UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
INTERNET CABLE CORPORATION
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(Name of Small Business Issuer in its charter)
NEVADA 87-0540291
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Second Floor
263 King Street
Charleston, South Carolina 29401
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (843) 722-8007
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Securities to be registered under Section 12(b) of the Act:
Not applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value per share
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INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
This registration statement contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended, and is subject to the
safe harbors created by those sections. These forward-looking statements are
subject to significant risks and uncertainties, including information included
under Items 1 and 2 of this registration statement, which may cause actual
results to differ materially from those discussed in such forward-looking
statements. The forward-looking statements within this registration statement
are identified by words such as "believes", "anticipates", "expects", "intends",
"may", "will" and other similar expressions regarding the Company's intent,
belief and current expectations. However, these words are not the exclusive
means of identifying such statements. In addition, any statements which refer to
expectations, projections or other characterizations of future events or
circumstances and statements made in the future tense are forward-looking
statements. Readers are cautioned that actual results may differ materially from
those projected in the forward looking statements as a result of various
factors, many of which are beyond the control of the Company. The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances occurring subsequent to the filing of this registration statement
with the SEC. Readers are urged to carefully review and consider the various
disclosures made by the Company in this registration statement.
ITEM 1. DESCRIPTION OF BUSINESS:
BUSINESS DEVELOPMENT SINCE INCEPTION-
Internet Cable Corporation (the "Company") was incorporated in
Nevada on February 15, 1995, under the name of Firenze, Ltd. The
Company's founders were B.A. Rothchild, E.J. Rothchild and Charles
Ellington III, none of whom have not been associated in any capacity
with the Company since 1997. The Company changed its name to Internet
Cable Corp. on July 15, 1997 and then to Internet Cable Corporation on
September 12, 1997. For a period of approximately two months in 1997,
stock certificates for the Company were issued under the name of
Internet Channel Corporation, based upon management's intent to change
the Company's name to that name and a premature notice of name change to
the transfer agent, but the change of name was never filed with the
State of Nevada. The Company was originally organized for the purpose of
engaging in the cosmetics business. In October 1995, the Company changed
its business focus to the telecommunications sector with the acquisition
of licenses for cellular telephone software technology, which were
subsequently rescinded. The Company refocused its business in March 1997
on high speed Internet access via cable television lines, commonly known
as data-over-cable communication.
At incorporation, the Company was authorized to issue 50,000,000
common shares, 5,000,000 Class A common shares and 5,000,000 shares of
preferred stock. The Company completed a 1-20 reverse stock split on
March 17, 1997, another reverse stock split of 1-20 on September 1, 1997
and a 3-2 forward stock split of its common shares on December 31, 1997.
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BUSINESS-
The Company is a high speed Internet cable modem services
provider. Cable modems connect personal computers to the Internet
through cable television coaxial wiring via a standard Ethernet
connection. The Company is also a reseller of its excess bandwidth to
businesses in the Charleston and Columbia, South Carolina metropolitan
areas for high speed data transmission. The Company has begun the
installation of a cable television system, which it will own and
operate, in an apartment development in the Columbia area. The Company
operates a point of presence ("POP") in Charleston and Columbia. The
Company has signed a contract to evaluate and supervise the upgrade of
cable infrastructure at sixty-five resort hotels in China, for which it
also will provide Internet content and operate a reservation system. The
Company intends to pursue acquisitions of operating businesses which
provide cable engineering and installation services which the Company
currently contracts with others to provide in the upgrading and
installation of cable infrastructure. The Company's use of broadband
technology offers a high-performance and cost-effective bundle of data
and telecommunications services to consumers and businesses.
Residential subscribers access the Company's Cablewave(TM) service
primarily through high-speed cable modems, which attach their personal
computers via a standard Ethernet connection, while businesses can also
connect through telecommunications networks. Although peak data
transmission speed of a cable modem depends on the specific model and
can approach 10-27 megabits per second downstream and 2-10 megabits per
second upstream, the performance subscribers actually experience is
often constrained by the capacity of their personal computers, the
capacity of the server being accessed and the type of network
architecture utilized. The Company uses a cable television return path
which eliminates the need for a second telephone line that is required
by most other data-over-cable services. The Company's dependence on the
cable systems it services and its own cable system infrastructure
exposes the Company to significant risk of system failure. The Company
also utilizes certain key technologies from third parties to build and
manage the broadband network.
The Company has designed its data-over-cable broadband network on
the premise that sustainable, high-performance Internet access requires
a new, scalable architecture to alleviate Internet bottlenecks and to
enable true end-to-end network management capabilities. The four key
principles of the Company's network strategy are moving data closer to
the user, end-to-end network management, "always-on" service and
scalability.
The Company's broadband network utilizes caching and replication
technologies to move the information a subscriber requests close to the
subscriber. Local caching reduces network traffic, enabling the
Company's broadband network to overcome a fundamental weakness of the
Internet's duplicative data transfers. For example, when a subscriber
downloads a video clip from a Web site, the user must "pull" data across
the Internet from that Web site to the user's Internet service provider
and finally to the user's computer. If the user's neighbor requests the
same video clip from the Web site, the neighbor must pull the same data
across a similar path. In contrast, the Company's approach moves the
video clip only once in a given geographic area and retains it in the
Company's local cache near the user's home where it can be accessed by
every subscriber within that area without retransmission over the
Internet. This more cost-effective approach simultaneously improves the
end user's performance and reduces traffic volume across the Internet.
The Company achieves end-to-end network management through a
proactive network quality, service and performance management system.
The Company's broadband network provides visibility from its servers
across the Internet and all the way to the subscriber's home.
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This broadband network is "always on", unlike switched
technologies, such as a standard dial-up telephone connection. The user
is always connected to the Internet as long as his or her computer and
cable modem are on. This eliminates the need for a time-consuming
connection process, as with a dial-up service, and changes the way the
customer uses the Internet.
The Company's service is designed to be scalable to handle
increasing numbers of subscribers without degradation. Although users in
the same service area share high-bandwidth access (much like corporate
LANs), which may limit the effective bandwidth that is available to a
given subscriber at a given time, this shared connection is particularly
efficient and well suited to the sporadic nature of Internet traffic,
where browsing tends to consume bandwidth in discrete bursts intermixed
with periods of inactivity. As subscriber penetration increases, the
cable operator has multiple cost-effective alternatives to increase
capacity, including allocating additional six MHz channels for the
service or reducing the number of subscribers sharing a given bandwidth
by adding nodes, with each node serving a smaller number of subscribers
over the same infrastructure.
The Company and Intermark Associates V, LLC have entered into a
cable television system/internet installation agreement. Pursuant to the
agreement, the Company will install, own and operate a cable television
plant and Internet access system (a POP) at the Keswick Apartments, a
180 unit, upper end apartment project located in suburban Columbia,
South Carolina. The project is scheduled for completion in September
1999. Under the agreement, the Company is permitted to charge cable
television fees competitive with Time Warner, in addition to Internet
access fees, and is obligated to pay Intermark ten percent of gross
revenues. The agreement has a fifteen year term, but may be terminated
by Intermark for the Company's failure to provide service and may be
terminated by the Company in certain events. In the event of termination
by Intermark, Intermark is required to pay the Company the fair market
value of the system.
Intermark's parent company, Intermark Management, Inc., is a
developer and owner of apartment communities. The Company has purchased
a right of first refusal to own the cable system and provide cable
television and high speed Internet access services to Intermark
Management's existing and future properties. At the date of this report,
Intermark Management operates forty-three apartment projects containing
an aggregate of 4,575 units. Intermark Management's properties are
located predominantly in North Carolina, South Carolina and Georgia.
The Company believes significant opportunities exist in installing
or upgrading, owning and operating the coaxial cable infrastructure in
residential, apartment, condominium and resort developments. While the
Company may not own the infrastructure in every such arrangement, its
intent will be to provide cable television programming and high speed
Internet access to residents and guests of such projects. The Company
plans to seek additional opportunities in such projects.
The Company and Shangri-La Vacation & Exchange have entered into
an agreement under which the Company is to provide high speed Internet
access by cable modem to up to sixty-five hotels and resorts throughout
China. Shangri-La is a joint venture between Yunnan Tobacco, a state
owned tobacco monopoly and owner of the hotels and resorts, and
Silverhawk Development Co. of Hawaii. Shangri-La's purpose is to
increase occupancy of the hotels and resorts, in part through a time
share sales program. The Company will evaluate the cable infrastructure
presently installed in the facilities, supervise upgrading and improving
the infrastructure, provide Internet content and provide and operate the
reservation system via the Internet. The Company may also be involved in
providing cable television programming. The Company expects to begin the
evaluation process at a cross section of the hotels about June 1999 and
have it completed within six weeks. A time schedule for upgrading and
improving the cable infrastructures to accommodate cable modem access is
to be established by the parties at the completion of the evaluation
process.
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The Company has learned that operators of small to mid-sized cable
television systems in general do not have the knowledge needed to
implement high speed Internet access for their subscribers. The Company
believes that many such operators have an interest in providing Internet
access to their subscribers. The Company's Cablewave(TM) service enables
cable television system operators to generate additional revenues from
their coaxial cable infrastructure by offering Internet access along
with cable television programming. The Company implements cable system
upgrades and improvements, at the cable television system operator's
expense, which are necessary to successfully carry the Internet data
traffic over the coaxial cable. The Company provides the "head-end
plant" for bandwidth and packet administration. The Company becomes the
Internet service provider for the cable television subscribers who elect
to use their cable television company for high speed access to the
Internet. The Company's monthly subscriber fee is typically $45, which
is billed and collected by the cable television operator and shared
between the Company and the operator on a negotiated basis. The Company
sells the cable modems, purchased from a variety of manufacturers, to
the cable system operator for lease or resale to its subscribers. The
Company plans to offer a home page portal, browser and Internet content
in a co-branded joint venture with browser and content providers, at
some point in the future.
In the continental United States, approximately 5,500 cable
television systems fit the Company's marketing profile, with an
estimated aggregate of over 1 million data-over-cable subscribers. These
cable television systems represent approximately sixty percent of all
cable television subscribers in the United States. The Company's
marketing strategy is built on the lack of interest the leading
providers of Internet service via cable television modem, such as @Home
Corporation, Road Runner and others have demonstrated in the small to
mid-sized markets. The Company's market will be limited to those cable
system operators who are willing to devote adequate resources to
upgrading and improving their systems sufficiently to accommodate
Internet cable modem service. Improvements which may be made in cable
modem technology in the future may reduce, however, the amount of
upgrading of the cable infrastructure required to provide high speed
cable modem access to the Internet.
The Company and US Cable of Coastal-Texas, L.P. doing business as
US Cable Coastal Properties Inc. ("US Cable") have entered into a
revenue sharing agreement for the Company's Internet access service at
US Cable's system serving the Wild Dunes residential community in the
Charleston, South Carolina area. Wild Dunes is composed of 1,800
residences. This golf course community caters to high income families.
US Cable currently has 1,500 subscribers to cable television in that
community. Upgrading and improving the cable infrastructure for
high-speed Internet access at Wild Dunes has recently been completed. At
the date of this registration statement, the Company has approximately
200 computers using cable modem service in the Wild Dunes community
before beginning any formal marketing program. The Company plans to
begin marketing its Cablewave(TM) service to Wild Dunes' homeowners in
the near future. The Company expects the number of subscribers to its
Cablewave(TM) service to increase substantially in response to a
marketing campaign, which will utilize both billing inserts and
commercial spots on cable system programing.
At the date of this registration statement, the Company is
substantially dependent upon US Cable for fulfillment of its growth
strategy in residential high-speed Internet cable access service. The
Company believes US Cable is satisfied with its services at the date of
this registration statement and it will have an opportunity to service
additional US Cable systems, should it choose to do so in the future.
The Company intends to approach additional cable television system
operators on a direct basis to explore their interest in offering high
speed Internet access services to their subscribers.
The Company's POPs in Charleston and Columbia, South Carolina have
excess bandwidth which the Company resells to businesses for high speed
data transmission. The Company has entered into a marketing agreement
with Carolina Communications Networks, Inc. ("CCN") under which CCN acts
as the Company's independent marketing agent for excess bandwidth. CCN
has been in the business as a reseller of local and long distance
telephone service since 1996 and employs nineteen sales representative.
At the date of this registration statement, the Company has eighty-four
customers for its excess bandwidth in Charleston. The Company completed
installation of its POP in Columbia in late March 1999.
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SALES AND MARKETING-
The Company plans to provide a sales and marketing program to the
operators of the cable systems for which the Company provides high speed
Internet access. The cable system operator will have the responsibility
to distribute the sales and promotional materials to the subscribers on
cable television systems. Distribution to the subscribers is expected to
be primarily by billing inserts and by commercial spots in the cable
television programming. The cable system operator will have the
financial responsibility for distribution of the sales and promotional
materials. The Company expects the cable system operators also to
incorporate marketing of the Company Cablewave(TM) services into their
marketing programs directed to homes passed by their coaxial cables
which are not subscribers to cable television services. The Company's
marketing to the non-subscribing households within an area served by the
cable system is expected to be distributed primarily by direct mail and
advertising in local newspapers and broadcast media, including both
radio and television. The Company plans to monitor the distribution of
these materials to assure the cable system operator is meeting its
obligation to the Company.
The Company will conduct its own marketing program directed to the
potential subscribers to the cable television systems which the Company
owns and operates. This marketing program will be designed to cover both
cable television services and the Company's Cablewave(TM) services. The
Company expects the initial marketing effort to be conducted by direct
mail and paid advertising local print and broadcast media.
INTELLECTUAL PROPERTY-
The Company claims a common law service mark in Cablewave(TM). The
Company is aware of another company using Cablewave(TM) as a service
mark but believes its services are so distinctly different from the
Company's services that there is no opportunity for confusion between
the Company's services and the services of that Company.
COMPETITION-
The Company competes with all providers of Internet access to
residential and business customers, excluding other providers of
Internet access by cable modem. The competing ISPs use exclusively
dial-up modem technology, which uses conventional telephone lines for
communications, except for the limited number of commercial and business
users who either have installed or have purchased access to a T-1
telephone line or an ISDN line. Dial-up modems are significantly slower
than cable modems, being limited at the date of this registration
statement to 56.6 baud per second. The cable modem is capable of speeds
of up to thirty-seven megabits per second. Furthermore, a dial-up modem
must be connected for each session on the Internet, unless the user
stays continuously connected, thereby possibly incurring a greater
charge for the service. Connection by dial-up modem is subject to time
outs, which may occur in the middle of a session and which require the
connection to be reestablished. A cable modem is always on and there is
no additional hourly or incremental charge for the continuous
connection. Consolidation of small to mid-sized cable system operators
under a single ownership with a vested interest in a competing provider
of cable modem Internet access services could result in foreclosing the
Company from an opportunity to provide its Cablewave(TM) services to
such cable system operators.
Although @Home, Road Runner and HSA Net provide cable modem access
to the Internet, the Company does not compete with those companies at
the present time. There is no assurance those companies will not do so
in the future. If they were to do so, they have significantly greater
experience, name recognition and financial resources than the Company.
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It should be noted that there is a limit to the amount of Internet
traffic a coaxial cable can efficiently carry. The larger cable systems
often have a number of subscribers on a single cable node which exceeds
the capacity of the cable to efficiently carry the Internet traffic at
advertised speeds. This situation has contributed to temporary and
periodic loss of speed to cable modem subscribers on those systems, at
least once producing a complete shut down of Internet access for
subscribers on the system. The Company believes a smaller number of
subscribers on each node of the cable systems in its target market will
inherently prevent significant slow downs in access speed for the
Company's customers.
Deregulation of telephone companies could enhance their ability to
compete against the Company's service. The Federal Communications
Commission also is considering whether to provide the Bell operating
companies and other incumbent local exchange carriers with significant
relief from existing access, resale, unbundling, pricing, and cost
recovery rules and policies, without regard to local access and
transport boundaries, in order to encourage the deployment and
operations by these carriers of high-capacity, packet-switched networks
and other advanced telecommunications facilities and related services,
including Internet access services. Deregulation of telephone company
advanced services could enhance the ability of these companies to
compete against the Company's delivery of its services by the Company's
cable partners.
ADOPTION OF CABLE MODEM TECHNICAL STANDARDS-
The North American cable industry has adopted DOCSIS to support
the delivery of data over cable services utilizing interoperable cable
modems. DOCSIS is an acronym for "data over cable systems interface
specifications". The Company believes this new standard and the
distribution of DOCSIS-compliant modems through computer retailers will
facilitate the growth of the cable modem industry.
