hereby or the subject matter hereof.
21
7.6 Headings. The article and paragraph headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
7.7 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Nevada.
7.8 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7.9 No Oral Modification. This Agreement may be amended solely in
writing, and only after the mutual agreement of the parties affected hereby.
7.10 Rescission of Agreement. Company and Company Parties understand
that the Company and its shareholders are relying on the representations and
projections contained in this Agreement, the Company Business Plan and other
documents delivered to the Public Company. In the event that any such
representations, projections or material facts about Company are discovered to
be untrue or otherwise materially and adversely affect the business prospects of
the Company and/or the value of the securities issued by the Company, a majority
of the shareholders of the Company (determined as of the date immediately prior
to the effective date of this Agreement) may immediately and unilaterally
rescind this Agreement with written notice to Company and may return to Company
all of its assets and liabilities as if the transaction contemplated hereby had
never taken place. No decision of any court or other government or regulatory
agency shall be necessary to effectuate the rescission. The rescission shall
entitle the Company to proceed to elect new officers and directors and to cancel
the certificates issued to the shareholders of Company, and to proceed to
acquire another private company which has a valid business plan and potential
value to the shareholders of the Public Company. A notice of rescission to
Company by Public Company and the return of the shares delivered by Company to
Public Company, shall not entitle Company to obtain any damages, fees, or costs
from Public Company or its previous or newly appointed officers, directors or
shareholders as a result of the rescission and Company shall only be entitled to
the assets which were in existence as of the date immediately preceding the
effective date of this Agreement and the benefits derived directly from such
assets. The goal of any rescission shall be to return the parties to the
position that they were in on the date immediately preceding the effective date
of this Agreement.
7.11 Survival of Representations, Warranties and Covenants. The
representations, warranties, covenants and agreements contained herein shall
survive the date and execution of this Agreement.
7.12 Legal Counsel; Expenses. The parties hereby acknowledge that they
have had an opportunity to obtain legal counsel in respect of all matters
leading to, and including, the transactions evidenced hereby.
7.13 Simultaneous Closing. Public Company and the Company Parties
specifically
22
acknowledge and represent that the closing hereunder was, in effect,
simultaneously completed with Public Company and the Company Parties on the date
of this Agreement.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be
executed on the date and year first above written.
SUARRO COMMUNICATIONS, INC. a Nevada corporation ("PUBLIC COMPANY")
(Formerly known as Solutions, Inc., a Nevada corporation)
/S/ XXX X. XXXXXXXX
Xxx X. Xxxxxxxx, President/Director
PUBLIC COMPANY
Attest:
/S/ XXXXX XXXXXXXXXX
Xxxxx Xxxxxxxxxx, Secretary/Director
INTERNET CONSOLIDATION GROUP, INC., a
Texas corporation ("COMPANY")
/S/ XXXXX X. XXXXXXX
Xxxxx X. Xxxxxxx, President/ Director
COMPANY
Attest:
/S/ XXXXXXX X. XXXXXXXX
Xxxxxxx X. Xxxxxxxx, Secretary/Director
23
EXHIBIT A
COMPANY SHAREHOLDERS:
/S/ XXXXX X. XXXXXXX
Xxxxx X. Xxxxxxx
/S/ XXXXXXX X. XXXXXXXX
Xxxxxxx X. Xxxxxxxx
/S/ XXXXXXXXXXX X. XXXXXX
Xxxxxxxxxxx X. Xxxxxx
/S/ XXX X. XXXXX
Xxx X. Xxxxx
/S/ XXXXXXX XXXXXXX
Xxxxxxx Xxxxxxx
/S/ XXXX X. XXXXX
Xxxx X. Xxxxx
Xxxxx & Xxxxx Xxxxxx Family LP
/S/ XXXXX XXXXXX
By: Xxxxx Xxxxxx
/S/ XXXXX X. XXXXXXXXX
Xxxxx X. Xxxxxxxxx
/S/ XXX X. XXXXXX
Xxx X. Xxxxxx
EXHIBIT B
OFFICERS TO BE APPOINTED
Xxxxx X. Xxxxxxx, CEO
Xxxxxxx X. Xxxxxxxx, President/COO
Xxxxxxxxxxx X. Xxxxxx, Secretary/Treasurer
Xxx X. Xxxxx, Vice President Corporate Development
DIRECTORS TO BE APPOINTED
Xxxxx X. Xxxxxxx, Chairman
Xxxxxxx Xxxxxxxx, director
Xxx X. Xxxxx, director
Xxxxxxxxxxx X. Xxxxxx, director
Xxxxx X. Xxxxxxxxx, director
Xxx X. Xxxxxx, director
EXHIBIT C
INTERNET CONSOLIDATION GROUP, INC.
BUSINESS PLAN
MAY 26, 1997
Internet Consolidation Group, Inc.
Business Plan
May 26, 1997
Copy Number__________
Assigned to_________ On_________ ,1997
i
TABLE OF CONTENTS
SUBJECT PAGE #
------- ------
The Company ...................................................... 1
Ownership Summary ................................................ 1
Objectives ....................................................... 1
Mission .......................................................... 2
Keys to Success .................................................. 2
Expansion Cost Summary ........................................... 2
The Business ..................................................... 2
Industry Analysis ................................................ 4
Growth Strategy .................................................. 6
Internet & Network Security Expertise ............................ 7
Acquisition Growth ............................................... 10
Franchise & Licensing Growth ..................................... 11
Management Team .................................................. 12
Staffing & Employment Issues ..................................... 13
Considerations ................................................... 13
Conclusion ....................................................... 14
Financial Plan ................................................... 15
ii
EXECUTIVE SUMMARY
The Company
Internet Consolidation Group, Inc. (the "Company" or "ICG")
was organized in January 1996 as a Texas corporation for the purpose of
developing an international communications network. From inception until present
it continued to review several acquisition candidates searching for the most
suitable operating entities to purchase with a mix of market proven products,
services and management team upon which the Company can build around. In May
1997, the Company concluded its search by acquiring Networks On-Line, Inc.
(NOL), a young profitable Houston, Texas based network solution provider. NOL
generated approximately $5 million in sales in years 1995 & again in 1996, and
is Houston's seventh largest Internet service provider. The acquisition of NOL
gives ICG the market presence and business foundation to fuel it's expansion
plan and to support sales and earnings goals. ICG will continue it's acquisition
search for companies that compliment NOL, and during the next three years plans
to close at least one (1) additional acquisition annually. In the next twelve
(12) months ICG plans to grow it's consolidated sales to approximately
$1,500,000 a month, and is forecasting consolidated revenues of approaching
$19,000,000, with net earnings approaching $1,800,000, followed by significant
growth and earnings.
The Company is uniquely positioned as both a national Internet
Service Provider(ISP) and systems integrator, as NOL provides enterprise
solutions that most ISP's and integrators cannot deliver independently. NOL is
considered a sole source solution provider in the industry as it can effectively
implement a complete project, large or small, without outsourcing itself or
requiring the use of subcontractors. This give NOL total project control, saving
costs and giving a customer a higher comfort level that the job will meet their
expectations. This complete service makes NOL an attractive partner to
consulting groups such as Xxxxxx Xxxxxxxx and Coopers & Xxxxxxx which
subcontract technology installation for local, regional and national projects.
At this time there are fewer than eight organizations in Houston classified as
an ISP integrator. Four of those being AT&T, MCI, Sprint and LDDS Worldcom. It
is the Company's intent to further strengthen those existing specialty areas of
expertise and build upon that firm foundation for its national expansion
program.
NOL's product authorizations differentiate them from most local ISP's,
as it is qualified as a Sun, Tricord, NSG (One of only fifteen resellers
worldwide) Hewlett Packard and IBM RISC value added reseller programs (VAR).
These product authorizations are a powerful combination when attached to the ISP
services. NOL is positioned to take advantage of and perform the following
services for its customers:
- National ISP/LDDS Worldcom Strategic Partner
- Systems Integrator - Sun, Tricord, Hewlett Packard Super Servers
- NSG Network Security Products/Network Monitoring Stations (Secure Internet)
- LAN/WAN Design
- Novell/Microsoft
- Desktop Computers, Compaq, IBM, Dell
- Ability to resell long distance and local exchange services
Company Ownership Summary
Internet Consolidation Group, Inc. is a closely held Texas
corporation, with 1,000,000 shares of common stock authorized, and currently has
52,000 common shares issued and outstanding. With fewer than 20 shareholders,
the officers and directors are the majority shareholders with less than 10 other
shareholders holding minority shareholder positions.
Objectives
1. To further develop it's core operating businesses that fuel and support sales
and earnings goals.
2. To maintain operating margins of at least 30% of sales.
3. To continue to grow the Company until it becomes an attractive acquisition
for a major telecom company.
1
Mission
Internet Consolidation Group, Inc. is a company dedicated to
generating sales and earning profit which translate into continued increases in
value of it's shareholder equity. We intend to accomplish our mission by
maintaining a leadership role in the design, operation and monitoring of secured
networks and developing a worldwide network of Internet service providers and
telecommunication companies, under ICG's banner. We intend to earn enough net
profit to generate a fair return for our investors and to finance continued
growth.
Keys to Success
In our view the keys to success in ICG's business are:
o Maintain it's leading edge in network security, Internet and
other business communications services.
o Only consider viable companies for acquisition that compliment
it's core business (NOL).
o Always structure acquisition transactions so our shareholders
receive value added consideration.
o Minimize dilution of ICG shareholders expansion activities.
Capital Requirement Summary
The cost associated with ICG's expansion program is estimated to
be approximately $1,500,000. To obtain the capital required ICG plans to finance
this by, arranging for a registration and sale of $1.250,000 it's common stock,
and arranging for a $250,000 revolving line of credit. An allocation of capital
requirements is as follows:
Direct Operating Capital $ 1,490,000
Capital Office Equipment $ 10,000
------------
Total $1,500,000
THE BUSINESS
Internet Consolidation Group, Inc. (the "Company" or "ICG)) is an
emerging growth company. The Company's business is to seek out viable Internet,
telecommunication and network service entities for consolidation (acquisition)
to further develop it's communications network.
To differentiate itself from other communications
companies ICG is combining its consolidation strategy with
its expertise and international relationships in developing world-wide high
level secured communications networks. This expertise complements its strong
offering of Internet and non-Internet network services, network security review,
installation and monitoring, virtual private networks and integration and
Internet/Intranet development. The Company's simultaneous development of a
domestic network and international expansion utilizing its international
relationships will facilitate the Company's becoming a leader in network access
and intrusion security monitoring.
The development of the domestic network into core cities, forms
the foundation for marketing the Company's ancillary services. Combining the
growth in network security services with the Company's core on-line business
through franchising and international licensing programs will allow the Company
to obtain substantial growth and maintain reasonable profitability.
The Company's management is focused in three areas. First, it is
focused on maximizing the profitability of the assets it acquires. The Company
not only provides capital support, but also administrative support and economies
of scale to its newly acquired Companies allowing management to focus on
developing new revenue streams and increasing existing business rather than
administrative issues.
Secondly, the Company is concentrating on developing its own
international backbone and network security services, including intrusion
detection and network monitoring services. The Company feels its existing
reseller agreements
2
with Network Security Group, (one of only 15 worldwide) provides it with a
semi-exclusive line of sophisticated network security products, originally
developed for government use and now available on a private commercial basis.
The NSG contract coupled with the Company's ability to sell traditional firewall
and other network security equipment positions the Company to provide a
full-line of software and hardware security solutions for businesses and
individuals. Included in the security products are residual income services such
as network maintenance, access monitoring and intrusion detection and ancillary
services such as security consulting and network design.
Thirdly, the Company is focused on becoming a full-service,
international Internet/Intranet provider and expanding its network of local
points of presence ("POP") throughout the United States by either acquisition or
franchise licensing. In addition to its domestic franchising operations the
Company has relationships with strategic partners in the United Kingdom,
Mexico-Latin America and Africa allowing the Company to initiate joint ventures
expanding the Company's network internationally.
The Company is well acquainted with several small
privately owned companies as consolidation candidates,
each strategically positioned in region and local geographic markets, each with
an established customer base and infrastructure. ICG intends to utilize it's
value added consolidation program to attract candidates and their shareholders
to become an intricate component of the network of ICG consolidated operations.