PERSONNEL-
At the date of this registration statement, the Company employs
seven persons, including its executive officers, two executive
assistants, one engineer, one computer technician and one office
manager. The Company has been contracting most of the services required
to upgrade and improve the cable infrastructure at Wild Dunes. The
Company plans to use contractors to install the cable infrastructure at
the Keswick Apartment project and to make the assessments and upgrades
of hotel and resort properties included in the Shangri-La joint venture.
The Company plans to employ a full time chief financial officer and
additional staff and support personnel in the future as its financial
condition permits.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
GENERAL
The following discussion and analysis should be read in conjunction
with the financial statements, including the notes thereto, appearing elsewhere
in this document.
The Company is a provider of broadband Internet services over the cable
television infrastructure to consumers. The Company's "Cablewave" service allows
residential subscribers to connect their personal computers via cable modems to
a high-speed Internet backbone network developed and managed by the Company.
This enables subscribers to receive Cablewave over approximately one hundred
times faster that a typical dial-up connection and an "always on" connection
through the Company's broadband Internet portal. The Company also sells excess
bandwidth to businesses in the Charleston and Columbia, South Carolina
metropolitan areas. This excess bandwidth provides high-speed data transmission
at competitive rates. The Company's service is sold under the name "Cablewave."
Internet Cable Corporation was incorporated in the State of Nevada on
February 15, 1995 under the name Firenze, LTD. The Company changed its name to
Internet Cable Corporation on September 12, 1997. The Company's principal
executive offices are located at 263 King Street, Second Floor, Charleston,
South Carolina 29401. The telephone number is (843) 722-8007.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED JUNE 30, 1998 AND 1997
SALES. Sales for The Fiscal Year Ended June 30, 1998 ("Fiscal 1998")
were $50,410 as compared to sales for The Fiscal Year Ended June 30, 1997
("Fiscal 1997") of $0. The Company did not generate any sales in Fiscal 1997
because it was a development stage company. The increase in sales in Fiscal 1998
was a result of sales of high-speed Internet connections through U.S. Cable's
operations. Additional revenue was generated through the sale of excess
bandwidth to businesses located in the Charleston, South Carolina region.
COST OF SALES. Cost of sales for the Fiscal 1998 were $52,897 as
compared to $0 in Fiscal 1997.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the
Fiscal 1998 ($1,595,639) increased by $1,553,520, or approximately 3700%, as
compared to Fiscal 1997 ($42,119). The increase in expense was due to by
issuance of stock to executive employees.
INTEREST EXPENSE. Interest expense for Fiscal 1998 was $15,925 as
compared to $0 in Fiscal 1997. The increase was due to payroll taxes.
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PENALTY EXPENSE. Penalty for Fiscal 1998 was $68,245 as compared to $0
for Fiscal 1997. The increase in penalty expense was due to by issuance of stock
options to executive employees.
NET DEVELOPMENT STAGE LOSS. The net development stage loss for Fiscal
1998 ($1,718,633) increased by $1,336,800, or approximately 450%, as compared to
Fiscal 1997 ($381,833). The loss was a result of $789,750 of stock issued for
services
NINE MONTH PERIOD ENDED MARCH 31ST, 1999 AND 1998
SALES. Sales for The Nine Month Period March 31, 1999 ("Nine Month
Period 1999") were $19,009 as compared to sales of $48,062 for The Nine Month
Period March 31, 1998 ("Nine Month Period 1998"). The $29,053 decrease in sales
for The Nine Month Period 1999 were a result of upgrades to the cable plant. The
Company plans to increase its sales revenue through the sale of excess bandwidth
to businesses located in the Charleston, South Carolina region.
COST OF SALES. Cost of Sales for The Nine Month Period 1999 were
$20,248.00 as compared to sales of $19,968.00 for The Nine Month Period 1998
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for The Nine Month Period 1999 were $540,336 as compared to $174,419
for The Nine Month Period 1998. This decrease was attributable $789,75 as a
result of stock issued for service.
INTEREST EXPENSE. Interest expense for The Nine Month Period 1999 was
$5,78 as compared to $11,724 for The Nine Month Period 1998. This decrease was
attributable $789,750 as a result of in stock issued for service
PENALTY EXPENSE. Penalty for The Nine Month Period 1999 was $0 as
compared to $54,089 for the Nine Month Period 1998. This decrease was
attributable $789,750 as a result of in stock issued for service
NET DEVELOPMENT STAGE LOSS. The Company net development stage loss for
The Nine Month Period 1999 was $575,215 as compared to $1,244,074 for The Nine
Month Period 1998. The decrease of the net development stage losses was
principally due to a $789,750 decrease of stock issued for services being
partially offset (approximately $121,000) by an increase in sales, general and
administrative expenses caused by the Company beginning its planned operation.
LIQUIDITY AND CAPITAL RESOURCES.
Since inception, the Company has financed its operations primarily
through a combination of private and public sales of equity securities and
non-interest bearing loans from the Company's executive officers. As of June 30,
1998, the Company's cash and cash equivalents were $1,330 as compared to $41,580
at June 30, 1997. The decrease was primarily a result of the continued expenses
associated with operating the Company's business operations, maintaining its
offices as well as the payment of other expenses such as professional,
accounting, communication, printing and other general and administrative costs.
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As of The Nine Month Period March 31, 1999, the Company's cash and cash
equivalents were $38,645 as compared to $6,063 For The Nine Month Period March
31, 1998. The increase was a result of proceeds of a private placement.
The Company' incurred development stage losses of $2,119,443 since
inception through June 30, 1998. Current liabilities exceed current assets by
$428,975. The Company is currently operating at a cost of approximately $240,000
annually and completed a Rule 504 Offering in December of 1998 of $847,500
through the sales of the Company's common stock at $2.00 per share.
The Company's capital requirements primarily relate to the working
capital requirements and investments in the network computer equipment, in
addition, the Company is seeking capital to help facilitate acquisitions and
create strategic alliances. The Company foresees its' cash requirements for
operations for the next twelve months to be approximately $500,000. The Company
expects to satisfy this need through proceeds of a bridge financing which we
expect to be completed within 30-60 days. For acquisition purposes and for
supplemental strategies, the Company is seeking to complete an offering of at
least $15 million dollars within the next six months. The Company plans to
finance its capital equipment expenditures from a variety of sources, including
direct vendor leasing programs, third party commercial leasing arrangements and
bank financing. The Company is meeting with various sources of capital to
satisfy its equity requirements for its plans for its growth strategy. However,
there can be no assurance that the Company will be able to obtain such financing
on terms acceptable to the Company, if at all.
The Company believes if is it able to obtain $500,000 in financing, it
will have the financial resources necessary to meet its presently anticipated
business requirements for the next twelve months. Nonetheless, depending on the
market conditions, the Company may seek to sell additional equity or debt
securities or obtain alternative credit facilities. The sale of additional
equity or debt securities will result in significant dilution to the existing
shareholders. There can be no assurance that the Company will be able to raise
such capital on terms acceptable to the Company, if at all.
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Year 2000 computer issues create certain risks for the Company,
although the Company believes that such risks are less significant than
those faced by many companies due to the fact the Company commenced
operations in 1997. If the Company's internal and network information
systems do not correctly recognize and process date information beyond
the year 1999, there could be an adverse impact on the Company's
operations. To address these Year 2000 issues with its internal and
network systems, the Company has initiated a program to evaluate its
internal and network systems. The Company has initiated a comprehensive
program (the "Program") to address Year 2000 readiness in its systems
and with its customers' and suppliers' systems. The Program has been
designed to gather information regarding the Year 2000 compliance of
products and services that are required by the Company to deploy its
residential and commercial Internet services. Under the Program,
assessment and remediation are proceeding in tandem and are intended to
have the Company's critical systems in Year 2000 compliance by June 30,
1999. These activities are intended to encompass all major categories of
systems in use by the Company. The costs incurred to date related to the
Program have not been material. The total cost estimate does not include
potential costs related to any customer or other claims or the costs of
internal software or hardware replaced in the normal course of business.
The total cost estimate is based on the current assessment of the
Company's Year 2000 readiness needs and is subject to change.
The Company also is communicating with its significant suppliers
to determine the extent to which the Company is vulnerable to such
suppliers' failure to remedy their own Year 2000 issue. The Company has
already received assurances of Year 2000 compliance from a number of
those suppliers. Most of the suppliers have no contractual obligations
under existing contracts with the Company to provide such information to
the Company. The Company is taking steps with respect to new supplier
agreements to ensure that the suppliers' products and internal systems
are Year 2000 compliant.
While the Company currently expects that the Year 2000 issue will
not pose significant operational problems, delays in the implementation
of new information systems or a failure to fully identify all Year 2000
dependencies in the Company's existing system and in the systems of its
suppliers could have material adverse consequences. Therefore, the
Company is developing contingency plans for continuing operations in the
event such problems arise.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS-
SUBSCRIBER GROWTH RISKS:
The Company's ability to increase the number of cable modem
subscribers to achieve its business plans and generate future revenues
will be dependent on a number of factors, many of which are beyond the
Company's control. These factors include, among others: (i) the rate at
which the Company's current and future Cable Partners upgrade their
cable infrastructures; (ii) the ability of the Company and its Cable
Partners to coordinate timely and effective marketing campaigns with the
availability of such upgrades; (iii) the success of the Cable Partners
in marketing the Cablewave(TM) service to subscribers in their local
cable areas; (iv) the prices that the Cable Partners set for the
Cablewave(TM) service and its installation; (v) the speed at which the
Cable Partners can complete the installations required to initiate
service for new subscribers; (vi) the quality of customer and technical
support provided by the Company and its Cable Partners; and (vii) the
quality of content on the Cablewave(TM) service. The Company believes
subscriber growth has been constrained, and will continue to be
constrained, by the cost and the amount of time required to install the
Cablewave(TM) service for each residential consumer. In addition, most
of the Company's Cable Partners are not obligated to upgrade their cable
infrastructures or market the Cablewave(TM) service. Moreover, the
Cablewave(TM) service is currently priced at a premium compared to many
other online services, and large numbers of subscribers may not be
willing to pay a premium for the Cablewave(TM) service. Because of the
foregoing factors, among others, the Company's actual revenues or the
rate at which it will add new subscribers may differ from its forecasts.
The Company may not be able to increase its subscriber base in
accordance with its internal forecasts or the forecasts of industry
analysts or to a level that meets the expectations of investors. The
rate at which subscribers have increased during the first three quarters
of 1998 should not be taken as indicative of the rate at which
subscribers may be expected to increase in the future.
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Dependence on cable partners to upgrade to two-way cable
infrastructure necessary to support the Cablewave(TM) service; Uncertain
availability and timing of upgrades:
Transmission of the Cablewave(TM) service over cable is dependent
on the availability of high-speed two-way cable infrastructure. However,
only a small portion of existing cable plants in the United States have
been upgraded, and even less are capable of high-speed two-way
transmission. Cable system operators have limited experience with these
upgrades, and investment in upgrades often place a significant strain on
the financial, managerial, operating and other resources of the cable
system operators, most of which are already highly leveraged. Therefore,
the Company expects these infrastructure investments to exceed the
capability of many cable system operators who might otherwise become the
Company's cable partners. The Company's commercial success in any cable
system depends on the successful and timely completion of infrastructure
upgrades. The failure of the Company's cable partners to complete these
upgrades in a timely and satisfactory manner, or at all, would prevent
the Company from delivering high-performance Internet services and would
have a material adverse effect on the Company's business and operating
results related to that cable system, which in turn would impact the
Company's overall financial condition and results.
UNPROVEN NETWORK SCALABILITY, SPEED AND SECURITY:
Due to the limited deployment of the Company's services, the
ability of the Cablewave(TM) service to connect and manage a substantial
number of online subscribers at high transmission speeds is as yet
unknown, and the Company faces risks related to the Cablewave(TM)
service's ability to be scaled up to its expected subscriber levels
while maintaining superior performance. The Cablewave(TM) service may be
unable to achieve or maintain a high speed of data transmission,
especially as the number of the Company's subscribers grows. The
Company's failure to achieve or maintain high-speed data transmission
would significantly reduce consumer demand for its services and have a
material adverse effect on its business, operating results and financial
condition. In addition, while the Company has taken steps to protect
against "email spamming," public concerns about security, privacy and
reliability of the cable network, or actual problems with the security,
privacy or reliability of the Company's network, may inhibit the
acceptance of the Company's Internet services.
MANAGEMENT OF EXPANDED OPERATIONS; DEPENDENCE ON KEY PERSONNEL:
The Company may not be able to successfully manage any future
periods of rapid growth or expansion, which could be expected to place a
significant strain on the Company's managerial, operating and other
resources. The Company's failure to successfully manage growth or
expansion could be expected to have a material adverse effect on
subscriber growth and retention and would materially adversely affect
the Company's business, operating results and financial condition. The
Company is highly dependent upon the efforts of its senior management to
manage growth effectively, which will require the Company: (i) to
implement additional management systems effectively; (ii) to develop
further operating, administrative, financial and accounting systems and
controls; (iii) to maintain close coordination among all facets of its
business; and (iv) to hire and train additional managerial, technical
and marketing personnel. There is intense competition for senior
management, technical and marketing personnel in the areas of the
Company's activities. The loss of the services of any of the Company's
senior management or the failure to attract and retain additional key
employees could have a material adverse effect on the Company's
business, operating results and financial condition. The Company does
not maintain key-person life insurance. The Company plans to purchase
key person insurance on its executive officers when its financial
condition permits.
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DEPENDENCE ON TWO-WAY CABLE MODEMS: NEW INDUSTRY STANDARDS:
Each of the Company's subscribers currently must obtain a cable
modem from the cable system operator to access the Cablewave(TM)
service. The North American cable industry has recently adopted a set of
interface standards known as DOCSIS for hardware and software to support
the delivery of data services over the cable infrastructure utilizing
interoperable cable modems. The Company believes that these
specifications, together with the recently executed non-binding
distribution agreement with CompUSA will facilitate the growth of the
cable modem industry and the availability of lower cost, interoperable
cable modems through retail channels. The Company's subscriber growth
could be constrained and the Company's business, operating results and
financial condition could be materially adversely affected to the extent
the cable system operators with whom the Company enters into agreements
choose to slow the deployment of the Cablewave(TM) service until
DOCSIS-compliant cable modems are commercially available. Cable modems
that are DOCSIS-compliant are not expected to be available in
significant quantities until late 1999. Although multiple vendors are
expected to supply DOCSIS-compliant cable modems and their constituent
components, any cable system operator's reliance on a single provider of
such modems or components could cause that operator to be unable to
generate expected subscriber growth for the Cablewave(TM) service in the
event such supplier does not provide the operator with a sufficient
quantity of DOCSIS-compliant modems to meet the operator's requirements.
RISK OF SYSTEM FAILURE:
The Company's operations are dependent upon its ability to support
its highly complex network infrastructure and avoid damage from fires,
earthquakes, floods, power losses, telecommunications failures and
similar events. The occurrence of a natural disaster or another
unanticipated problem at the Company's operations center could cause
interruptions in the services provided by the Company. Additionally,
failure of the Company's cable system operators or companies from which
the Company obtains data transport services to provide the data
communications capacity required by the Company, as a result of natural
disaster, operational disruption or any other reason, could cause
interruptions in the services provided by the Company. Any damage or
failure that causes interruptions in the Company's operations could have
a material adverse effect on the Company's business, operating results
and financial condition.
RISKS OF TECHNOLOGICAL CHANGE:
The markets for consumer and business Internet access services and
online content are characterized by rapid technological developments,
frequent new product introductions and evolving industry standards. The
emerging nature of these products and services and their rapid evolution
will require that the Company continually improve the performance,
features and reliability of its network, Internet content and consumer
and business services, particularly in response to competitive
offerings. The Company may not be successful in responding quickly, cost
effectively and sufficiently to these developments. The Company's
management believes there may be a time-limited market opportunity for
the Company's cable-based consumer and business Internet services, and
the Company may not be successful in achieving widespread acceptance of
its services before competitors offer products and services with speed
and performance similar to the Company's current offerings. In addition,
the widespread adoption of new Internet or telecommuting technologies or
standards, cable-based or otherwise, could require substantial
expenditures by the Company to modify or adapt its network, products and
services and could fundamentally affect the character, viability and
frequency of Internet-based advertising and content services, either of
which could have a material adverse effect on the Company's business,
operating results and financial condition. In addition, new Internet or
telecommuting services or enhancements offered by the Company may
contain design flaws or other defects that could have a material adverse
effect on the Company's business, operating results and financial
condition.
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RISK OF FCC REGULATORY ACTION:
In recent months, AOL, MindSpring Enterprises, Inc., the Consumers
Union and other parties have requested the Federal Communications
Commission (the "FCC") to require cable operators to provide ISPs and
online service providers ("OSPs") with equal access to the cable
infrastructure. In the event that the FCC were to require such third
party access to the cable infrastructure, ISPs and OSPs could
potentially provide services over the cable infrastructure of the
Company's cable system operators that compete with the services offered
by the Company. The third party access issue has been raised in two
different FCC proceedings. At the present time, subscribers to the
Cablewave(TM) service can select from among any of the popular browsers
a their home page, such as America Online. The FCC has been asked to
review the third party access issue in connection with its inquiry
concerning the availability of advanced telecommunications services
pursuant to Section 706 of the Telecommunications Act of 1996 (the "1996
Telecom Act"). The Company believes that the FCC should reject the
demands for third party access to the cable infrastructure for a number
of reasons First, requiring cable operators to unbundle their plant will
reduce their incentive to make the significant investment that is
required to upgrade their networks and roll-out broadband services.
Second, such regulatory action could have a "chilling effect" on other
emerging broadband satellite and wireless providers that also must make
sizable investments to offer facilities based broadband solutions.
Third, regulation is unnecessary as cable operators do not have a
dominate position in the Internet services market and do not limit
access to AOL or other Internet content. Fourth, it is doubtful that the
FCC has the legal authority to mandate such third party access under the
1996 Telecom Act or other existing telecommunications laws.
POSSIBLE VOLATILITY OF STOCK PRICE:
The stock market has from time to time experiences significant
price and volume fluctuations. In addition, the market price of the
shares of the Company's common stock, similar to the market prices of
other Internet companies, has been, and is likely to be highly volatile.
Factors such as fluctuations in the Company's operating results,
announcements of technological innovations or new products by the
Company or its competitors, regulatory actions, market rumors,
acquisitions in the telecommunications or cable industries and general
market conditions may have a significant effect on the market price of
the Company's common stock.
ITEM 3. DESCRIPTION OF PROPERTY:
The Company leases 2,000 square feet of general office space in
downtown Charleston, South Carolina, which serves as its principal
executive offices, operations center and head end plant which provides
bandwidth administration and the interface between the cable system and
the Internet. The Company's lease has three years remaining at a monthly
rental of $2,000. [Generally describe the head end capacity and the
telecom connections]
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
The number of shares of the Company's common stock owned by the
Company's directors and officers and by each person who owns legally and
beneficially more than five percent of the Company's issued and
outstanding common stock at April 23, 1999, the address of each such
person and the percentage of the common stock represented by such shares
is set forth in the following table. Unless otherwise indicated all
ownership is both legal and beneficial.
NAME/ADDRESS NUMBER OF SHARES PERCENTAGE
------------ ---------------- ----------
J. Robert Jones (1,2) 600,375 7.79
Michael L. Jones (1,3) 25,000*
Timothy R. Karnes (1,4) 2,086,342 27.08
Lisa B. Safford (1,5) 25,000*
All directors and officers
as a group (4 persons) 2,736,717 35.52
Mark E. Gould (6) 1,400,000 18.17
Larry Namer (7) 400,000 5.19
* less than 1%
1. The address of the directors and officers is the address of the
Company's principal executive offices.
2. Includes 150,000 common stock purchase options . See, "Description of
Securities"
3. Includes 250,000 common stock purchase options . See, "Description of
Securities"
4. Includes 25,000 common stock purchase options . See, "Description of
Securities"
5. Mr. Gould's address is 306 North Glenwood Avenue, Clearwater, Florida
33755.
6. Mr. Namer's address is c/o Comspan Communications, Inc., Suite 400,
201 Santa Monica Boulevard, Santa Monica, California 90401.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The names, ages and terms of office of directors and executive
officers of the Company are set forth in the following table:
NAME AGE POSITIONS WITH COMPANY DIRECTOR SINCE
---- --- ---------------------- --------------
J. Robert Jones 45 Director and Secretary 1998
Chief Technical Officer
Michael L. Jones 41 Director 1999
Timothy R. Karnes 41 Director and President 1997
Lisa B. Safford 38 Director and Treasurer 1997
Each director is elected by holders of a majority of the Common
Stock to serve for a term of one year and until his successor is elected
and qualified, which is generally at the annual meeting of stockholders.
The directors were most recently elected at the annual meeting of
stockholders held on January 22, 1999. Directors are not paid any
compensation over and above their executive salaries; however non
management directors have been compensated with stock purchase options.
Officers serve at the will of the board, subject to possible future
employment agreements which would establish term, salary, benefits and
other conditions of employment.
J. Robert Jones is a director and the Company's Secretary and
Chief Technical Officer. Mr. Jones brings sales and marketing, company
startup, Zenith certification, and technical and cable-modem experience
to the Company. As Vice President of Marketing/Technology at King
Communications, Mr. Jones pioneered the first generation of cable modems
to King, North Carolina. Mr. Jones has eighteen years experience in
negotiating multi-million dollar sales contracts for numerous companies
such as Pan American Continental and Transworld Airlines. Mr. Jones has
founded two successful companies, one of which, Micro Tech, implemented
Internet service for many of the Caribbean Islands. Mr. Jones attended
Central Piedmont College in Charlotte, North Carolina and the College of
Marin County in Marin County, California.
Michael L. Jones is a director of the Corporation and a member of
the Compensation Committee of the Board of Directors. Mr. Jones is the
founder, joint owner with his wife, of American Phone Center in
Charleston, South Carolina and a major stockholder and the President of
Telecommunications Inc. of Charleston, d/b/a TELECO/Charleston. TELECO/
Charleston is a seller, installer and servicer of telecommunications
equipment founded sixteen years ago. Mr. Jones is also the Chief
Executive Officer of Carolina Communications, Inc. Mr. Jones attended
The Citadel.
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Timothy R. Karnes is the chairman of the board and the Company's
president. In 1994, Mr. Karnes co-founded Sims Internet, a pioneer in
the Internet service provider industry, which was acquired by Internet
Channel, Inc. Mr. Karnes served as Vice President of Internet Channel,
Inc. where his duties included developing the business direction,
raising capital, and working with securities council and auditors. Mr.
Karnes became President of the Company in February 1997 and left
Internet Channel, Inc. in March 1997. Mr. Karnes is certified by Zenith
Electronics Corporation in cable modem technologies. Prior to 1994 Mr.
Karnes founded and was president of Palmetto Research Opportunities,
Inc., an employment research firm. Mr. Karnes was the founder and
publisher of Auction Guide Magazine in 1988 which was distributed on
news stands in regional sections of the United States by Capitol
Distributors. In 1991, Mr. Karnes founded a nonprofit organization,
Operation Desert News, Inc., to coordinate seventy-two national magazine
publishers supplying over 200,000 donated magazines (editorial content
pre-approved by the Pentagon and Joint Command) to the U.S. troops
serving in Saudi Arabia. R.J. Reynolds Tobacco Company funded the
project. Mr. Karnes attended Ecole de Monte Rosa in Lausanne,
Switzerland, the College of Charleston and Wake Forest University.
Lisa B. Safford is a director and the Company's Treasurer. Mrs.
Safford is a vice president of Landmark Enterprises, Inc., a family
owned commercial and industrial real estate development company engaged
in sales, leasing property management and development of commercial and
industrial real estate. Mrs. Safford has over fifteen years experience
in the accounting and finance industry and now manages over 500,000
square feet of industrial, distribution and office space. Since joining
Landmark Enterprises, Inc. in 1994, Mrs. Safford has consistently sold
and leased over $1 million worth of property a year. Currently Mrs.
Safford is involved in site acquisition, selecting the architectural
design, arranging favorable financing and leasing of a shopping center
in Mt. Pleasant, South Carolina and several industrial projects in the
North Charleston area. Mrs. Safford earned a Bachelor of Science degree
in accounting and business administration (1993) from the College of
Charleston.
ADVISORS TO MANAGEMENT-
The Company has established a Board of Advisors consisting of
knowledgeable individuals in fields of cable television, computer
networks and computer hardware and software. The individual advisors may
vary from time to time, depending upon the availability of such
individuals and the addition or substitution of individuals. The
Company's advisors will not have obligations or responsibilities for the
Company's management, business, plans, programs or finances. They will
be available, however, to consult with the Company's management with
respect to various business and technology matters. The following
persons are currently advisors to management.
Noel Hunter has been a technical consultant since 1989, including
system design, integration and administration, programing, and client
training on UNIX, IBM compatible and MacIntosh servers. Mr. Hunter has
published articles on network design and implementation. He participated
in the start-up phase and administration of an Internet service provider
in King, NC. He currently provides his services to companies seeking
design of networks, system design and integration, programming and
teaching. Mr. Hunter is an independent consultant for systems design and
administration to Wake Forest University.
Larry Namer is an entertainment industry entrepreneur, having
started several successful companies, including E! Entertainment
Television, Inc. (formerly Movietime, Inc.), Movies USA magazine and
Recovery Network Inc. which launched in April of 1997 and made a public
offering in September 1997. Mr. Namer was employed by Time Incorporated
Manhattan Cable in 1971, and was promoted to the position Director of
Corporate Development prior to leaving that employment. Comspan
Communications, Inc. (CCI), an entity founded by Mr. Namer, is widely
recognized as the leading independent firm specializing in the business
development of niche television networks. In 1994, CCI became involved
in multimedia projects and developed the first live sporting event Web
site on the Internet and continues its pioneering interactive efforts
and is producing several new Web businesses, including the Jackpot Zone,
the World Film Awards and State of The Worth Forum. Comspan is the
primary consultant to Microsoft for that company's interactive
television project "MITV". Mr. Namer also founded Comspan/BIGSTAR Russia
to develop and explore media opportunities in the former Soviet Union.
Presently, BIGSTAR Russia is the leading producer of entertainment
events in Russia.
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Lance Ong has been involved since 1982 in the design and
development of computer software for large networked systems, data
collection, data distribution and analysis, security, digital audio and
MIDI. His responsibilities have included engineering design
coordination, quality assurance and management technologies. Mr. Ong is
a joint inventor of a networked inventory control system covered by
broad process patents and he is the inventor of a low cost media server
design for telecommunications applications named "Media on Demand" and
of a digital recording technology which he currently has under
development. Mr. Ong has been an accomplished professional composer,
music synthesist and audio engineer for twenty-five years. He has
produced music for over 700 national television and radio commercials,
including such clients as Levi's Jeans, Pepsi, Chevy, Ford, and several
television shows. He has been nominated for an Emmy for a CBS Sports
theme. He has played on albums with the Pointer Sisters, David Sanborn,
Grand Funk Railroad, Andre Crouch (a Grammy winning album) and Anne
Murray, to name only a few. Mr. Ong has been engaged in his own
businesses, including the Ong Corporation, for more than the past five
years. Mr. Ong intends to devote as much time as he determines is needed
to the Company's business and plans to continue his involvement with
businesses other than the Company. Mr. Ong has programmed electronic
musical instruments and equipment for Yamaha, also creating factory
programmed sounds for several models of Yamaha's instruments, and for
Eventide Electronics. Mr. Ong attended the University of California at
Santa Barbara, taking both music and engineering courses.
ITEM 6. EXECUTIVE COMPENSATION:
The following table below sets forth cash compensation paid to Mr.
Karnes, the Company's president (chief executive officer), since
inception.
Timothy R. Karnes, 1997 $70,000
Director and President 1998 $70,000
Amounts shown in the table above represent accrued amounts. The
Company did not pay approximately $20,000 of this amount per year but is
obligated to pay the unpaid balance when the Company's financial
condition permits. The Company expects to pay Mr. Karnes cash
compensation of $70,000 for 1999. In addition to cash compensation for
1999, the Company granted to Mr. Karnes on January 22, 1999 common stock
purchase options exercisable to purchase 250,000 shares of common stock
at a price of $2.50 per share. The options are exercisable for a period
of five years from the date of grant.
At the date of this registration statement, the Company does not
have an employment agreement with Mr. Karnes. The Company anticipates it
will enter into an employment agreement with Mr. Karnes in the near
future. Until an employment agreement is entered into with Mr. Karnes,
the Company is depending upon Mr. Karnes' stock ownership in the Company
as an incentive for him to remain in the Company's employment.
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ITEM 7. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS:
J. Robert Jones and Michael L. Jones, directors of the Company,
are not related.
Michael L. Jones is the Chief Executive Officer and a forty-five
percent stockholder of Carolina Communications Networks, Inc. ("CCN").
The Company has an agreement with CCI under which CCN acts as the
Company's independent marketing agent for the Company's excess bandwidth
in Charleston and Columbia, South Carolina. The agreement was entered
into before Mr. Jones became a director of the Company. The Company
believes the terms of the marketing agreement are substantially
equivalent to the terms which it could have obtained from any other
unrelated party.
ITEM 8. LEGAL PROCEEDINGS:
At the date of this registration statement, the Company is not
involved in any litigation and does not have any pending claims. The
Company's management is not aware of any threatened claims or the basis
therefor, except a claim by the cofounder of Sims Internet which was
previously dismissed without prejudice.
It is possible that claims could be made against Internet and
online service providers under United States law for defamation,
negligence, copyright or trademark infringement, or other theories based
on the nature and content of the materials disseminated through their
networks. Several private lawsuits seeking to impose such liability are
currently pending. In addition, legislation has been proposed that would
impose liability for or prohibit the transmission over the Internet of
certain types of information. The imposition upon Internet and online
service providers of potential liability for information carried on or
disseminated their systems could require the Company to implement
measures to reduce its exposure to this liability. This may require the
Company to expend substantial resources or discontinue certain services
or product offerings. The increased attention focused upon liability
issues as a result of these lawsuits and legislative proposals could
impact the growth of Internet use. Furthermore, certain foreign
governments, such as Germany, have enacted laws and regulations
governing content distributed over the Internet that are more strict
than those currently in place in the United States. One or more of these
factors could be detrimental to the Company's business.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS:
The Company's Common Stock is quoted under the stock symbol "ICBL"
on the OTC Bulletin Board operated by the National Association of
Securities Dealers, Inc. The following table sets forth the approximate
high and low bid and asked quotations for the Company's Common Stock for
the four quarters ended March 31, 1999. These quotations are
inter-dealer quotations without retail markup, markdown or commissions
and may not represent actual transactions.
Quarter ended High Bid Low Bid High Ask Low Ask
June 30, 1998 $ 5.750 $ 3.1250 $ 6.00 $ 4.5000
September 30, 1998 $ 3.875 $ 1.2500 $ 4.25 $ 2.3500
December 31, 1998 $ 1.031 $ 5.3125 $ 6.00 $ 1.0625
March 31, 1999 $ 20.250 $ 5.2500 $ 20.50 $ 5.6250
The closing high bid and low asked quotations for the Company's
common stock on April 29, 1999 were $ 9 1/8 and $ 8 31/32, respectively.
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NUMBER OF STOCKHOLDERS. At April 23, 1999, the Company had 104
stockholders of record and an estimated 300 beneficial stockholders with
shares registered in street name, as determined from the records of
Depository Trust Company.
DIVIDENDS. Dividends on the common stock can be paid lawfully only
out of current and retained earnings and surplus of the Company, when,
as and if declared by the board of directors. The Company has not
declared or paid any dividends on the common stock since inception and
there is no assurance dividends will be paid in the foreseeable future.
The payment of dividends in the future rests within the discretion of
its board of directors and will depend, among other things, upon the
Company's earnings, its capital requirements and its financial
condition, as well as other factors which the board of directors deems
relevant.
TRANSFER AGENT. The Company's transfer agent and stock registrar
is Interstate Transfer Company, 56 West 400 South, Salt Lake City, UT
84101, telephone (801) 531-7860.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES:
The Company's current directors and officers, who took over
management of the Company in February 1997, do not have any specific
information about any unregistered sales of securities which may have
occurred between April 1, 1996 and March 31, 1997. Current management
believes any such sales were limited to only a few persons who were
primarily not U.S. persons and the Company may have purported to rely
upon Regulation S for an exemption from the registration requirements of
Securities Act of 1933, as amended. Current management is not able to
determine whether such reliance was in good faith or otherwise satisfied
the requirements of said regulation.
On September 1, 1997, the Company issued 3,145,004 shares to
directors, officers and certain professional service providers, a total
of 6 persons, at an aggregate value of $ 786,250 . The Company has
relied upon the exemption provided in Section 4(2) of the Securities Act
of 1933, as amended, for an exemption from the registration requirements
of said act.