ICG has it's main office in Houston (TX), and sells it's
services by direct contact at the corporate level either
by its own direct sales force or it's limited network of contract
representatives. In the next full fiscal year we intend to generate
approximately $19,000,000 in consolidated revenue and to improve our
consolidated revenues to more than $1,500,000 a month. The keys to our success
and critical factors for the next year are, in order of importance:
1 Financial control and cash flow planning.
2 Network backbone development.
3 Develop International Joint Ventures
This Business Plan illustrates our operating plan and projects
highlights of events as well as our projected financial performance for the next
three fiscal years. Thereafter sales and profits should continue to grow.
INDUSTRY ANALYSIS & DISCUSSION
Industry Analysis - Networks & Security
SECURITY. The market for computer products and Network
services has experienced significant growth in recent years and the use of such
products and services within organizations has been impacted by several
concurrent trends. The introduction of LANs and WANs has allowed organizations
to supplement or replace expensive, centralized mainframe computer systems with
more flexible and affordable PC-based client/server platforms. The emergence of
widely accepted industry standards for hardware and software has increased the
acceptance of open architecture LANs and WANs which can and frequently do
contain products from numerous manufacturers and suppliers. Rapid technological
improvements in computer hardware and the introduction of new software operating
systems have also created the need to expand or upgrade existing networks and
systems. At the same time Internet price decreases have made such networks and
systems affordable to a larger number of organizations. The Company believes
that these trends have increased the general demand for computer products,
Internet access and related services.
This dramatic increase in network development and usage has
also created a need for software and hardware security to protect proprietary
and private information. Recent lawsuits and high profile news stories regarding
industrial espionage have raised the profile and created anxiety in all
corporate information officers regarding the protection of their company's data.
Network security issues cover items such as outsiders gaining access to private
E-mail or establishing an inbound and outbound monitoring service to increase
productivity by identifying cyberloafing employees and prevent unauthorized data
from being sent outside the company.
3
Traditional corporate organizations will dramatically increase
their need for security products as the sophistication of the users increase and
the risk of loss increases. Network security issues for business will increase
as more complicated networks are created through the increase in telecommuting
by employees, home-based businesses and Internet transactions. This disbursement
of the "virtual company" will revolutionize the way companies do business and
create new security problems for corporate information officers. For example, it
is estimated that 2.3 million employees telecommuted at least one day each
week., by 1993 this number had grown to 7.6 million and is expected to reach 20
million by the year 2000.
Companies can no longer post a guard in the lobby and prevent
unauthorized personnel from entering their business or the unauthorized removal
of proprietary information. Every new telecommuter adds a new entrance to the
company's information network that needs to be protected. For example one
thousand widely disbursed employees working from their homes around the world on
flexible schedules requires twenty-four hour availability and will require
twenty-four hour security, monitoring and intrusion control.
In addition to offering protection as more and more business
is transacted electronically, network security solutions must be transparent to
legitimate users. Increasingly bandwidth and processor hungry communications and
software applications such as video conferencing and other data transfer
requirements will require sophisticated solutions to prevent the security
solution from creating data transfer bottlenecks.
Doing business on the Internet will further increase the
market for network security, as customers begin doing more business using
electronic cash, credit cards and other debit arrangements. The lack of a
dependable security solution for credit cards has restricted the mass market
appeal of Internet commerce. As the number of Internet-enabled households
increases from the 17,000,000 in 1996 to 44,000,000 by 2000 the demand for
network security will increase dramatically.
International Data Corp., estimates that sales of Internet
fire walls alone will grow from 10,000 units in 1995 to more than 1.5 million
units in 2000. Similar growth patterns can be predicted for all security gear,
especially when including upgrades, replacements and retrofitting.
The Company expects to take full advantage of this huge new
market by positioning itself early with both the Fortune 1000, as well as,
mid-size customers. The Company markets a full line of network security products
and services, everything from simple software encryption to enterprise wide
multi-level hardware and software security, including offering nationwide access
and intrusion monitoring services. Because of the limited number of resellers
marketing "Network Security Group" products, many of the products and services
offered by the Company will carry higher margins than sales of other
widely-available hardware and network gear.
RESELLERS. Distribution channels for computer and network
products changed significantly beginning in the early 1990's. During that
period, many manufacturers of computers began to scale back their sales forces
and, in order to ensure the continued wide distribution of their products,
started to offer their products to wholesale computer distributors which
previously had sold only software and peripheral equipment. In addition,
manufacturers also began allowing resellers to purchase products from more than
one aggregation or distributor, a practice known as "open sourcing." Expanding
computer sales to distributors and allowing open sourcing intensified price
competition among suppliers. The Company believes that, in general, the
manufacturers of its primary product lines are continuing to rely on resellers
of computer products to distribute a significant portion of their products to
end-users.
Maintenance. The advent of open architecture networks has also
impacted the market for information technology services. Wider use of complex
networks involving a variety of manufacturer's equipment, operating systems and
applications software has made it increasingly difficult for companies to
diagnose problems and maintain the technical knowledge and repair parts
necessary to provide support services. The Company believes that increased
outsourcing of more sophisticated support services by business and institutional
customers has resulted from the technical complexities created by
multi-manufacturer and supplier network systems and rapid technological change.
Increasingly, organizations seeking computer products often require prospective
vendors not only to offer products from many manufacturers and suppliers, but to
have available and proficient service expertise to assist them in product
selection, system design, installation and post-
4
installation assistance and service. The Company believes that the ability to
offer customers a comprehensive solution to their information technology needs,
including the ability to work within its customers' corporate environments as
integral members of their management information system staff, are increasingly
important in the marketplace.
Industry Analysis - Internet
The Internet was created over 30 years ago as a
Department of Defense project to provide an alternate means
of communication in the event of a nuclear war. Eventually, universities and
government contractors were added to the network. Other countries began
connecting to the Internet. In 1990, the Internet was opened to commercial
entities and very quickly, the number of commercial users surpassed the original
educational and governmental user base. However, as the modern Internet
developed and became commercial, funding shifted to the private sector. Over the
past year, the number of worldwide Internet users has increased significantly.
In addition, the number of domains registered, a forward-indicator of activity
on the Internet, has increased at a rapid pace. There are several key factors
responsible for driving this rapid proliferation of Internet use:
-- PERFORMANCE IMPROVEMENTS - Significant bandwidth, communications,
and price/performance improvements have xxxx and are continuing to be made in
communications over the Internet. With these improvements the Internet is
becoming an increasingly attractive medium for conducting business attracting
more users.