Beginning in May 1997 through February 1998, the Company sold an
aggregate of 2,033,333 shares, adjusted for stock splits, of its common
stock to a total of five investors for total proceeds of $271,982.50.
The Company believes that these investors were accredited. The Company
has relied upon the exemption provided in Section 4(2) of the Securities
Act of 1933, as amended, for an exemption from the registration
requirements of said act.
Beginning in July 1998 through December 1998, the Company sold an
aggregate of 419,437 shares of its common stock to a total of fifteen
investors for total proceeds of $847,124. The Company believes that
these investors were accredited and seven of them are not U.S. persons.
The Company has relied upon the exemption provided in Rule 504 under the
Securities Act of 1933, as amended, for an exemption from the
registration requirements of said act.
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ITEM 11. DESCRIPTION OF SECURITIES:
PREFERRED STOCK:
The authorized preferred stock of the Company consists of five
million shares of preferred stock, $.001 par value per share. At April
23, 1999, no shares of the preferred stock were issued and outstanding.
COMMON STOCK:
The authorized common stock of the Company (divided into two
classes identified as "Class A Common Stock" and "Common Stock", the
shares of both classes having identical characteristics) consists of
fifty-five million shares, $.001 par value per share. A total of
7,703,861 shares of Common Stock are issued and outstanding at April 23,
1999. None of the five million shares of Class A Common Stock was issued
and outstanding at that date. Holders of the common stock of both
classes (i) have equal and ratable rights with all holders of issued and
outstanding common stock to dividends from funds legally available
therefor, when, as and if declared by the board of directors of the
Company; (ii) are entitled to share ratably with holders of issued and
outstanding common stock in all of the assets of the Company available
for distribution to holders of common stock, upon liquidation,
dissolution or winding up of the affairs of the Company; (iii) do not
have preemptive, subscription or conversion rights; (iv) have no
redemption or sinking fund provisions applicable thereto; (v) have one
vote on election of each director and other matters submitted to a vote
of stockholders; and (vi) do not cumulative voting rights. All shares of
common stock outstanding are duly authorized, legally issued, fully paid
and non-assessable.
COMMON STOCK PURCHASE OPTIONS:
The Company has issued 6 persons common stock purchase options
exercisable to purchase an aggregate of 470,000 shares of common stock
at a price of $2.50 per share. These options are exercisable for a
period of five years from the date of grant, January 22, 1999 . These
options were issued to directors, officers, employees and certain
professional consultants to the Company.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS:
The Company may indemnify directors and officers against damages
which qualify, in the opinion of the disinterested members of the board,
for indemnification under Nevada law and the Company's Bylaws. Insofar
as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
Company pursuant to Nevada law, the Company has been informed that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable. [add more from part II of sb2]
ITEM 13. FINANCIAL STATEMENTS:
Independent Auditor's Report
Balance Sheets
Statements of Operations
Statement of Stockholders' Equity (Deficit)
Statements of Cash Flows
Notes to Financial Statements
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To : The Board of Directors and Stockholders
Internet Cable Corporation
Charleston, South Carolina
We have audited the accompanying balance sheets of Internet Cable
Corporation (a development stage enterprise) as of June 30, 1998 and 1997, and
the related statements of operations, stockholders' equity (deficit) and cash
flows for the years then ended and for the period from February 15, 1995
(inception) to June 30, 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Internet Cable
Corporation (a development stage enterprise) as of June 30, 1998 and 1997, and
the results of its operations and its cash flows for the years then ended and
for the period from February 15, 1995 (inception) to June 30, 1998, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 10, the
Company has experienced development stage losses, and has a negative working
capital and net worth, which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also discussed in Note 10. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Durland & Company
- ----------------------
Durland & Company, CPAs, P.A.
Palm Beach, Florida
January 18, 1999
20
<PAGE>
INTERNET CABLE CORPORATION
(A Development Stage Enterprise)
Balance Sheets
June 30, 1998 and 1997
and March 31, 1999 and 1998 (unaudited)
<TABLE>
<CAPTION>
June 30, March 31,
1998 1997 1999 1998
(unaudited) (unaudited)
----------- -----------
ASSETS
CURRENT ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 1,330 $ 41,580 $ 38,645 $ 6,063
Accounts receivable 0 0 3,439 0
Inventory 0 0 16,354 0
----------- ----------- ----------- -----------
Total Current Assets 1,330 41,580 58,438 6,063
FIXED ASSETS
Furniture and fixtures 52,786 0 76,302 11,585
Less: Accumulated depreciation 5,203 0 14,313 2,786
----------- ----------- ----------- -----------
Total Fixed Assets 47,583 0 61,989 8,799
OTHER ASSETS
Loans and accrued interest 0 30,468 26,424 0
receivable, net of reserve
of $0 (1998) and $90,316 (1997)
Advance rent deposit 2,000 0 2,000 2,000
Franchise rights, 95,833 0 77,083 0
net of amortization
$4,167 -6/30/98
$0 -6/30/97
$18,750 -3/31/99
$0 -3/31/98
Total Other Assets 97,833 30,468 105,507 0
----------- ----------- ----------- -----------
Total Assets $ 146,746 $ 72,048 $ 225,934 $ 16,862
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 88,082 $ 36,449 $ 60,012 $ 0
Accounts payable - related party 4,022 0 1,000 0
Payroll taxes payable 167,850 11,144 106,819 129,259
Accrued payroll tax penalties
and interest 82,698 0 84,997 65,813
Advances and accrued interest
- related parties 102,897 0 0 46,035
----------- ----------- ----------- -----------
Total Current Liabilities 445,549 47,593 252,828 241,107
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.001 par value,
authorized 5,000,000 shares;
none issued and outstanding shares 0 0 0 0
Class A common stock, $0.001 par
value, authorized 5,000,000 shares;
no issued and outstanding shares 0 0 0 0
Common stock, $0.001 par value,
authorized 50,000,000 shares;
issued and outstanding
6,964,424 shares -6/30/98
4,294,057 shares -6/30/97
7,383,861 shares -3/31/99
5,654,424 shares -3/31/98 6,964 4,294 7,384 5,654
Additional paid-in capital 1,828,920 545,896 2,675,624 1,430,229
Stock subscription receivable 0 (109,681) 0 0
Deficit accumulated during
the development stage (2,134,687) (416,054) (2,709,902) (1,660,128)
Total Stockholders' Equity (Deficit) (298,803) 24,455 (26,894) (224,245)
----------- ----------- ----------- -----------
Total Liabilities and
Stockholders'Equity (Deficit) $ 146,746 $ 72,048 $ 225,934 $ 16,862
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Internet Cable Corporation
(A Development Stage Enterprise)
Statements of Operations
Years Ended June 30, 1998 and 1997
and Nine Months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, NINE MONTHS ENDED PERIOD FROM
MARCH 31, INCEPTION
THROUGH
MARCH 31,
REVENUE 1998 1997 1999 1998 1999
(unaudited) (unaudited) (unaudited)
----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Development stage sales and services $ 50,410 $ 0 $ 19,009 $ 48,062 $ 69,419
EXPENSES
Cost of sales 52,887 0 20,248 19,968 73,135
Sales and marketing 0 800 0 0 800
General and administrative 1,593,639 42,119 540,336 1,174,419 2,192,036
Amortization 4,167 0 18,750 0 23,317
Depreciation 5,203 0 9,110 2,968 14,841
Bad debt expense 28,968 90,316 0 28,968 119,284
---------- --------- -------- ----------- ----------
Total expenses 1,684,864 133,235 588,444 1,226,323 2,423,413
Other income (expense)
Interest and dividend income 0 1,402 0 0 2,051
Interest expense (15,925) 0 (5,780) (11,724) (21,705)
Penalty expense (68,254) 0 0 (54,089) (68,254)
Loss on disposal of marketable
equity securities 0 (250,000) 0 0 (250,000)
Loss on disposal of asset 0 0 0 0 (18,000)
Net development stage loss $(1,718,633) $(381,833) $(575,215) $(1,244,074) $(2,709,902)
Net development stage loss per share $ (0.36) $ (2.62) $ (.08) $ (.30) $ (1.74)
Weighted average number of shares
giving effect to forward and
reverse stock splits and
share cancellations 4,762,107 145,783 7,237,476 4,146,685 1,558,621
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Internet Cable Corporation
(A Development Stage Enterprise)
Statements of Cash Flows
Years Ended June 30, 1998 and 1997
and the Period from February 15, 1995 (Inception)
Through June 30, 1998
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
NINE MONTHS ENDED THROUGH
YEAR ENDED JUNE 30 MARCH 31, MARCH 31,
1998 1997 1998 1999 1999
(unaudited) (unaudited) (unaudited)
----------- ----------- ------------- ----------- -----------
CASH FLOWS FROM DEVELOPMENT ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net development stage loss $(1,718,633) $ (381,833) $(1,244,074) $ (575,215) $(2,709,902)
Adjustment to reconcile net loss
to net cash provided by (used for)
development stage activities:
Amortization 4,167 0 0 18,750 23,317
Depreciation 5,203 0 2,768 9,110 14,841
Loss on disposal of marketable
equity securities 0 250,000 0 0 250,000
Stock issued for services 1,142,875 0 789,750 0 1,142,875
Loss on disposal of asset 0 0 0 0 18,000
Changes in operating assets
and liabilities :
Increase in accounts receivable 0 0 0 (3,439) (3,439)
(Increase) in Inventories 0 0 0 (16,354) (16,354)
(Increase) in advance rent deposit (2,000) 0 (2,000) 0 (2,000)
(Increase) in reserve for bad debts 28,968 90,316 30,468 0 119,284
(Decrease) in interest receivable 0 (1,400) 0 0 (1,400)
(Decrease) / Increase in
accounts payable 51,633 36,449 (36,449) (28,070)
(Decrease) / Increase in
accounts payable - related parties 4,022 0 0 (3,022) 1,000
(Decrease) / Increase in
payroll taxes payable 156,706 11,144 118,115 (61,031) 106,819
Increase in payroll tax penalties
and interest 82,698 0 65,813 2,299 84,997
Increase in accrued interest
- related parties 1,482 0 0 0 1,482
Net cash provided by (used by)
development activities (242,879) 4,676 (275,609) (656,972) (970,480)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (52,786) 0 (11,567) (23,516) (76,302)
Payment on related party debt 0 0 0 (102,897) (102,897)
Investment in intangible assets 0 0 0 0 (268,000)
Net cash used by investing
activities (52,786) 0 (11,567) (126,413) (447,199)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of
common stock 152,500 155,319 205,624 847,124 (144,308)
Loans receivable 1,500 (119,384) 0 (26,424) (1,499,217)
Advances - related parties 101,415 0 46,035 0 101,415
Net cash provided by financing
activities 255,415 35,935 251,659 820,700 1,456,324
Net increase (decrease) in cash
and equivalents (40,250) 40,611 (35,517) 37,315 38,645
Cash and equivalents, beginning 41,580 969 41,580 1,330 0
Cash and equivalents, end $ 1,330 $ 41,580 $ 6,063 $ 38,645 $ 38,645
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash $ 0 $ 0 $ 0 $ 0 $ 1,482
Non-cash financing activities:
Stock issued for subscription
receivable (canceled) $ 2,400 $ 102,681 $ 109,681 $ 0 $ 109,681
Stock issued for franchise rights 100,000 0 0 0 $ 100,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
Internet Cable Corporation
(A Development Stage Enterprise)
Statement of Changes in Stockholders' Equity (deficit)
Years Ended June 30, 1998 and 1997 and the
Period from February 15, 1995 (Inception)
Through March 31, 1999
<TABLE>
<CAPTION>
Number of Common Additional Stock Accumulated Total
Shares Stock Paid-in Subscription Deficit Stock-
Capital Receivable Holders'
Equity
------------------------------------------------------------------------------------------
Capital transactions:
<S> <C> <C> <C> <C> <C> <C>
02/15/95 - cash ($0.001/sh.) 4,640,000 4,640 0 0 0 4,640
05/30/95 - cash ($0.017/sh.) 1,000,000 1,000 16,000 0 0 17,000
Net loss 0 0 0 0 (2,692) (2,692)
BALANCE, JUNE 30, 1995 5,640,000 5,640 16,000 0 (2,692) 18,948
Capital transactions:
10/07/95 -subscription
($0.001/sh.) 20,000,000 20,000 (13,000) (7,000) 0 0
10/16/95 -reverse split (23,309,003) 23,309 0 0 0
10/24/95 -cash ($0.02/sh.) 13,000,000 13,000 247,000 0 0 260,000
10/24/95 -cash ($0.001/sh.) 3,550,000 3,550 0 0 0 3,550
10/24/95 -exchange for PCT stock 5,000,000 5,000 620,000 0 0 625,000
10/24/95 -exchange for Prime stock 5,000,000 5,000 6,745,000 0 0 6,750,000
06/30/96 -exchange for license 4,000,000 4,000 7,796,000 0 0 7,800,000
Net loss 0 0 0 0 (31,529) (31,529)
BALANCE, JUNE 30, 1996 32,880,997 32,881 15,434,309 (7,000) (34,221) 15,425,969
Capital transactions:
02/28/97 -PCT stock return (5,000,000) (5,000) (620,000) 0 0 (625,000)
02/28/97 -Prime stock return (5,000,000) (5,000) (6,745,000) 0 0 (6,750,000)
02/28/97 -cancel license (4,000,000) (4,000) (7,796,000) 0 0 (7,800,000)
03/17/97 -reverse split (17,236,947) 17,237 0 0 0
05/02/97 -cash ($0.01/sh.) 1,500,000 1,500 148,500 0 0 150,000
05/30/97 -subscription ($0.01/sh.) 650,000 650 64,350 (59,681) 0 5,319
06/20/97 -subscription ($0.01/sh.) 500,000 500 49,500 (50,000) 0 0
06/30/97 -writeoff subscription 0 0 (7,000) 7,000 0 0
Net loss 0 0 0 0 (381,833) (381,833)
BALANCE, JUNE 30, 1997 4,294,050 4,294 545,896 (416,054) 24,455
Capital transactions:
07/22/97 -subscription ($0.001/sh ) 2,400,000 2,400 0 (2,400) 0 0
07/22/97 -reverse split (3,347,025) (3,347) 3,347 0 0 0
07/22/97 -services ($0.001/sh.) 3,500,000 3,500 0 0 0 3,500
09/12/97 -reverse split (6,162,322) (6,162) 6,162 0 0 0
09/12/97 -cancellation (497,670) (498) 498 0 0 0
09/12/97 -services ($0.25/sh.) 3,145,004 3,145 783,105 0 0 786,250
09/12/97 -cash ($0.38/sh.) 150,000 150 57,350 0 0 57,500
12/19/97 -cash ($1.50/sh.) 33,333 33 49,967 0 0 50,000
12/31/97 -stock split 1,757,804 1,758 (1,758) 0 0 0
01/15/98 -services ($1.06/sh.) 50,000 50 53,075 0 0 53,125
02/13/98 -cash ($0.10/sh.) 350,000 350 34,650 0 0 35,000
03/31/98 -cancellation (18,750) (19) 19 0 0 0
03/31/98 -writeoff subscription 0 0 (112,081) 112,081 0 0
04/09/98 -services ($0.10/sh.) 1,000,000 1,000 99,000 0 0 100,000
04/23/98 -cash ($1.00/sh.) 10,000 10 9,990 0 0 10,000
04/25/98 -services ($1.00/sh.) 200,000 200 199,800 0 0 200,000
04/30/98 -franchise 100,000 100 99,900 0 0 100,000
Net loss 0 0 0 0 (1,718,633) (1,718,633)
BALANCE, JUNE 30, 1998 6,964,424 $ 6,964 $ 1,828,920 $ 0 $ (2,134,687) (298,803)
Capital transactions:
7/21/98 -cash ($2.25 per share) 33,000 33 74,217 0 0 74,250
Net loss 0 0 0 0 (128,779) (128,779)
BALANCE, September 30, 1998 6,997,424 6,997 1,903,137 0 (2,263,466) (353,332)
(unaudited)
Capital transactions:
10/11/98 -cash ($2.00/sh.) 386,437 386 772,448 (109,983) 0 662,891
Net loss 0 0 0 0 (308,022)
(308,022)
BALANCE, December 31, 1998 7,383,861 $ 7,383 $ 2,675,625 (109,983) $ (2,571,488) 1,537
(unaudited)
1/12/99 -subscription received 0 0 0 109,983 0 109,983
Net loss 0 0 0 0 (138,414) (138,414)
BALANCE, March 31, 1999 7,383,861 $ 7,383 $ 2,675,625 $ 0 $ (2,709,902) $ (26,894)
(unaudited)
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Internet Cable Corporation
(A Development Stage Enterprise)
Notes to Financial Statements
(Information with respect to Periods Ended
March 31, 1999 and 1998 is unaudited)
Note 1. Summary of Significant Accounting Policies.
The Company: Internet Cable Corporation is a development stage
enterprise which conducts business from its headquarters in Charleston,
South Carolina. The Company was organized under the laws of the State
of Nevada on February 15, 1995. Internet Cable Corporation is in the
process of entering the market for providing high-speed cable access to
the Internet, to businesses and to individuals. The Company has
concentrated its activities in the State of South Carolina, and
substantially all of its sales and activities have been to one
customer. The financial statements have been prepared in conformity
with generally accepted accounting principles. In preparing the
financial statements, management is required to make assumptions that
effect the reported amounts of assets and liabilities as of the dates
of the balance sheets and statements of operations for the years then
ended. Actual results may differ from these estimates. The financial
statements for the years ended June 30, 1998 and 1997 include all
adjustments which in the opinion of management, are necessary for fair
presentation.
a) Net loss per share. Net loss per share is computed by dividing the
net loss by the weighted average number of shares outstanding during
the period adjusted for forward and reverse stock splits and share
cancellations.
b) Cash equivalents. The Company considers all highly liquid debt
instruments with an original maturity of three months or less to be
cash equivalents.
c) Fixed assets. Fixed assets are recorded at cost. Depreciation is
computed on the straight-line method, based on the estimated useful
lives of the assets, generally five or seven years. Expenditures for
maintenance and repairs are charged to operations as incurred.
Note 2. Income taxes. At June 30, 1998 and 1997, the Company had net
loss carry-forwards for income tax purposes of approximately $2,119,443
consisting of $1,851,443 in net operating losses and $268,000 in net
capital losses, expiring as follows: $2,692 in 2010, $13,529 in 2011,
$131,831 in 2012, and $1,703,389 in 2013 as to net operating loss carry
forwards and $18,000 in 2001, $250,000 in 2002 as to net capital loss
carry forwards. The amount recorded as deferred income tax asset as of
June 30, 1998, $529,860, represents the amount of tax benefits of loss
carry-forwards. The Company has established a $529,860 valuation
allowance, as the Company has no history of profitable operations. The
Company has not filed Federal or State Income Tax returns and may be
subject to statutory penalties.
At March 31, 1999 and 1998, the Company had net loss carry-forwards for
income tax purposes of approximately $2,694,658 consisting of
$2,426,658 in net operating losses and $268,000 in net capital losses,
expiring as follows: $3,267 in 2010, $17,554 in 2011, $172,670 in 2012,
and $2,233,165 in 2013 as to net operating loss carry forwards and
$18,000 in 2001, $250,000 in 2002 as to net capital loss carry
forwards. The amount recorded as deferred income tax asset as of March
31, 1999, $711,624, represents the amount of tax benefits of loss
carry-forwards.
25
<PAGE>
Note 3. Loans and accrued interest receivable. The "fair value of the
collateral" method was used to value an impaired note receivable with
an outstanding principal balance of $117,884 plus accrued interest of
$1,400 at June 30, 1997, because foreclosure was probable. The interest
accrual was halted effective June 30, 1997, when it was determined that
the note was impaired and a reserve for bad debt was established in the
amount of $90,316 at that time. In addition to this note, there was an
unrelated advance of $1,500 which was repaid after fiscal year end. The
impaired note receivable for $117,884 was foreclosed on October 1, 1997
and the collateral was repossessed. The collateral had no value at the
time of the repossession and the balance remaining owed was charged to
bad debt expense.
Note 4. Investment in marketable equity securities. In October 1995 the
Company issued 5,000,000 shares of its common stock in exchange for
5,000,000 shares of Prime International Products, Inc. The two
companies also entered into a licensing agreement for certain prepaid
cellular technology owned by Prime. The Company valued the shares in
the exchange at a discount from Prime's bid price per share,
$6,750,000. In October, 1995, the Company issued 5,000,000 shares of
its common stock and paid $250,000 in cash in exchange for 6,250,000
shares of PCT Prepaid Telephone, Inc., a company controlled by Prime.
The Company valued the transaction at $875,000, which was determined
from the last cash price for which PCT shares were traded plus the cash
exchanged. In February, 1997, the Company returned the 10,000,000
shares in Prime and PCT because it was unable to commercially exploit
the license. The share values originally set forth have been reversed
against common stock and additional paid-in capital and cash paid was
charged as a loss on disposal of marketable equity securities. The
Company treated the return of Prime and PCT shares as having no
economic consequence and thus no gain or loss. The Company treated the
$250,000 in cash expended in the transaction as a complete economic
loss.
Note 5. Intangible assets.
(a) Licensing rights. In June, 1996, the Company issued 4,000,000
shares of its common stock in exchange for the prepaid cellular
telephone rights to certain additional geographic areas. These
additional licensing rights were valued at $7,800,000 based on a
discount to the market value of the Company's stock on that date. The
Company failed to exploit these rights and the rights were canceled.
The Company treated the cancellation of the rights and the forfeiture
of the shares as having no economic value for the same reasons as
described in Note 4 and, therefore, no gain or loss was incurred. The
original transaction was reversed against common stock and additional
paid-in capital at the time the licensing rights were canceled.
(b) Franchise rights. In May 1998, the Company entered into an
agreement with Carolina Communications Network, Inc. in which the
Company has received certain franchise rights to the customer base of
that company for a period of four years, along with other benefits. The
Company is amortizing the agreement cost monthly for four years on a
straight-line basis. The cost of the franchise was the fair market
value of 100,000 shares of the company's common stock at $1.00 per
share, which was the most recent value per share for shares issued by
the company for cash.
26
<PAGE>
Note 6. Advances and accrued interest - related parties. During the
year ended June 30, 1998, the company received advances from two
related parties. A previous director and shareholder advanced $94,000
at 7%, which was subsequently repaid, and the President of the Company
advanced $7,415 at no interest.
During the period ended March 31, 1999, the President of the Company
received advances of $26,400 at no interest.
Note 7. Stockholders' equity. The Company has authorized 50,000,000
shares of $0.001 par value common stock, 5,000,000 shares of $0.001 par
value Class A common stock and 5,000,000 shares of $0.001 par value
preferred stock. On February 15, 1995, the Company issued 4,640,000
shares to the founders in exchange for $4,640 in cash. In May, 1995,
the Company issued 1,000,000 shares of common stock for $17,000 in
cash, net of offering costs. In early October, 1995, the Company issued
20,000,000 shares of common stock in exchange for a subscription
receivable from a shareholder in the amount of $7,000. The Board of
Directors approved a reverse stock split of 1 share for 11, for
stockholders of record October 16, 1995. On October 24, 1995, the
Company issued 13,000,000 shares for $260,000 in cash. The Company then
issued 3,550,000 shares for $3,550 in cash. Also in October, 1995, the
Company issued 5,000,000 shares and $250,000 in cash in exchange for
the shares of PCT Prepaid Telephone, Inc. and the Company issued
5,000,000 shares in exchange for 5,000,000 shares of Prime
International Products, Inc. In June 1996, the Company issued 4,000,000
shares in exchange for prepaid cellular telephone rights. The Company
valued these transactions as described in Notes 3 and 4. The assets
received in these transactions were returned or canceled in fiscal year
ending June 30, 1997.
In March, 1997, the Board of Directors approved a reverse stock split
of 1 share for 20 shares. In May and June 1997, an additional 2,650,000
shares were issued of which 1,096,810 shares were subject to
shareholder stock subscriptions receivable of $109,681. At June 30,
1997, the Company charged a shareholder stock subscription receivable
of $7,000 to additional paid-in capital.
The Board of Directors approved a stock subscription, on July 22, 1997,
of 2,400,000 shares with Internet Marketing, Inc. and a previous
acting, interim officer of the Company. In addition, the Board of
Directors, on this date, approved a reverse stock split of 1 share for
2 shares. The Company issued 3,500,000 shares, on July 22, 1997, to the
President of the Company in exchange for current and future services to
be rendered. The Board of Directors approved a reverse stock split of 1
share for 10 shares on September 12, 1997. The Board of Directors
approved a September 12, 1997 post split cancellation of 497,670
shares. The Board of Directors, on September 12, 1997, issued 3,145,000
shares to consultants, employees and officers of the Company, including
2,000,000 shares to the President, who returned his original 3,500,000
shares to the Company, and 1,000,000 shares to a consultant and acting
Secretary in exchange for services rendered, valued at $0.25 per share,
or $786,250, comparable to a recent cash sale of $0.38 per share and
the quoted bid price per share of $0.17. Stock options issued to these
persons were canceled at this time. Due to fractional shares, the total
issued and outstanding was increased by 4 shares. The Company sold
150,000 shares for $57,500 cash. The Company, on December 19, 1997,
then issued 33,333 shares for $50,000.00 in cash. The Company had a
forward split of 3 shares for 2 shares on December 31, 1997. The Board
of Directors, on January 15, 1998, issued 50,000 shares to various
persons in exchange for services rendered, valued at $1.06 per share,
or $53,125. The Company, on February 13, 1998, then issued 350,000
shares for $35,000 in cash. As described in Note 3, the Company
canceled 18,750 post split shares to PCT Prepaid Telephone on March 30,
1998. In December 1997, the Company authorized options to purchase
800,000 shares of common stock at $.05 per share to consultants and key
employees, which were subsequently canceled. The Board of Directors, on
April 9, 1998, approved 1,000,000 shares for services rendered to a key
Company employee and a member of the Board of Advisors, valued at $0.10
per share, the most recent prior cash price. The Company issued, on
April 23, 1998, 10,000 shares for $10,000.00 in cash. On April 25,
1998, the Company issued 200,000 shares to the President valued at
$1.00 per share. The Company entered into a strategic alliance with
Carolina Communications Network, Inc. on April 30, in exchange for
100,000 shares, valued at $1.00 per share. The Company on July 21, 1998
issued 33,000 shares for $74,250 in cash as part of a 504 Regulation D
offering. In continuation of the 504 Regulation D offering, $386,437
shares were issued at $2.00 per share from October 11 through January
12, 1999.
27
<PAGE>
Note 8. Commitments and contingencies. The company has entered into a
long term lease for its office space. The lease is for three years
commencing December 31, 1997, and ending November 30, 2000. The rent
payment is $2,000 per month plus utility expenses.
Note 9. Litigation - subsequent event. In September, 1997, two
shareholders filed suit against the Company and a number of other
defendants. On November 4, 1998, the Company settled this suit and it
was dismissed, with prejudice.
Note 10. Going concern. The Company incurred development stage losses
of $2,119,443 since inception through June 30, 1998. Current
liabilities exceed current assets by $428,975 and the Company is
delinquent in payment of payroll taxes which may cause it to incur
substantial penalties. At the date of the report, liability insurance
and insurance on fixed assets had not been obtained. Currently, the
Company is dependent on the success of two contracts for services. The
Company is currently operating at a cost of approximately $240,000
annually and has obtained additional investor capital of $847,500
through sales of stock at $2.00 per share since July 1, 1998. The
ability of the Company to continue as a going concern is dependent on
the success of its contracts and on obtaining additional investor
capital and financing sufficient to finance operations, pay payroll
taxes and penalties, and obtain adequate insurance coverage. The
financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
The Company incurred development stage losses of $2,709,902 since
inception through March 31, 1999. At this time, current liabilities
exceed current assets by $194,221. The Company is currently operating
at a cost of approximately $912,000 annually.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE:
Not applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS:
(a) Financial statements filed as part of this registration statement.
1. Balance sheets at June 31, 1998 and 1997 and at March 31, 1999 and
1998.
2. Statement of operations for the years ended June 31, 1998 and 1997
and for the nine month periods ended March 31, 1999 and 1998.
3. Statement of cash flows for years ended June 30, 1998 and 1997 and
the Period from February 15, 1995 (inception) Through June 30, 1998.
4. Statement of changes in stockholder equity for Years Ended June 30,
1998 and 1997 and the Period from February 15, 1995 (inception) Through
March 31, 1999.
5. Notes to financial statements
(b) Exhibits.
3.1 Articles of Incorporation and amendments thereto
3.2 Bylaws, as amended
4.1 Specimen of stock certificate
4.2 Specimen of common stock purchase option
10.1 Agreements with US Cable Coastal-Texas, L.P.
10.2 Cable System Installation Agreement with Intermark Associates V,
LLC
10.3 Agreement with Intermark Management, Inc.
10.4 Agreement with Shangri-La Vacation & Exchange
28
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Internet Cable Corporation
By: /s/ Timothy R. Karnes
------------------------
President and Chief Operating Officer May ___, 1999
/s/ J. Robert Jones
- -------------------- May ___, 1999
J. Robert Jones, Director and Secretary
/s/ Michael L. Jones May ___, 1999
- ----------------------
Michael L. Jones, Director
/s/ Timothy R. Karnes May ___, 1999
- -----------------------
Timothy R. Karnes, Director, President
and Principal Operating Officer
/s/ Lisa B. Safford May ___, 1999
- ----------------------
Lisa B. Safford, Treasurer
and Principal Financial and Accounting Officer
29
ARTICLES OF INCORPORATION
OF
INTERNET CABLE CORPORATION
FORMERLY
FIRENZE, LTD.
FIRST. The name of the corporation is FIRENZE, LTD.
SECOND. Its principal office in the State of UTAH located at 241 NORTH VINE
STREET, SUITE 501 WEST SALT LAKE CITY, UTAH, 84103. The name and address of its
resident agent is MONROE INTERNATIONAL LTD., BANK OF AMERICA PLAZA, 300 4TH
STREET, SUITE 1111., LAS VEGAS, NV 89101.
THIRD. The nature of the business, or objects or purposes proposed to be
transacted, promoted or carried on are: to engage in any lawful activity.
FOURTH. 1. The amount of the total authorized COMMON STOCK of the corporation is
FIFTY Thousand Dollars ($50,000) consisting of FIFTY million (50,000,000) shares
of common stock of the par value of One Thousandth Cent ($0.001) each. 2. The
amount of the total authorized CLASS A COMMON STOCK of the corporation is FIVE
THOUSAND DOLLARS ($5,000.00) CONSISTING OF FIVE million (5,000,000) shares of
CLASS A COMMON STOCK of par value of One Thousand Cent ($0.001) each.
Preferences, rights, qualifications, and other features shall be set forth in a
pursuant to NEVADA CORPORATE LAW. 3. The amount of the total authorized
PREFERRED STOCK of the corporation is FIVE THOUSAND DOLLARS ($5,000.00)
consisting of FIVE MILLION (5,000,000) SHARES of PREFERRED STOCK of the par
value of ONE THOUSAND CENT ($0.001) EACH. Preferences, rights, qualifications,
and other features shall be pursuant to NEVADA
<PAGE>
CORPORATE LAW.
No shareholder of the corporation shall have any preemptive or preferential
right of subscription to any shares of any class of the corporation, whether now
or hereafter authorized, or to any obligations convertible into shares of the
corporation, issued or sold, nor any right of subscription to any thereof other
than such right, if any, and at such price as the Board of Directors, in its
discretion from time to time may determine, pursuant to the authority hereby
conferred by the Articles of Incorporation, and the Board of Directors may issue
shares of the corporation or obligations convertible into shares without
offering such issue either in whole or in part to the shareholders of the
corporation. Should the Board of Directors as to any portion of the shares of
the corporation, whether now or hereafter authorized, or to any obligation
convertible into shares of the corporation, offer the same to the shareholders
or any class thereof, such offer shall not in any way constitute a waiver or
release of the right to the Board of Directors subsequently to dispose of other
portions of such shares or obligations without so offering the same to the
shareholders. The acceptance of shares in the corporation shall be a waiver of
any such preemptive or preferential right which in the absence of this provision
might otherwise be asserted by shareholders of the corporation or any of them.
FIFTH. The governing board of this corporation shall be known as directors, and
the number of directors may from time to time be increased or decreased in such
manner as shall be provided by the by-laws of this corporation, provided that
the number of directors shall not be reduced to less than three (3), except that
in cases where all the shares of the corporation are owned beneficially and of
record by either one or two stock-holders, the number of directors may be less
than three (3) but not less than the number of stockholders. The names and
addresses of the first board of directors, which shall be three (3) in number,
are as follows:
NAME ADDRESS
CHARLES ELLINGTON III 241 NORTH VINE ST. SUITE 603
W.S.L.C., UTAH 84103
B.A. ROTHCHILD 241 NORTH VINE ST. SUITE 406
W.S.L.C., UTAH 84103
E.J. ROTHCHILD 241 NORTH VINE ST. SUITE 501
W.S.L.C., UTAH 84103
2
<PAGE>
SIXTH. The capital stock, after the amount of the subscription price, or par
value, has been paid in shall not be subject to assessment to pay the debts of
the corporation.