-- INCREASE IN MODEM-ENABLED PCS - Most new computers and a
significant amount of existing personal computers ("PC") are either shipped with
or have been upgraded to have a modem connection.
-- INCREASES IN BROAD-BASED CONTENT - New information and commercial
services available on the Internet have created a widespread appeal.
-- EXPANSION OF PRIVATE NETWORKSS - Growing corporate, government, and
educational local area networks ("LANs") and wide area networks ("WANs") are
enabling multiple users to be connected to the Internet through a single point
of contact. Therefore, the actual number of Internet users connected through
these LANs and WANs greatly exceeds the number of connection points.
-- GROWTH OF ELECTRONIC COMMERCE OVER THE INTERNET - The Internet's
potential as the basis for commercial services and electronic commerce is
growing as companies or expand their use of the Internet for commercial
purposes.
-- IMPROVED NAVIGATIONAL AND UTILITIES - Improved browsers and
software which facilitate Internet use have made it easier for users to access
the World Wide Web and other user-friendly interfaces have made it easier for
users to access desired information on the Internet.
The convergence of these factors is creating a perception that
businesses and other organizations need to establish Internet access and an
Internet presence. The Company believes that its Internet access, security
products, Website hosting and value-added services offerings are particularly
appealing to businesses for a number of reasons. Most commercial customers have
Internet requirements that go beyond the simple dial-up access most Internet
service providers offer. These Internet requirements include protocol
flexibility, security, network consulting, high-bandwidth managed access and
data services.
The Internet, as a nationwide "Information Super-Highway", is a
rapidly growing global web of computer networks linking people and organizations
from all over the world. The links are accomplished through a combination of
phone lines, high-speed "lease" lines and satellite links. Today, over 50
million users access this global computer network to accomplish tasks as diverse
as sending "electronic mail" to business associates, relatives and friends;
shopping for goods and services; accessing corporate, educational and
governmental information; and participating in "chat" groups on topics of mutual
interest. Through the computer screen, the Internet can connect users to many
major university libraries, famous museums, the Library of Congress, The Supreme
Court, even The White House.
The Internet is the fastest growing "new media" by which
businesses can nationally promote and market their products and services
internationally. According to Input, a market research firm, it is estimated
that worldwide corporate spending on Internet technologies and services more
than tripled between 1994 and 1995, reaching approximately $12 billion in 1995.
By the year 2000, Input projects total spending to reach $200 billion. The
Internet and the Web provides users with the potential for a new commercial
marketplace in which goods and services and information can be marketed
5
and sold, and over which other financial transactions can occur. No longer a
vision of the future, the Internet is today's reality. The Company believes that
the use of the Internet as a commercial medium will become more widespread with
the continued development and acceptance of systems providing secure execution
of financial transactions.
The traditional U.S. telecommunications and network
communications market is immense and for the most part dominated by large
national companies. The Company has targeted the niche markets of network
security, Internet service and ancillary telecom services for it's consolidation
program, which combined currently account for over $150 billion in U.S. sales
annually. The elected targeted niche market for the most part is dominated by
small independent operators providing limited services.
GROWTH STRATEGY
The Company's plan calls for its to become a nation-wide,
full-service network services and integration provider, focused primarily in the
area of network security and Internet services. The Company's intends to
capitalize on the explosive growth in the demand for network security,
integration and Internet services. Each of its targeted lines of business are
multi-billion dollar markets that are projected to experience double-digit
growth over the next ten years.
The Company intends to continue to build around it's initial
acquisition NOL, to expand upon it's strong established foundation as the
network operating center and infrastructure. It will also create the training,
reseller relationships, software and administrative tools to achieve rapid
assimilation of follow-on acquisitions and allow those companies to maximize
sales opportunities in their local market areas.
The Company will achieve it's growth in three ways:
1. Developing and marketing leading edge network security and Internet services,
increasing the market share and profitability of its existing and acquired
operations through economies of scale, improved marketing and reduced expenses.
The new entity will be able to provide its Customers with access to a new level
of sophisticated products and services, previously unavailable. This national
expertise will allow the local operator of its future acquisitions and licensees
to maximize sales opportunities to its existing customer base and provide
opportunities to serve customers previously beyond its capabilities.
2. Acquiring complimentary privately owned telecommunication service companies
increasing profitability through economies of scale. The acquisitions will be
structured as stock for stock transactions, therefore the financial statements
are combined on a pooling of interest basis. As each transaction is completed
the Company's consolidated financial statement will reflect the financial
condition of it and the acquired companies, including sales and earnings for the
period.
3. Developing new domestic and international markets through franchising its
branded products and services into markets which provide growth potential with
limited risk.
I. INTERNET & NETWORK SECURITY EXPERTISE - OPTIMIZING ACQUIRED ASSETS
Networks On-Line, Inc.
Prior to its incorporation in the State of Texas on December 15,
1995, Networks On-Line, Inc.'s business was operated as a partnership. Networks
On-Line, Inc.'s sales revenue for hardware, Internet, and services was $125,000
in 1993; $1,700,000 in 1994, $5,000,000 in 1995 and 1996. The original objective
of the business was to provide LAN and WAN integration for the Houston area and
develop and grow an Internet service business allowing it to cross market both
its hardware products and network services.
In late 1996, Networks On-Line, Inc. ("NOL") made the strategic
decision to shift its main focus from the commodity business of reselling
computer hardware to a focus directed specifically at expanding its Internet and
network service offerings. As a result it became one of a limited number of
authorized Network Security Group ("NSG") resellers and began to focus its
hardware business on the security aspects of network operation.
6
Along with the shift in hardware focus NOL expanded its Internet
service beyond its local base and entered into a long term agreement with a
national Internet backbone provider (WorldCom/GridNet) to extend local access
capabilities for its Internet customers to over 300 additional cities
nationwide.
Utilizing NSG's high end network security products and its
national backbone contract NOL is seeking to round out its network security
services by offering network monitoring and intrusion detection services on a
nationwide basis.
Networks On-Line, Inc. is both a local and national Internet
provider. It achieves its nationwide service through its contracts with
WorldCom's Gridnet for it's national backbone. It is marketing this national
backbone access through a number of resellers and marketing companies, one of
which has committed in contract to provide 50,000 users within 13 months.