SEVENTH. The name and post-office address of each of the incorporators signing
the articles of incorporation are as follows:
CHARLES ELLINGTON III 241 NORTH VINE ST. SUITE 603
W.S.L.C., UTAH 84103
EIGHTH. The corporation is to have perpetual existence.
NINTH. In furtherance, and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized:
Subject to the by-law, if any, adopted by the stock-holders, to make, alter
or amend the by-laws of the corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in, to authorize and cause to be executed mortgages and
liens upon the real and personal property of this corporation.
By resolution passed by a majority of the whole board, to designate one (1)
or more committees, each committee to consist of one (1) Or more of the
directors of the corporation, which, to the extent provided in the
resolution or in the by-laws of the corporation, shall have and may
exercise the powers of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be stated in
the by-laws of the corporation or as may be determined from time to time by
resolution adopted by the Board of Directors.
3
<PAGE>
To enact by-laws, subject to any by-law enacted by the shareholders,
providing for the appointment of an executive committee of the Board of
Directors. The Board of Directors may define the duties of the executive
committee, but if not otherwise defined by the Board of Directors, it shall
have and exercise such of the powers of the Board of Directors, it shall
have and exercise such of the powers of the Board of Directors, during the
period of time between meetings of the Board of Directors, as may be
lawfully delegated.
The directors in their discretion may submit any contract or act for approval or
ratification at any annual meeting of the shareholders or at any meeting of the
shareholders called for the purpose of considering any such act or contract, and
any contract or act that shall be approved or be ratified by the vote of the
holders of a majority corporation represented in person or by proxy at such
meeting (provided that a lawful quorum of shareholders is represented in person
or by proxy) shall be as valid and as binding upon the corporation and upon all
the shareholders, as though it had been approved or ratified by every
shareholder of the corporation, whether or not the contract or act would
otherwise be open to legal attack because of the directors' interest, or for any
other reason.
TENTH. The corporation, by resolution or resolutions of its Board of Directors,
shall have power to create and issue, whether or not in connection with the
issue and sale of any shares or any other securities of the corporation,
warrants, rights, or options entitling the holders thereof to purchase from the
corporation any shares of any class or classes or any other securities of the
corporation, such warrants, rights, or options to be evidenced by or in such
instrument or instruments as shall be approved by the Board of Directors. The
terms upon which, the time or times, which may be limited or unlimited in
duration, at or within which, and the price or prices (not less than the minimum
amount prescribed by law, if any) at which any such warrants, rights, or options
may be issued and any such shares or other securities may be purchased from the
corporation upon the exercise of any such warrant, right, or option shall be
such as shall be fixed and stated in the resolution or resolutions of the Board
4
<PAGE>
of Directors providing for the creation and issue of such warrants, rights, or
options. The Board of Directors is hereby authorized to create and issue any
such warrants, rights, or options from time to time for such consideration, and
to such persons, firms, or corporations, as the Board of Directors may
determine.
ELEVENTH. The corporation shall indemnify any and all persons who may serve or
who have served at any time as directors or officers, or who at the request of
the Board of Directors of the corporation may serve or at any time have served
as directors or officers of another corporation in which the corporation at such
time owned or may own shares of stock or of which is was or may be a creditor,
and their respective heirs, administrators, successors, and assigns, against any
and all expenses, including amounts paid upon judgments, counsel fees, and
amounts paid in settlement (before or after suit is commenced), actually and
necessarily incurred by such persons in connection with the defense or
settlement of any claim, action, suit, or proceeding in which they, or any of
them, are made parties, or a party, or which may be asserted against them or any
of them, by reason of being or having been directors or officers or a director
or officer of the corporation, or of such other corporation, except in relation
to matters as to which any such director or officer or former director or
officer or person shall be adjudged in any action, suit, or proceeding to be
liable for his own negligence or misconduct in the performance of his duty. Such
indemnification shall be in addition to any other rights to which those
indemnified may be entitled under any law, bylaw, agreement, vote of
stockholders, or otherwise.
TWELVE. Meetings of stockholders may be held outside the State of Nevada, if the
by-laws so provide. The books of the corporation may be kept (subject to any
provision contained in the statutes) outside the State of Nevada at such place
or places as may be designated from time to time by the Board of Directors or in
the by-laws of the corporation.
5
<PAGE>
THIRTEENTH. This corporation reserves the right to amend, alter, change or
repeal any provision contained in the articles of incorporation, in prescribed
by statute, or by the articles of incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation law of the State of
Nevada, do make and file these articles of incorporation, hereby declaring and
certifying that the facts herein stated are true, and accordingly have hereunto
set my hand this 13 day of February, 1995.
Charles Ellington, III
STATE OF UTAH )
:VX
COUNTY OF )
On this 13 day of February 1995, before me, a Notary Public, personally
appeared_______________, who severally acknowledged that they executed the above
instrument.
Kirk A. Grant
Notary seal
6
<PAGE>
AMENDMENTS TO THE
ARTICLES OF INCORPORATION
OF
FIRENZE, LTD.
The undersigned acting as the sale director and officer of Firenze, Ltd., and
pursuant to Section 78.320 of the Nevada Revised Statutes, hereby adopts the
following Amendments to the Articles of Incorporation of Firenze, Ltd.
ARTICLE I
There are presently 25,640,000 one mil ($.00l) par value common shares of
the corporation outstanding. Those 25,640,000 common shares are hereby
reverse split one (1) share for eleven (11) shares, without changing the
par value thereof, so that the 25,640,000 one mil ($.00l) par value common
shares of the corporation which are presently outstanding shall hereafter
constitute 2,330,909 one mil ($.00l) par value common shares of the
corporation. Fractional shares shall be disregarded. A copy of the text of
this amendment shall be served upon the transfer agent of the corporation
with instructions to implement the same as to any shares submitted for
transfer after the effective date hereof.
III
MANNER OF ADOPTION
The foregoing amendment to the Articles of Incorporation of the corporation
was adopted by the consent of stockholders of the corporation pursuant to
Section 78.320 of the Nevada Revised Statutes on October 16, 1995. On the
date of said consent, there were 25,640,000 common shares of the
corporation outstanding and entitled to vote on such amendment. The
foregoing amendment was adopted by the written consent of the registered
owners of 20,000,000 such shares.
7
<PAGE>
The number of votes cast in favor of these amendments was sufficient
constitute approval of the amendment by the holders of common shares of the
corporation.
Dated this 16th day of October, 1995.
FIRENZE, LTD.
Christophe Giovarinetti
President and Sole Director
IN WITNESS WHEREOF, I, Christophe Giovanetti, have executed the
foregoing Amendment to the Articles of Incorporation in duplicate this 16th day
of October, 1995 and say:
1. That I am the President and Sole Director of Firenze, Ltd.
2. That I have read the above and foregoing Amendment to the
Articles of Incorporation; know the contents thereof and that the
statements therein contained are true to the best of my knowledge
and belief, excepting as to matters alleged on information and
belief and as to those matters, I believe them to be true.
Christophe Giovannetti
Subscribed and sworn to before me this 18th day of October, 1995.
Leon Lipkin
Notary Public
Notary seal
8
<PAGE>
AMENDMENTS TO THE
ARTICLES OF INCORPORATION
OF
FIRENZE, LTD.
The undersigned, the President and the Secretary of Firenze, Ltd., and
pursuant to Section 78.320 of the Nevada Revised Statutes, hereby adopts the
following Amendments to the Articles of Incorporation of Firenze, Ltd.
And caused same to be filed in the Office of the Secretary of State of Nevada.
ARTICLE I
The name of the corporation shall hereafter be INTERNET CABLE
CORPORATION
II
MANNER OF ADOPTION
The foregoing amendment to the Articles of Incorporation of the
corporation was adopted, upon the recommendation of the Board of Directors, by
the consent of stockholders of the corporation pursuant to Section 78.320 of the
Nevada Revised Statutes on September 1, 1997 and by vote of the Company's Board
of Directors. On the date of said consent, there were 6,847,025 common shares of
the corporation outstanding and entitled to vote on such amendment. The
foregoing amendment was adopted by the written consent of the registered owners
of 3,500,000 such shares. The number of votes cast in favor of this amendment
was sufficient to continued approval of the amendment by the holders of common
shares of the corporation.
9
<PAGE>
Dated this 2nd day of September, 1997.
Firenze, Ltd.
Timothy R. Karnes
President and Director
Mark Gould
Secretary and Director
Before me, the undersigned Notary Public, appeared Timothy Karnes, know
to me to be the President of Firenze, Ltd. Who executed the within Articles of
Amendment on behalf of the Corporation and did not take on oath.
Marten Morgan Baldwin
Notary Public Residing at Charleston, SC
Date 9/2/97
My Commission Expires 3/21/99
10
BY-LAWS
OF
INTERNET CABLE CORPORATION
FORMERLY
FIRENZE, LTD.
ARTICLE I
NAME OF CORPORATION
SECTION 1: The principal office of the corporation will be located at 241 North
Vine Street, Suite 501 West Salt Lake City, Utah 84103. The corporation may
maintain such other offices as the Board of Directors may designate from time to
time.
ARTICLE II
STOCKHOLDERS
SECTION 1: The annual meeting of the stockholders shall be held in December of
each year at a date and time to be specified by the Board of Directors. Said
meeting shall be for the purpose of electing directors for the ensuing year and
for the transaction of such other business as may come before the meeting. If
the election of directors shall not be held on the day designated for the annual
meeting of the shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
stockholders as soon thereafter as possible.
SECTION 2: Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by Statute may be called by the President or by the
Board of Directors and shall be called by the President at the request of the
holders of not less than one-tenth of all the outstanding shares of the
corporation entitled to vote at the meeting.
SECTION 3: The Board of Directors may designate any place within or without the
State of Nevada as the site for any annual or special stockholders meeting. A
waiver of notice singed by all stockholders entitled to vote at a meeting may
designate any place, either within or without the State of Nevada, as the site
for any meeting hereinabove authorized. If no designation is made, the place of
the meeting shall be at the principal office of the corporation in the State of
Nevada.
SECTION 4: Written or printed notice stating the site, date and time of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) days nor more than
sixty (60) days before the date of the meeting, either personally or by mail or
at the direction and over the signature of the President, or the Secretary, or
the officer or person calling the meeting, to each stockholder of record
<PAGE>
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the stockholder
at his address as it appears on the stock transfer books of the corporation with
postage thereon prepaid.
SECTION 5: For the purpose of determining stockholders entitled to notice of or
to vote at any meeting of stockholders, or any adjournment thereof, or
stockholders entitled to receive payment of any dividend or in order to make a
determination of stockholders for any other proper purpose, the Board of
Directors of the corporation may provide that the stock transfer books shall be
closed for a stated period, not to exceed twenty (2) days. In lieu of closing
the stock transfer books, the Board of Directors may fix in advance a date as
the record date for any such determination of stockholders, such date in any
case to be not more than sixty (60) days and, in case of a meeting of
stockholders, not less than fifteen (15) days prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
If the stock transfer books are not closed and no record dates fixed for the
determination of stockholders is to be taken. If the stock transfer books are
not closed and no record dates fixed for the determination of stockholders
entitled to notice of or to vote, or entitled to receive payment of a dividend
the date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of stockholders.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section such determination shall
apply to an adjournment thereof, except where the determination has been made
through the closing of the stock transfer books and the stated period of closing
has expired.
SECTION 6: The officer or agent having charge of the stock transfer books for
share of the corporation shall make, at least ten (10) days before each meeting
of stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order with the
address of, and the number of shares held by, each, which list, for a period of
ten (10) days prior to such meeting, shall be kept on file at the principal
office of the corporation and shall be subject to the inspection of any
stockholder during the meeting.
SECTION 7: A majority of the outstanding shares of the corporation entitled to
vote, represented in person or by proxy, shall constitute a quorum at a meeting
of stockholders. If less than a majority of the outstanding shares are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 8: At all meetings of stockholders, a stockholder may vote by proxy
which shall be executed in writing by the stockholder or by his duly authorized
attorney in fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be filed with
the Secretary of the corporation before or at the time of the meeting.
2
<PAGE>
No proxy shall be filed with the Secretary of the corporation before or at the
time of the meeting. No proxy shall be valid after six (6) months for the date
of its execution, unless otherwise provided in the proxy or coupled with an
interest.
SECTION 9: Each outstanding share otherwise entitled to vote shall be entitled
to one (1) vote upon each matter submitted to a vote at a meeting of
stockholders. A majority vote of those shares present and voting at a duly
organized meeting shall suffice to defeat or enact any proposal unless the
Statutes of the State of Nevada require a greater-than-majority vote, in which
event the higher vote shall be required for the action to constitute the action
of the corporation.
SECTION 10: Shares held by an administrator. executor ,guardian or conservator
may be voted by him, either in person or by proxy, without the transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into his name if authority to do so be contained in
an appropriate order of the Court bv which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such shares
until the shares are transferred into the name of the pledgee, and thereafter
the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the corporation or held bv it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time
SECTION 11: An action required to be taken at a meeting of the stockholders. or
any other action which may be taken at a meeting of the stockholders, may be
taken without a meeting, if a consent in writing, setting forth the action so
taken, shall be signed by a majority of the stockholders entitled to vote with
respect to the subject matter thereof, unless a greater-than-majority vote would
be required at a duly organized meeting, in which even said
greater-than-majority stockholder approval must be obtained,
Such consent shall be field with the Minutes of Proceedings.
SECTION 12: The following order of business shall be observed at all meetings of
the stockholders, so far as practicable:
(a) Calling the roll:
(b) Reading. correcting and approving of minutes of previous meeting;
(c) Reports of officers;
(d) Reports of Committees;
3
<PAGE>
(e) Election of Directors;
(f) Unfinished business;
(g) New business; and
(h) Adjournment.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1: The business and affairs of the corporation shall be managed by its
Board of Directors.
SECTION 2: As provided in the Articles of Incorporation, the Board of Directors
shall consist of three (3) persons. but may be increased by resolution of the
Board of Directors. The directors shall hold office until the next annual
meeting of stockholders and until their successor shall have been elected and
qualified. Directors need not be residents of the State of Nevada or
stockholders of the corporation.
SECTION 3: Directors shall be elected at an annual or special stockholders'
meeting by secret ballot of those stockholders present and entitled to vote, a
plurality of the vote being cast being required to elect. Each stockholder shall
be entitled to one (1) vote for each share of stock owned. If there is but one
(1) nominee for any office it shall be in order to move that the Secretary cast
the elective ballot to elect the nominee.
SECTION 4: A regular meeting of the Board of Directors shall be held without
notice, other than this Bv-Law immediately after, and at the same place as, the
annual meeting of stockholders. The Board of Directors may provide, by
resolution. the day, time and place for the holding of additional regular
meetings without other notice than such resolution. The Secretary of the
corporation shall serve as Secretary for the Board of Directors and shall issue
notices for all meetings as required by the By-Laws; shall keep a record of the
minutes of the proceedings of the meetings of directors; and shall perform such
other duties as may be properly required of him by the Board of Directors.
SECTION 5: Special meetings of the Board of Directors may be called by or at the
request of the President or any director. The person or persons authorized to
call special meetings of the Board of Directors may fix any place, within or
without the State of Nevada, as the place for holding any special meeting of the
Board of Directors called by them.
SECTION 6: Nonce of any special meeting shall be given at least two (2) days
prior thereto by written notice delivered personally or mailed to each director
at his business address, or by telegram. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail so addressed, with
postage prepaid thereon. If notice be given by telegram. such notice shall be
deemed to be delivered when the telegram is delivered to the telegraph company.
4
<PAGE>
Any director may waive notice of any meeting. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business to be transacted at, nor the purpose of, any regular
or special meeting of the Board of Directors need be specified in the notice or
waiver of such meeting.
SECTION 7: A majority of the number of directors fixed according to Section 2 of
this Article IV shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than such majority is present at
a meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice. Once a quorum has been established at a duly
organized meeting, the Board of Directors may continue to transact corporate
business until adjournment, notwithstanding the withdrawal of enough members to
leave less than a quorum.
SECTION 8: The act of the majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors unless the
Statutes of the State of Nevada require a greater-than-majority vote. in which
case, such greater vote shall be required for the act to be that of the Board of
Directors.
SECTION 9: Any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining directors, though less than a
quorum of the Board of Directors. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. Any directorship to
be filled by election at an annual meeting or at a special meeting of the
stockholders called for that purpose.
SECTION 10: By resolution of the Board of Directors, the directors may be paid
their expense. if any, of attendance at each meeting of the Board of Directors,
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
SECTION 11: A director of the corporation who is present at a meeting of the
Board of Directors at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the Secretary of the meeting before the adjournment
thereof or shall express such dissent by written notice sent by registered mail
to the Secretary of the corporation within one (1) day after the adjournment of
the meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
SECTION 12: Any action required to be taken at a meeting of the Board of
Directors, or any other action which may be taken at a meeting of the Board of
Directors, may be taken without a meeting if a written consent thereto is signed
by all the members of the Board. Such written consent shall be filed with the
minutes of proceedings of the Board. Any meeting of the Board of Directors may
be held by conference telephone call, with minutes thereof duly prepared and
entered into the Minute Book.
5
<PAGE>
ARTICLE V
OFFICERS
SECTION 1: The officers of the corporation shall be a President, a
Vice-President, a Secretary, a Treasurer, and a Resident Agent, each of whom
shall be elected by the Board of Directors. Other officers and assistance
officers may be authorized and elected or appointed by the Board of Directors.
Any two (2) or more offices may be held by the same person.
SECTION 2: The officers of the corporation shall be elected annually by the
Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the stockholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
convenient. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified or until his death or until he shall
resign or shall be been removed in the manner hereinafter provided. Each officer
shall serve for a term of one (1) year, or until his successor is chosen and
qualified.
SECTION 3: Any officer or agent elected or appointed by the Board of Directors
may be removed by the Board of Directors whenever in its judgment the best
interests of the corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
SECTION 4: A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by a majority vote of the Board of
Directors for the unexpired portion of the term of such office.
SECTION 5: The President shall preside at all meetings of the directors and the
stockholders and shall have general charge and control over the affairs of the
corporation subject to the Board of Directors. He shall sign or countersign all
certificates, contracts and other instruments of the corporation as authorized
by the Board of Directors and shall perform such other duties as are incident to
his office or are required of him by the Board of Directors.
SECTION 6: The Vice-President shall exercise the functions of the President, in
the President's absence. and shall have such powers and duties as may be
assigned to him from time to time by the Board of Directors.
SECTION 7: The Secretary shall issue notices FOR all meetings as required by the
By-Laws, shall keep a record of the minutes of the proceedings of the meetings
of stockholders and directors, shall have charge of the Seal and of the
corporate books, and shall make such reports and perform such other duties as
are incident to his office, or properly required of him by the Board of
Directors.
6
<PAGE>
SECTION 8: The Treasurer shall have the custody of all monies and securities of
the corporation and shall keep regular books of account. He shall disburse the
funds of the corporation in payment of the just demands against the corporation.
or as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Board of Directors, from time to time as
may be required of him, an account of all his transactions as Treasurer and of
the financial condition of the corporation. He shall perform all duties incident
to this office or which are properly required of him by the Board of Directors.
SECTION 9: The Resident Agent shall be in charge of the corporation's registered
office, upon whom process against the corporation may be served, and shall
perform all duties required of him by statute.
SECTION 10: The salaries of all officers shall be fixed by the Board of
Directors, and may be changed from time to time by a majority vote of the Board
of Directors.
ARTICLE VI
AGREEMENTS AND FINANCES
SECTION 1: The Board of Directors may authorize any officer or officers, agent
or agents, to enter into any contract or execute and deliver any instrument in
the nature of and on behalf of the corporation. and such authority may be
general or confined to specific instances.
SECTION 2: No loans shall be contracted on behalf of the corporation and no
evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the Board of Directors. Such authority may be general or confined
to specific instances.
SECTION 3: All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation shall be
signed by such duly authorized officer or officers, or agent or agents of the
corporation and in such manner as shall from time to time by determined by
resolution of the Board of Directors.
SECTION 4: All funds of the corporation not otherwise employed shall be
deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositories as the Board of Directors may select.
ARTICLE VII
CERTIFICATE OF SHARES
SECTION 1: Certificates representing shares of the corporation shall be in such
form as shall be determined by the Board of Directors. Such certificates shall
be signed by the President and by the Secretary. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and address of
the person to whom the shares represented thereby are issued, with the number of
7
<PAGE>
shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for transfer shall
be cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, a new one
may be issued therefor upon such terms and indemnity to the corporation as the
Board of Directors may prescribe.
SECTION 2: Transfer of shares of the corporation shall be made only on the stock
transfer books of the corporation by the holder of record thereof or by his
legal representative, who shall furnish proper evidence of authority to
transfer, or by his attorney authorized by power of attorney duly executed and
filed with the Secretary of the corporation, and on surrender for cancellation
of the certificate for such shares. The person in whose name shares stand on the
books of the corporation shall be deemed by the corporation to be the owner
thereof for all purposes, unless otherwise notified by such person in writing.
ARTICLE VIII
FISCAL YEAR
SECTION 1: The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors.
ARTICLE IX
SEAL
SECTION 1: The corporation may or may not have a corporate seal, as may from
time to time by determined by resolution of the Board of Directors. If a
corporate seal is adopted, it shall have inscribed thereon the name of the
corporation and the words "Corporate Seal" and "Nevada." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.
ARTICLE X
AMENDMENTS
SECTION 1: Those By-Laws may be amended by a majority vote of all the stock
issued and outstanding and entitled to vote at any annual or special meeting of
the stockholders, provided notice of intention to amend shall have been
contained in the notice of the meeting.
SECTION 2: The Board of Directors, by a majority vote of the entire Board at any
meeting, may amend these By-Laws, including By-Laws adopted by the stockholders.
8
<PAGE>
ARTICLE XI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1: Every person who was or is a party to, or is threatened to be made a
part to, or is involved in any action, suite or proceedings, whether civil,
criminal, administrative or investigative, by reason of the fact that he or a
person or whom he is the legal representative is or was a director or officer of
the corporation or is or was serving at the request of the corporation as a
director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless to the fullest extent legally permissible under the laws of the
State of Nevada from time to time against all expenses, liability and loss,
including attorneys' fees, judgments, fines and amounts paid or to be paid in
settlement. reasonably incurred or suffered by him in connection therewith,
pursuant to NRS 78.151. Such right of indemnification shall be a contract right
which may be enforced in any manner desired by such person.
This indemnification is intended to provide at all times the fullest
indemnification permitted by the laws of the State of Nevada and the corporation
may purchase and maintain insurance on behalf of any person who is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer of another corporation, or as its
representative in a partnership. joint venture, trust or other enterprise
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the corporation would
have the power to indemnify such person.
CERTIFICATE OF SECRETARY
I hereby certify that I am the Secretary of Firenze, Ltd., and that the
foregoing By-Laws were adopted as the laws of the corporation by the Board of
Directors of the corporation on this 10 day of February, 1995.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 10 day of
February, 1995.
------------------------
9
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
CUSIP NO.
NUMBER SHARES
INTERNET CABLE CORPORATION
AUTHORIZED COMMON STOCK: 50,000,000 SHARES
PAR VALUE: $.001
THIS CERTIFIES THAT
IS THIS RECORD HOLDER OF
Shares of INTERNET CABLE CORPORATION Common Stock transferable on the
books of the Corporation in person by duly authorized attorney upon surrender of
this Certificate properly endorsed. This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
____________________________ ___________________________
SECRETARY PRESIDENT
NOT VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT
Countersigned:
INTERSTATE TRANSFER COMPANY
874 East 5900 South, Suite 101
Salt Lake City, Utah 84107
(801) 281-9746 Fax (801) 281-9750
By:______________________________
AMENDED STOCK OPTION CERTIFICATE
THIS STOCK OPTION IS GRANTED BY
INTERNET CABLE CORPORATION
TO:
CERTIFICATE NO. _____ SHARES: ________
NAME _____________________
Address:_____________________
in accordance with and pursuant to the terms of the 19___ Stock Option Plan (the
"Plan") of ________________, a _________ corporation (the "Company").
The terms of the Plan are incorporated by references and shall be
considered to be a part of this Stock Option Certificate. A copy of the Plan is
attached hereto.
The terms of the Stock Option granted to you include the following:
1. On ________, 199_, the Board of Directors of the Company granted to
the Optionee an Option (the "Option") to purchase all or any part of an
aggregate of ________ (the "Shares") of the Common Stock, no par value (the
"Common Stock"), of the Company, at the price of $____ per share ("Exercise
Price"), subject to adjustment in accordance with the terms and conditions set
forth in the Plan.
2. This Option shall expire at 5:00 p.m., _________ time, on ______,
200_, subject to earlier termination as provided in the Plan.
Should your affiliation with the Company terminate for any reason,
voluntary or involuntary, for cause or otherwise, or due to death, retirement or
disability, the exercisability of the option and the extent of the availability
of the Shares shall be governed by Sections _______ of the Plan. Note that you
may not exercise the Stock Option which you have more than _____ (_) months
after you cease being employed by the Company; except if the termination is due
to death, permanent disability or retirement at or after age 65 which allows for
exercisability for ____ (_) year from such termination; provided termination for
cause results in this Option becoming immediately null and void.
Upon the occurrence of any Change in Control as defined in Section ____
of the Plan, the Option shall become fully exercisable notwithstanding the
limitations of exercise in paragraph 3, and the Company or surviving entity
shall redeem the Option for cash in an amount as delineated in Section of the
Plan; provided, you have the right to keep the Option by written notification to
the Company, Acquiring Person or Successor, as the case may be, within ____ (_)
<PAGE>
days of the redemption notification as provided in Section __ of the Plan. If
you elect to keep the Option, it shall continue in effect, even if your
affiliation with the Company ceases by virtue of such Change in Control.
3. This Option may be exercised by giving written notice to the Company
in the form attached hereto as Exhibit A stating the number of Shares to be
purchased and by concurrently tendering payment by check equal to the Exercise
Price for the Shares being purchased upon such exercise. Upon exercise and
payment, the certificate for the purchased Shares shall be issued as soon as
possible as fully-paid and non-assessable Shares.
The Exercise Price may also be paid (a) by delivering Shares having a
Fair Market Value equal as of the date of the exercise to the cash Exercise
Price of the Option, or (b) with a twenty (20%) percent down payment in cash or
Shares and the Optionee's personal recourse note in the principal amount equal
to the difference between the aggregate Exercise Price and the down payment,
payable in three years, bearing interest payable not less than annually at the
lower of (i) the commercial lending rates or (ii) the prescribed rate as
published by Revenue Canada and secured by collateral having a value equal to
the principal amount of the note; or (c) by delivery of an assignment to the
Company of a sufficient amount of the proceeds from the sale of the Shares
acquired upon exercise of the Option equal to the Exercise Price and with an
authorization to the broker or selling agent for the Optionee to pay that amount
to the Company, which sale shall be at the Optionee's discretion at the time of
exercise.
Subject to the limitation of exercise as provided in this Certificate,
the Optionee may exercise the Option any number of times for any number of
Shares granted in the Option. The Optionee may not exercise the Option granted
for a period of ___(_) months from the date of grant. Subsequent to the first
___ (_) month anniversary date of the grant of the Option, the Optionees may
exercise the Option to the extent of twenty-five (25%) percent thereof, and an
additional twenty-five (25%) percent every six (6) month anniversary date
thereafter, with the full amount being exercisable on or after ______, 199_.
4. This Certificate and the Options granted herein are not transferable
by the Optionee otherwise than by will or the laws of descent and distribution,
and the Shares issuable upon exercise of the Option are not transferable until
____ years from the date of exercise and then only in accordance with the United
States federal and state laws and regulations; and shall be exercised only by
the Optionee, subject to certain rights of the Optionee's legal representative,
as provided in the Plan.
The Optionee acknowledges that he has no contractual right to require
the registration of the Option or the Shares; and the Optionee understands that
the Shares issued upon exercise of the Option shall have a legend on the face
thereof indicating the restrictions on transfer; and that such Shares and the
Option shall have stop transfer instructions issued against the same.
2
<PAGE>
At the time of any exercise of the within Option, the Optionee shall
represent to and agree with the Company in writing that he is acquiring the
Shares in respect of which the Option is being exercised for the purpose of
investment and not with a view to distribution.
The Company shall not be obligated to take any other affirmative action
in order to cause or facilitate the exercise of the Option or the issuance of
Shares pursuant thereto to comply with any Canadian or United States federal,
state or local law, rule or regulation.
Any transfer in violation of this Section may cause termination of the
Option.
5. This Option shall be subject to exercise as provided herein and as
provided by the terms of the Plan and shall, in accordance with such terms, be
binding upon the Company and the Optionee.
6. This Certificate shall be governed by and construed in accordance
with the laws of the Province of Ontario, Canada.
IN WITNESS WHEREOF, _______________ has hereunto set its hand as of the
_____ day of _____________, 199_.
----------------------------------
By:_________________________________
Name:
Title:
3
<PAGE>
EXHIBIT A
EXERCISE LETTER
---------------
___________, 199__
- -------------------
- -------------------
- -------------------
Gentlemen:
1. Pursuant to the terms of the Stock Option Certificate dated
____________, 199_ (the "Option") of ___________________, a __________
corporation (the "Company"), the undersigned elects to exercise the Option to
the extent of purchasing _________ shares of (the "Options Shares") of Common
Stock, ____ par value (the "Common Stock"), of the Company (giving effect to all
adjustments since the date of the Option) and hereby tenders $_________ in
payment of the exercise price by delivery of a check payable to the order of the
Company.
2. The Option Shares purchased hereby should be registered as follows:
______________________________________ (Name)
______________________________________ (Street)
______________________________________ (City, State)
______________________________________ (Social Security No.)
3. The undersigned acknowledges that the Option Shares purchased hereby
may be subject to, and the certificates representing such Option Shares may be
legended to reflect certain resale restrictions under the United States
Securities Act of 1933, as amended, and agrees to comply with all such
restrictions and to execute such documents or take such other actions as the
Company may require in connection with such restrictions. In particular, the
Option Shares shall be restricted
<PAGE>
from public sale or other public transfer for two years from the date of
exercise unless registered, with Optionee acknowledging there are no contractual
registration rights relating to the Option Shares.
Very truly yours,
- --------------------------------- -----------------------------------
Signature
- -------------------------------- -----------------------------------
Print Name
- --------------------------------
Address
STATE OF SOUTH CAROLINA )
) AGREEMENT
COUNTY OF CHARLESTON )
This Agreement dated as of this 21st day of November, 1997 by and
between Internet Cable Corporation, a Nevada corporation, having its principal
place of business at 263 King Street, Suite B, Charleston, South Carolina
(hereinafter referred to as "ICBL") and US Cable of Coastal-Texas, LP d/b/a US
Cable Coastal Properties headquartered at Montvale Plaza, 28 W. Grand Avenue,
Montvale, New Jersey and doing business at 3157 Maybank Highway, John's Island,
South Carolina (hereinafter referred to as "Cable").
WITNESSETH:
-----------
WHEREAS, ICBL is in the business of providing certain high speed cable
modem Internet-related services,
WHEREAS, Cable is in the business of providing cable-TV related
service,
WHEREAS, ICBL and Cable desire to enter into certain agreements
relating to the delivery of Internet-related data services to Cable's customers
using Cable's currently installed cable-TV wire system at Wild Dunes Resort,
Wild Dunes, South Carolina. Additional sites may be added under "Attachment C",
subject to further negotiations.
WHEREAS, ICBL and Cable desire to set forth certain terms, agreements
and conditions regarding their relationship as set forth below,
1
<PAGE>
1. TERM: The term of this Agreement shall be for one (1) year, with
said term commencing on this 21st day of November, 1997 and ending at midnight
on the 20th day of November, 1998, unless previously terminated as described
below, or extended by mutual written agreement. Termination, by Cable or ICBL,
shall be by written notice and given at least 90 days prior to the expiration of
the term. At the conclusion of this term, ICBL and Cable will conduct a
mandatory evaluation of this joint venture.
2. OBLIGATIONS: ICBL agrees to use its technical expertise and
knowledge to integrate/deploy hardware equipment for a limited delivery of
Internet Access through Cable's cable-TV lines. Area and subscribers for the
deployment will be selected jointly. ICBL agrees that it will maintain adequate
network capacity/bandwidth using generally accepted industry practices and
standards.