ICG's objectives include continuing growth of NOL's core regional
business while forming the foundation of its growth as a national provider of
Internet/Intranet, secured communications, and related services. To achieve its
growth objectives, the Company intends to pursue several key strategies:
Network Hardware & Security
With the support of the Company, NOL intends to reinforce and
increase its existing volume purchase agreements with all of its distributors
and suppliers. NOL has designed an Internet-based procurement system allowing
the customer, distributor and NOL to all process purchases electronically. The
implementation of this project will commence on the successful funding of this
offering.
Secured Communication Products
NOL has an agreement to market, sell and support the products and
services of Network Systems Group (NSG), a subsidiary of Storage Technology
Corporation (StorageTek). These products were developed with funding by the
Department of Defense and National Security Agency and are used quite
extensively by federal agencies. The Company will be selling the NSG products at
margins exceeding the 15% - 20% discount typical on computer hardware. The
uniqueness and limited availability of the NSG products allows them to be sold
without discounting.
NSG has reduced the number of its resellers from 200 in 1995, to
30 in 1996 and will further reduce its resellers to 15 worldwide in 1997,
because of the sophistication of the products and services. NOL is one (1) of
the fifteen (15) to remain. The primary product line that NSG sells is the
Borderguard and Net Ranger secured routers. These routers can support the four
major different types of encryption available and are the only routers that can
be distributed worldwide without getting clearance with the National Security
Agency (NSA). The features available from these devices are two years ahead of
the competition and the price gives every customer the best price/ performance
available in the market today.
The Company, through NOL also sells security consulting services
provided by the NSG partners Wheel Group Corporation, The Xxxxxx Group and
Xxxxxxxxxxx Xxxxx & Xxxxxxxx. The Wheel Group Corporation consists of a highly
trained and experienced group of ex-USAF Information Warfare professionals that
provide a breadth of information- protection capabilities, including security
posture consulting and network-security operations. This firm has also developed
a network-based automated intrusion detection and response system that can be
remotely monitored in real-time. This monitoring can be done by NOL's network
operating center facility and would become a very profitable enhancement to the
resale of this service. The Xxxxxx Group specializes in analyzing the physical
security of computer network including building and facility audits. Xxxxxxxxxxx
Xxxxx & Xxxxxxxx has a computer network security practice that includes a team
of attorneys with experience in Intellectual-property (i.e. international, tax,
litigation and employment law) and help customers establish a security-based
corporate culture through application of the law and sound corporate policies.
The Xxxxxxxxxxx team will also assist other customers in ensuring that legal
investigations are conducted with legal remedies in mind, as well as update or
draft legal policies that lay the legal groundwork for responding to internal
misuse of technology.
Network Systems Group also has developed an Asynchronous Transfer
Mode (ATM) line filter and encryption device with funding and support by the
Department of Defense. Currently, there is no other product available that can
secure an ATM circuit therefore creating a semi-monopolistic market segment.
Customers are already calling the company wanting to purchase the product even
though the pricing has not been established.
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The Company has focused on developing a full line of sophisticated
security solutions and has been actively soliciting Fortune 1000 clients in the
Houston, Texas area. The Company is currently in negotiations on a number of
large security contracts having a value of between $6 and $7 million over the
next twelve months. Implement Secured Virtual Private Networks
The Company will continue to strongly support the development of
the reseller agreement with Network Systems Group (NSG) to sell and support
secured communication products and services. The Company is currently taking
advantage of StorageTek's Global Partners Program where it assists its resellers
with introductions into StorageTeks tier one customer base.
The NSG products allow standard phone lines (i.e. leased lines,
packet switched, or the Internet) to be used as a secured and encrypted
point-to-point communication link for transmitting any type of data. With the
security issues constantly being raised about these communication lines, these
products fill a rapidly increasing demand in the market.
Increase Internet/ Intranet Business
NOL began offering Internet access in November 1994 and has proven
to have one of the best connections available in Houston. In January 1997, the
Company entered into an agreement to provide nationwide local dial access for a
national marketing firm. The distribution software is coming out of development
and a management infrastructure needs to be implemented to secure the success of
the project.
NOL will be the Company's network operating center and foundation
for operations for centralized services, billing and collection, software
development, network design, equipment selection. It will also be responsible
for the development of marketing materials to be used by other acquired INSPs
and franchisees to simplify their operations and increase the profitability of
the Company.
Computer Products
The Company through NOL offers its customers a wide variety of
computer hardware and software products available from over 600 manufacturers
and suppliers. The Company's products include, but are not limited to, desktop
and laptop computers, Monitors, printers and other peripheral devices, operating
system and application software, network products, and mid-range host and server
systems including the IBM RS6000 and Hewlett-Packard HP9000 systems. The Company
is an authorized reseller of products from a number of leading manufacturers of
computer hardware, software and networking equipment, including Compaq,
Hewlett-Packard, IBM, Microsoft and Novell. The Company focuses on selling
solutions and turn-key systems for automating a company and attaching them to
the Internet. The Company has found that the hardware and Internet groups have
generated business for each other and continues to build a unique synergy
between them and the customer base.
Internet / Intranet Products
NOL is Houston's seventh largest Internet Access Provider and
since it provides hardware and integration services it has in-depth working
knowledge and experience on high-end communication equipment. NOL is an
authorized reseller for leading manufacturers like Ascend, Cisco, 3Com, Bay
Networks and Digital Link among others. Most of these manufacturers have or are
currently being utilized by all INSPs in their local Internet access services.
NOL has an agreement with a nation-wide network marketing firm to
sell local dial Internet access in over 100 U.S. cities. The contract was
exercised in January 1997 and is good for the period of three (3) years. The
contract stipulates that the marketing company will bring on-line not less than
50,000 customers by the thirteenth month, representing roughly $250,000 per
month in reoccurring revenue. The network marketing company is requiring their
projected 400,000 distributors to be connected to the Internet and since they
are already distributing the service the Company feels they can achieve the goal
and sign-up at least 25% of their membership.
NOL has also been approached by other nationwide marketing
companies and several local operators to produce a program much like the one
noted above or as a private label service. The Company will be aggressively
pursuing the further development of these program. The Company believes it can
capitalize on the experience of NOL and intends to aggressively pursue
additional private-label programs to be marketed through other direct or network
marketing services.
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II. ACQUISITION GROWTH
ICG's current consolidation opportunity is made possible by recent
changes in telecommunication law enacted by the United States Congress in 1996.
The Company has already taken steps to seize a large portion of this opportunity
by putting the required infrastructure in place to implement it's program.
Acquisition Strategy
The Company intends to follow the same strategy as it used in the
acquisition of NOL. It will be very selective in companies it considers and
ultimately acquires, as it intends select and conclude at least one (1) key
acquisition per year to add to it's network.
Operations - Corporate Structure
The Company will manage and maintain each acquired company as a
subsidiary, and continue to operate it under it's known market identity,
introducing the Company's "branded" products and services to create a national
presence, similar to nationally-branded real estate sales organizations or other
business service organizations. Each subsidiary will be an independent operating
entity and have a local management team, that will take direction from the
Company management. Maintaining this form of corporate structure limits
liabilities to the subsidiary level, and offers the Company a certain insulation
against potential liabilities at that level.
Operations - Economies of Sale
Company research indicate that by utilizing a decentralized
management strategy, coupled with operating efficiencies, it can compete
efficiently in the targeted markets. The Company plans to achieve maximum
efficiencies by (I) creating cost savings by consolidating administrative and
cash functions, such as volume purchasing, billing and collection, payroll and
marketing development, group insurance; (II) combining certain functions at the
corporate level, thereby eliminating redundant facilities, such as financial,
payroll; (III) implementing improved technologies and operating systems; (IV)
increasing internal growth by continually broadening the range of products and
related services it offers.
Franchise & Licensing
Other viable markets within the Company's network will be served
by an affiliated group of franchisees that would be reselling the Company's
products and services and yet maintaining their own overheads. This expands the
Company's market presence into smaller markets and provides additional
opportunities without a large capital or market development investments. The
franchisees themselves also provide revenue to the Company in the form of
franchise fees, trailing fees and provide leads for selling higher-end products
not previously available to these small markets.
Sales Literature
The Company continually maintains up to date collateral material
including Company brochures, videos and CD's in regard to it's products and
services, to inform parties about ICG.
Sales Forecast
Based on the full implementation of this plan, the Company is
forecasting the following sales figures for each fiscal year ending June 30. The
numbers presented below have been rounded for ease of presentation and to
illustrate the general range of business activity the Company intends to
achieve: 1998 - $19,000,000, 1999 - $92,000,000, and 2000 - $370,000,000.
III. FRANCHISE & INTERNATIONAL LICENSING GROWTH
Utilizing the Company's existing and acquired ISP the Company
intends to fill out the smaller cities using a franchising structure. A
franchisee desiring to locate a "POP" in his or her city would invest the
capital to set up the local dial equipment required and already designed by the
Company to service 500 customers. The franchisee would also be responsible for
the on-going line charges and telecom costs of operating the business. The local
dial access equipment to
9
serve 500 users is approximately the size of two large VCRs. This equipment can
be placed anywhere the telecom lines are available. The franchisee would also
pay the Company an up-front franchise fee of approximately $10,000, covering the
initial setup and training. The franchisee would pay an ongoing license and
administrative fees for network support, billing and other maintenance services.
It is anticipated that for an investment of under $75,000 including launch
advertising a franchisee can establish his or her own full service franchise
Internet company capable of serving 500 - 700 users and capable of being
upgraded to serve an unlimited number of customers.
The Company intends to market its franchises to established
business communications companies and marketing and advertising firms. A Company
Internet franchise allows a business communications company, voice-mail, paging
or other PBX type services to offer network and Internet products without
requiring them to have the technical or network infrastructure knowledge to
offer the services. A marketing, advertising or graphics design firm would have
a marketing advantage because it could design web pages, xx xxxxxxxxx and other
Internet activities for its clients and keep a large share of the residual
revenue generated by hosting the web sites they design. In both cases it gives
the franchisee an opportunity to generate additional revenue from its existing
account base.
The Company intends to utilize this same methodology for its
international expansion. The Company has had negotiations with communications
companies in the United Kingdom, Mexico and Africa in regards to utilizing the
Company's expertise and the joint venture partners local relationships to expand
its network. The Company's international partners will give Company's customers
local access all over the world.
The Company's franchise operations group handle setting up the
POP, account administration, billing, collection and maintenance. These costs
and the ongoing royalty/license fee would be paid by the franchisee out of its
monthly xxxxxxxx. Advanced features, news servers, web site hosting and others
would be provided at the network operating center, not at the franchise
location. The Company would establish minimum service requirements, to maintain
quality and would give a franchise a territory covering approximately 1,000,000
of population. In the event the franchisee is extremely successful the business
is scalable and can be increased by adding additional units to service more
customers.
The franchisees and international licensees would be selling
branded products increasing market awareness for the Company and providing local
dial up POPs in additional areas of the world without the Company incurring a
large capital costs. Eventually these franchised, licensed, acquired and newly
developed POPs would be linked together over the Company's own backbone.
MANAGEMENT TEAM
Xxxxx X. Xxxxxxx - Chief Executive Officer / Chairman
Background includes 10 years marketing experience with IBM
Corporation, which involved developing marketing strategy, sales presentations
and training programs. Positions also included National Account Manager
responsible for marketing to Fortune 500 companies and coordinating the
marketing activities of Account Managers who maintained daily contact with the
various corporations at their locations throughout the United States.
Five years experience as National Marketing Director for regional
leasing company. Formed independent leasing operation and provided lease
financing for major projects including municipal projects, commercial leases and
college housing.
Structured joint ventures between national and international
telecommunications companies with emerging countries. Responsible for bringing
technical as well as financial structure. Projects include small teleports,
mobile/cellular operations, establishment and operation of earth stations as
well as design and implementation of a complete telephone company capable of
carrying national and international traffic.
Education includes University of Maryland, Texas Southern
University as well as various marketing and management classes provided by IBM.
(B.S. - Marketing)
10
Xxxxxxx X. Xxxxxxxx - President & Chief Operating Officer / Director
Xx. Xxxxxxxx has been heavily involved in corporate finance,
acquisitions and strategic business development situations since 1981. Xx.
Xxxxxxxx has been a participant and had a significant role in the acquisition of
$1.9 Billion in broadcast and telecommunications businesses.
Before joining Internet Consolidation Group, Inc. , Xx. Xxxxxxxx,
an attorney licensed in both Texas and Missouri and a certified public
accountant, served as a regulatory and financial consultant serving clients
operating as domestic and international cable television, wireless messaging and
text delivery service, competitive local and Interexchange services and other
telecommunications service providers.
Prior to that, Xx. Xxxxxxxx was employed by Metro Traffic Control,
Inc.. Metro Traffic Control, Inc. (MTC) a multi-based media company that is the
world's largest private provider of short form programming, i.e. broadcast
traffic and news information. At MTC Xx. Xxxxxxxx served as Vice President -
General Counsel and served as President of Metro Publications, Inc. a subsidiary
formed to acquire and consolidate short-form programming providers and analyze
manage Metro's participation and investment in new technology ventures.
Xx. Xxxxxxxx was also employed by Southwestern Xxxx Corporation,
now SBC Communications. At SBC Xx. Xxxxxxxx served in a variety of domestic and
international financial and strategic development roles, most recently as the
Finance Director and Group Company Secretary for SBC's United Kingdom's cable
television and competitive local exchange service provider, licensed to serve
698,000 homes.
Xxx X. Xxxxx - Vice President - Business Development / Director
Xx. Xxxxx has over thirteen years of sales and management
experience in the telecommunications, computer integration, (LAN/WAN) and
software industries. Currently he serves as President of ICOM Communications,
Inc. a Houston based telecommunications consulting group. He has held various
sales positions and has served as sales manager and Vice President of Sales for
both national and local organizations including Charter Communications
International, Computerland, Netserv and EDM Consulting Services.
Xx. Xxxxx'x management experience includes the building and
management of outbound sales teams, sales staff/office consolidation, developing
strategic partnerships with manufacturers, building Value Added Reseller (VAR)
programs and day to day operations. His project experience includes both
domestic and international negotiation for enterprise wide computing solutions,
long distance service, Internet access and video teleconferencing services.
Xxxxxxxxxxx X. Xxxxxx - Secretary & Chief Financial Officer /Director
Background includes over 12 years of financial accounting and
management experience in a both manufacturing and service industries, including
high tech and Internet communications. Xx. Xxxxxx is a certified public
accountant and has been responsible for all aspects of impacting a company's
financial position, financial reporting, treasury functions, insurance,
budgeting, forecasting and cash flow management.
Xx. Xxxxxx has played a lead role in advising and assisting senior
management's formulation of its strategic plan and has played a key role in a
number of fast growing enterprises.
Xxxxx X. Xxxxxxxxx - President of Networks On-Line, Inc. / Director
Xxxxx X. Xxxxxxxxx graduated from University of Houston - Central
Campus with a Bachelor of Arts in Management Information Systems. In June of
1984, he went to work for System Makers, Inc. (SMI) and was responsible for
managing a 200 commercial account base of PC network products. This sales
position covered a 3 state area and produced an annual sales revenue of over $10
million dollars with 12-20% gross profit margins. The annual quota was based at
$2 million that was accomplished every year for the last 7 years of employment
with SMI. In April of 1991 he went to work for Memorex Telex Corporation (MTC)
selling Memorex Telex 3270/5250 Mid-Range hardware and PC network products.
Since October of 1993, with Networks On-Line, Inc., he has managed the
Accounting and Administration responsibilities. These responsibilities have
included the implementation of the MAS 90 Accounting system and the hiring of
the support staff.
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Xxx X. Xxxxxx - Secretary of Networks On-Line, Inc. / Director
Xxx X. Xxxxxx graduated from the University of Houston - Clear
Lake with a Bachelor of Arts in Computer Information Systems. In October of
1986, he went to work for Integrated Business Systems (IBS) and did product
development on their product called LanTight at that time. The project
development included creation of manuals and help screens, all technical
support, and product sales and gave him an intricate knowledge of PC Computers
and Local Area Networks. With the same company, he also acted as Office Manager
for 6 months and during this tenure started the hardware division for IBS,
worked as a Xbase programmer for 6 months and finally went into networking
sales. Although being successful at all positions within the company he felt
most at home in the Sales department and thrived achieving 90% of the company's
total sales in his first year. As Sales Manager, he built the company up to $10
Million in sales within the networking group. In October 1991, he left IBS to
start a new networking division for Criterion Telephone Company. Due to the
company's limited desire to invest in future growth he left in October 1993 to
start Networks On-Line. While at Networks On-Line, he has managed the Sales and
Marketing efforts and coordinated the Service department. In November 1994, he
coordinated with Xx. Xxxxxxxxx in starting the Internet connection and continues
to manage the personnel today. Mr. Little has served on numerous advisory
councils some of which are listed below.
'91 TSTI - LAN Administrator Curriculum Advisor
'92-93 President - Local Area Network Dealers Association
'96 Sterling Who's Who - Executive Edition
'96 Novell Internet Focus Group
'97 Novell Gold Reseller Council
In addition to the above, ICG has contractual agreements with two
major telecommunications firms, GB TECH and Global Electro-comm International.
Their revenues are $20 million and $4.5 million respectively. Their client list
includes:
NASA (HQ) Xxxxxx-Xxxxxxxx
XxXxxxxxx Xxxxxxx Lockheed-Xxxxxx
US Air Materiel Command NASA (Xxxxxxx Space Center)
Xxxxxx Training Division Loral Space Information Systems
Rockwell Space Operations EDS (Electronic Data Systems)
Regional Xxxx System(s) MCI
FED EX UPS
Sprint American Airlines
AT &T Hertz
Their client list is extensive and includes a who's who in both
the public and private sector. Services provided include design engineering,
telecommunications network design/implementation/training, frequency management,
fiber optic networks, satellite communications etc. etc.. The Internet to them
is elementary as their services include everything from calculating payloads in
the launching of satellites and the Space Shuttle, positioning satellites, crew
and environmental training for NASA as well as monitoring the travel/expense
account of some 3,000 employees of a major corporation. Global, for example
recently completed the design, implementation/installation of a network for the
delivery of E-mail, Internet, data transmission etc. with 6,500 plus users
nationally and internationally. They also will be providing network management
and training.
The technical support and capabilities of these corporations are
superior to any that a lone Internet Service Provider would be able to match,
much less afford. These additional services and other economies of scale create
the incentive for smaller providers to join the ICG team.
STAFFING & EMPLOYMENT ISSUES
The Company will begin operations with four (4) permanent
employees in the Corporate holding company, Internet Consolidation Group, Inc.
and will have an additional eleven (11) employees in its operating subsidiaries.
The Company staffing philosophy is to limit its corporate staff to
those positions absolutely essential to accomplishing the task at hand. By
keeping its corporate overhead small and demanding operational accountability
from
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its employees the Company feels it will increase its flexibility and its ability
to respond to rapidly changing business conditions.
Personnel with operating responsibilities will reside in operating
subsidiaries with direct accountability for their actions. The Company intends
to cross train and develop its personnel so that its members can be utilized in
a variety of multi-dimensional tasks needed in the rapid expansion of a new
business. The Company feels this will increase job satisfaction and facilitate
on both a formal and informal basis the a team approach to all projects. The
Company also intends to extensive utilize strategic alliances between itself,
vendors, consultants and other marketing organizations to increase sales and out
source projects of a temporary nature or projects requiring expertise not
available within the Company.
CONSIDERATIONS
In the preparation of this business plan, management considered
the following key business points which stand in ICG's favor as to why this plan
should succeed.
o MARKET OPPORTUNITIES The global demand for communications and network
security solutions is growing exponentially and the Company is well
positioned to take full advantage of these market opportunities, such
as:
- Voice & Data Telecommunications - $500 Billion Market Growing 20%
Each Year.
- Network Security Firewall sales expected to grow from 10,000
Units in 1995 to 1,500,000 by 2000.
- Telecommuting expected to increase from 7.6 million in 1993
to 20 million in 2000
- Global Potential
o A LEADER IN NETWORK SECURITY & MONITORING ICG's NOL is one (1) of
fifteen (15) NSG resellers worldwide.
o SEASONED MANAGEMENT TEAM ICG has assembled a well rounded management
team with each member having over ten years experience in their
respective fields (sales, marketing, data & telecommunications,
business development and consolidation).
o NETWORK CONSOLIDATION OPPORTUNITY. There are almost 17,000 local
Internet operator across the country. The local operator industry is
highly fragmented with broad variations in quality of service and
availability. The local provider has limited support and access to the
tools needed to achieve optimum profitability. Changes in pricing and
customer needs will force small ISPs to seek affiliations with larger
entities. Growth through acquisitions or converting existing ISP's to
the Company's franchise concept will give the Company a national
presence quickly.
o EXISTING MARKETING INITIATIVES. The Company's broad base of products
and services provide the customer unique cost and performance
advantages. A multi-vendor supply base allows the Company to provide
the customer with the best equipment and services for the his or her
needs.
o A PROVEN HIGH QUALITY, HIGH VALUE PRODUCT FOR CONSUMERS. The products
offered by the Company have been designed to provide state of the art
service and reliability minimizing down time and maintenance expenses.
As such any differentials in initial cost can be recouped in a very
short time.
o NEW NETWORK SECURITY HARDWARE & SERVICES. New advances in network
security and security monitoring protect a customer's proprietary
information from internal and external intrusion, opening up
tremendous new market applications.
o MARKET PROVEN PRODUCTS AND SUCCESSFUL TRACK RECORD NOL has established
itself with market proven products that generated in excess of
$10,000,000 in sales in 1995 and 1996. With the new complimentary
products combined with it's excellent reputation as a sole source
solution provider gives it an advantage over the competition.
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CONCLUSION
With it's firm foundation set in place with market proven products
and service capabilities, combined with the strong growth oriented management
team, the Company stands a good chance of being even more successful than
depicted in this business plan.
14
Financial Plan
The attached worksheets are provided to outline ICG's financial
objectives for the next three years. Each worksheet reflect projected results on
a Consolidated Basis. As the Company intends to acquire candidates on a stock
for stock basis and continue to operate the acquired company as a subsidiary,
and for accounting purposes, the financial statements of both will be
consolidated into one, and reflected on the financial statement of the acquiring
Company (ICG). The acquiring Company then accounts for all sales and earnings of
the combined entities, for the current period (year). This means the Company
reportable sales and earnings will be determined by the business activities of
all operations during it's fiscal year, even before the transaction is closed.
Therefore it is important to project what the future reportable results should
be if this plan is successful.
For ease of reading we have included below a Summary which
summarizes all the attached Worksheets. It is used to indicate how the
successful implementation of this plan, and the intended results may effect ICG,
its investors and shareholders. The periods represented in the below Summary are
for years ending May 1988, 1999 and 2000. The numbers presented below are
projections (see following Footnote), and reflect managements current
expectation of business activities the Company intends to achieve.
SUMMARY
YEAR ENDING XXX-0000 XXX-0000 MAY-2000
------------- ------------- -------------
TOTAL REVENUE ............ $ 19,711,668 $ 92,393,521 $ 371,001,787
TOTAL EXPENSE ............ $ 16,702,880 $ 73,768,000 $ 299,495,269
EARNINGS BEFORE TAXES .... $ 3,008,788 $ 18,625,521 $ 69,146,269
INCOME TAXES ............. $ (1,203,515) $ (7,450,208) $ (27,658,761)
------------- ------------- -------------
NET AFTER TAX PROFIT ..... $ 1,805,273 $ 11,175,313 $ 41,487,761
============= ============= =============
ANALYSIS
NEW CAPITAL INVESTMENT ... $1,500,000 $-0- $-0-
RETURN ON INVESTMENT ..... 144% 894% 3,319%
FOOTNOTE:
WITH THE EXCEPTION OF HISTORICAL FACTS, THE STATEMENTS FOUND IN THIS BUSINESS
PLAN, SETS FORTH THE GENERAL PLAN OF HOW THE COMPANY INTENDS TO DEVELOP, AND IS
COMPRISED OF FORECASTED FUTURE LOOKING EVENTS AND FORECASTED FINANCIAL RESULTS,
WHICH INVOLVE VARIOUS ASSOCIATED RISKS AND UNCERTAINTIES. FORWARD LOOKING
STATEMENTS IN THIS PLAN ARE BASED ON MANAGEMENT'S CURRENT EXPECTATIONS OF
BUSINESS ACTIVITIES THE COMPANY INTENDS TO ACHIEVE. ACTUAL EVENTS AND RESULTS
MAY DIFFER MATERIALLY FROM THOSE FORECASTED IN THIS PLAN AS A RESULT OF VARIOUS
FACTORS WHICH ARE BEYOND THE COMPANY'S CONTROL.
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