3. EQUIPMENT: Cable shall purchase from ICBL, at ICBL's cost which may
include volume discounts, all headend equipment and cable modems necessary to
provide data over cable. Such equipment shall remain the property of Cable. See
"Attachment A." It is the intent of both parties that "Attachment A" shall be
representative of equipment suitable for the purposes anticipated under this
agreement. However, "Attachment A" does not create a binding requirement to
utilize a specific vendor or equipment. ICBL shall provide and maintain
bandwidth, Internet Access, IP Addresses, routing, cache and content servers as
necessary.
4. HELPDESK: ICBL will furnish all hardware and personnel as needed by
the Helpdesk. Helpdesk will be manned as necessary to provide superior service
in accordance with industry standards. Helpdesk Hours: Standard business hours
(8am-5pm Eastern Standard Time),with technicians on call 24 hours a day, 7 days
a week. Additional full-time staff hours will be added as the subscriber base
warrants.
2
<PAGE>
5. REVENUE SHARING: Collected gross revenues including the fair market
value of any barter transactions derived from the data services, as pertaining
to the individual cable systems (including, but not limited to, derivative
revenues from server, advertising, video conferencing, server co-location and
any other new technologies developed in the future) shall be shared equally.
Subscriber billing will be the responsibility of Cable with monthly figures
provided to ICBL. Cable will honor ICBL's invoices within industry standards of
Net 30 terms. ICBL will make available to Cable all records, receipts and
reports necessary to accurately disclose revenue generated.
6. CUSTOMER RATES: ICBL and Cable agree to the following proposed
customer user rates and installation charges in Attachment "B", with any
changes being mutually agreed upon in writing.
7. INSTALLATION: ICBL will provide personnel necessary to complete
installations into end-user computers. These technicians will be trained by ICBL
and be bound by acceptable employee policies and procedures agreed upon by ICBL
and Cable.
A. Headend: ICBL will be responsible for all headend set-up and
computer integration to enable data over the cable system. There will be no
set-up charges to Cable.
B. End-User: ICBL will be responsible for installation and
configuration of the end user's computer to receive data over the cable system.
The parties agree to develop an end-user agreement acceptable to both parties.
Said end-user agreement will not be modified without consent of both parties.
3
<PAGE>
8. OWNERSHIP: Each party hereto agrees that the ownership of any
property, whether personal or real, tangible or intangible, shall remain with
the party who owned the property immediately prior to the date of this
Agreement, and each party agrees that it shall not make any claim whatsoever
against any such property of the other.
9. MAINTENANCE: Each party hereto agrees that it will maintain in a
good state of repair its property which is being used pursuant to this
Agreement.
10. INSURANCE: Each party hereto agrees to obtain and maintain at all
times during the term hereof appropriate insurance against any loss or liability
for damages or injury to person or property due to any actions or inaction's of
such party relating to the transactions contemplated in this Agreement. Such
insurance policies shall be for a minimal amount of $1,000,000.00.
11. INDEMNITY: In the event Cable is made or becomes party to any suit,
claim or demand by reason of this agreement or an act or omission of ICBL in the
performance of this agreement, ICBL agrees to indemnify and hold Cable harmless
from and against any and all damages, expenses, claims, fines, penalties or loss
including reasonable attorney's fees, incurred by or imposed on Cable in
connection with any such suit, claim or demand. In the event ICBL is made or
becomes party to any suit, claim or demand by any wrongful or negligent act or
omission by Cable, Cable agrees to indemnify and hold ICBL harmless from and
against any and all damages, expenses, claims fines penalties or losses,
including reasonable attorney's fees, incurred by or imposed on ICBL in
connection with any suit, claim, or demand. In no event shall Cable be liable to
ICBL for any loss, of profit, loss of business, loss of use or data,
interruption of business, or for indirect, special, incidental or consequential
damages of any kind.
4
<PAGE>
ICBL and Cable will comply with all applicable laws, rules and
regulations, now existing or as subsequently amended, relating to Internet
access and related services and all other actions Cable takes pursuant to this
agreement.
12. DEFAULT: The occurrence of any one or more of the following events
shall at the option of a party constitute a material breach of this Agreement by
the other party:
A. The failure of the other party to make any payment required to be
made by the other party hereunder, as and when due;
B. The failure of the other party to observe or perform any of the
covenants, conditions or obligations of the other party under this Agreement
where such failure shall continue for a period of ten (10) days following
written notice thereof from the party to the other party, provided, however,
that if the nature of the other party's default is such that more than ten (10)
days may be reasonable required for such cure, then the other party shall not be
deemed to be in default if it commences such cure within the said ten (10) day
period and thereafter diligently pursues such cure to completion;
C. The making of any general arrangement or any assignment by the other
party for the benefit of creditors, or any other reason.
D. The filing by or against the other party of a petition to have said
party adjudged a bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless in the case of a petition filed against
said party it is dismissed or stayed within ninety (90) days;
E. The appointment of a trustee or receiver to take a possession of
substantially all of said party's assets;
5
<PAGE>
F. The attachment, execution or other judicial seizure of substantially
of said party's assets; or
G. The dissolution of said party which is not reversed within ninety
(90) days.
13. IN THE EVENT OF DEFAULT: In the event of default by one party
hereunder, the non-defaulting party, following any appropriate cure period, may
declare this Agreement to be terminated, in which event, each party's rights and
duties under this Agreement shall terminate without prejudice to the
non-defaulting party's right to receive damages for breach of this in equity
which said non-defaulting party may have. The defaulting party shall be liable
for all its costs and expenses, including reasonable attorney's fees, incurred
by the non-defaulting party in connection with any such default.
14. ACCESS: With respect to the transactions contemplated herein, each
party agrees to grant to the other party reasonable access throughout the term
of this Agreement and for one (1) year thereafter, to all of the properties,
books, contracts, records, etc. of the other party required for each party to
meet its obligations hereunder. Each party agrees to treat as confidential and
will not use or provide to others, during the term or following the termination
of this Agreement, information disclosed to it or to its counsel, accountants,
engineers or other representatives if said information is not publicly
available. Each party agrees not to dispose of any relevant books, contracts,
documents or other records relating to the transactions contemplated in this
Agreement for a period of one (1) year from the termination date of this
Agreement without first offering to deliver such records to the other party.
15. TERMINATION: This Agreement shall be terminated upon the occurrence
of one of the following:
6
<PAGE>
A. The expiration of the term described above;
B. At the option of the non-defaulting party, following a default by
the other party which is not cured within any applicable cure period; or
C. Upon the written agreement of each party hereto.
D. ICBL may terminate this agreement with no obligation to Cable at any
time if: (1) Cable fails to comply with any of the provisions of this agreement.
(2) Cable fails to meet the uptime or repair within a reasonable period of time,
(3) In the event of a major change to cable's system, ICBL determines that
Cable's system cannot be made compatible with ICBL's requirements within 48
hours of such a change.
E. Cable may terminate this agreement if ICBL's conduct, business
practices or equipment interferes with Cable's reception or core business. ICBL
will have 10 days to cure the problem. If the problem has not been cured within
10 days, then Cable has the option to terminate this agreement and neither party
shall have any claims against the other. If ICBL experiences capacity or any
other difficulties where it cannot meet acceptable network performance standards
or otherwise provide the services specified in this agreement, Cable will be
able to terminate the agreement without liability.
16. SURVIVAL: The respective representations, warranties covenants,
guaranties and indemnification's of each party hereto shall not terminate at,
but shall survive, the termination of this Agreement.
17. PARAGRAPH HEADINGS: The paragraph heading contained in the
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
18. NOTICES: Cable agrees to give written notice to ICBL immediately
upon receiving any order or request from a court, administrative or
investigative agency
7
<PAGE>
or other governmental body for information about or access affecting or having
the probability of affecting any ICBL subscriber or ICBL subscriber account (an
"Order"), and to give ICBL a reasonable opportunity to respond to Cable before
Cable responds to any such Order.
A. to the extent consistent with applicable laws, rules and
regulations, not to place ICBL in violation of its Service Use and End User
Licensed Agreements, and
B. to maintain full compliance with all laws, rules and regulations
applicable to the Order. Cable further agrees to furnish ICBL immediately with
copies of all correspondence to or from the requesting authority in relation to
such Order.
All notices, demands or other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered, or mailed first class
postage prepaid addressed, as follows:
A. If to ICBL:
INTERNET CABLE CORPORATION
263 KING STREET, SUITE B
CHARLESTON, SC 29401
C. If to Cable:
US CABLE COASTAL PROPERTIES US CABLE CORPORATION
ATTN: REGIONAL MANAGER ATTN: G. JOSEPH APPIO
3157 MAYBANK HIGHWAY MONTVALE PLAZA, 28 W. GRAND AVE.
JOHN'S ISLAND, SC 29455 MONTVALE, NJ 07645
or a party may hereafter designate such other address as for such purpose.
8
<PAGE>
19. MISCELLANEOUS:
A. ICBL and Cable are independent Contractors, and nothing this
agreement is to be interpreted to make their party an agent, partner,
representative or employee of the other. Neither ICBL nor Cable may assign this
agreement without the prior written consent of the other, except that ICBL may
assign this agreement, upon notice to Cable to any affiliate of ICBL.
B. PUBLICITY PRESS RELEASES AND MARKETING MATERIAL: All promotional
material including, but not limited to publicity press releases, name branding
and marketing material shall be approved by both ICBL and Cable in advance.
20. 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.
21. LAW TO GOVERN: This Agreement shall be construed and enforced in
accordance with the laws of the State of South Carolina and any dispute shall be
heard in a court of competent jurisdiction in Charleston County, South Carolina.
22. ENTIRE AGREEMENT; WAIVER: This Agreement constitutes the entire
agreement between the parties and supersedes prior negotiations, understanding
and agreements concerning the subject matter hereof. No modification or waiver
hereof shall be binding upon any party unless in writing and signed by or on
behalf of the party against which the modification or waiver is asserted.
23. EXPENSES AND TAXES: Each party hereto shall pay its own expenses
incident to this Agreement and the transactions contemplated herein, including
all legal and accounting fees and disbursements.
9
<PAGE>
24. ASSIGNMENT; PARTIES IN INTEREST: This Agreement shall inure to the
benefit of and be binding upon the parties named herein and their respective
successors and assigns, and any assignment of this Agreement or the right
hereunder by any party hereto without the written consent of the other party
shall be void.
25. RULE OF CONSTRUCTION: This Agreement has been negotiated between
the parties with assistance of legal counsel and no provision hereof shall be
construed against a party based on the identity of the party which prepared the
provision.
26. TIME: ICBL and Cable agree that time is of the essence in the
performance of this Agreement.
27. ADDITIONAL SITES: Additional sites may be added to and covered
under this Agreement without modifying the Agreement itself by modifying
"Attachment C." Additions are not considered part of this Agreement until both
ICBL and Cable have signed the modification to Attachment C.
28. CABLE CUSTOMER LIST: ICBL will have access to Cable's customer
list for the business purposes described herein. ICBL may not in any way use,
reproduce or distribute this customer list or any customer information to any
party outside of ICBL and may only use such information to facilitate this
agreement. ICBL may not utilize this customer list for any purpose other than
internal operations.
29. AMENDMENTS FOR TECHNICAL ADVANCEMENTS: Due to changing technical
environment which this business is based on, Amendments to this Agreement may be
made to accommodate new advances in technology. Amendments are not considered
part of this Agreement until both ICBL and Cable have signed the Amendment.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
US CABLE OF COASTAL-TEXAS, LP INTERNET CABLE CORPORATION
________________________ By: _____________________
G. Joseph Appio Timothy R. Karnes
- ------------------------ ---------------------
Vice President President
- ------------------------ ---------------------
Date Date
Attachment B
MONTHLY CHARGES
A: Residential - $ 44.95 per month, which will include access for one
computer/one IP address.
(1) Residential subscription rates will only be available in structures
zoned for residential occupancy.
(2) Residential connections are not intended to be used as dedicated
server connection.
(3) Both parties agree to adjust residential rates to meet the
competitor's and/or market demand.
B: Small business- $250.00 per month, with $25.00 per IP and with a
maximum of 5 users/IP addresses.
(1) If located in a structure zoned for commercial occupancy, the
account will be classified as, at least, a small business.
(4) Further classification of this category will limited to those
companies with less than $750,000 annual sales.
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C. Commercial - (greater than $750,000 in annual sales) $500.00 per
month, with $25.00 per IP up to 100 users/IP addresses (flat rate of
$2,500.00 per month thereafter).
INSTALLATION FEE
INSTALLATION FEE WILL BE MUTUALLY AGREED UPON TO COVER FOR COST AND
REASONABLE LABOR RATES.
- --------------------------- --------------------------- --------------
ICBL Signature Title Date
- -------------------------- ---------------------------- --------------
US Cable of Coastal-Texas, LP Title Date
Attachment C
Following are locations that are to be covered under the contract between
Internet Cable Corporation and US Cable signed November 21, 1997. The locations
listed below which have been signed by ICBL and US Cable are considered part of
the Agreement.
- --------------------------------
- --------------------------------
New Location
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Includes (the following service areas):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Additional Information:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Additional Terms and Conditions:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------- -------------------------- -------------
ICBL Signature Title Date
- ------------------------- -------------------------- -------------
US Cable of Coastal-Texas, LP Title Date
13
CABLE SYSTEM INSTALLATION AGREEMENT
- -----------------------------------
This Agreement is made as of February __, 1999 between Internet Cable
Corporation ("ICBL") located at 263 King Street, 2nd Floor, Charleston, SC 29401
and Intermark Associates V, LLC, a South Carolina limited liability company
("Intermark Associates V") with its principal address at Intermark Building,
3830 Forest Drive, Suite 202, Columbia, SC 29204.
WITNESSETH
WHEREAS, ICBL is engaged in the television and Internet cable business,
and develops and installs cable television systems;
WHEREAS, Intermark Associates V owns the property upon which the
apartment complex to be known as Keswick Apartments located at _______________
is to be constructed ("Facility");
WHEREAS, Intermark Associates V desires to retain ICBL to install and
operate a cable system and Internet system at the Facility and ICBL desires to
perform such services.
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties agree as follows:
1. Installation of Cable System/Maintenance
a. ICBL shall install, at its sole cost and expense, a fully
operational cable television system ("System") at the Facility. The System shall
be, when installed and during the entire term hereof, in accordance with
recognized industry standards and standards reasonably acceptable to Intermark
Associates V For purposes hereof, "recognized industry standards" means cable
television systems available to the public at large in the Georgia, South
Carolina, North Carolina region.
b. The System, when installed and operational, shall provide customers
with the ability to receive at least 40 television channels, including premium,
pay for view and basic cable stations. Customers shall be allowed to choose at
least two levels of service, including a "basic" level and "premium" level. The
System shall also provide for Internet access.
c. ICBL shall complete the installation of the cable system in a timely
manner, which shall be no later than two (2) weeks after the "certificate of
occupancy" (CO) for each building at the Facility has been issued. Installation
to begin after finish grade and sprinkle system are in place. ICBL shall not be
held responsible for weather, acts of god, or delay caused by the general
contractor.
d. ICBL shall install the System during the hours of 8 am to 5 p.m.
Monday through Saturday. The parties hereby agree to review the hours of
installation periodically to determine whether such hours shall be expanded.
e. ICBL shall maintain the System in good working order during the term
of this Agreement. In order to provide such maintenance, ICBL shall maintain a
service department and provide customers with a local telephone number to obtain
such service. The service department shall be open 24 hours every day to receive
complaints and requests from customers. ICBL shall use its best efforts to
provide repairs and service to customers within 24 hours of the request,
excluding Sundays. ICBL shall maintain a system of record keeping for the
recording of all customer calls to the service department and all installation,
repair and service visits to each residence in the Facility. Intermark
Associates V shall have the right to review such records at least once per
quarter during the term of this Agreement.
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f. Intermark Associates V shall provide and ICBL shall maintain a
suitable facility for the head-end equipment.
2. Compensation
a. ICBL shall bill all customers directly for the cable service
provided to each such customer, and shall be allowed to charge any fee for cable
television service and other services (including service repair and installation
fees) as is in accordance with applicable laws, and competitive with Time Warner
Cable or its successors. ICBL shall also be entitled to charge security deposits
and other fees (competitive with Time Warner Cable or its successors) as allowed
by applicable law.
b. ICBL shall pay Intermark Associates V a fee of 10% of all net
revenue generated by the cable television service at the Facility. Net revenue
shall mean the amount of the gross billings per month to customers, less (i)
amounts not collected from customers due to a failure to pay by the customer and
(ii) the direct cost to ICBL from its cable television suppliers for cable
service. ICBL shall pay any amounts due herein one month in arrears.
c. ICBL shall provide Internet access to customers at the Facility
through the System and Intermark Associates V shall receive 10% of the gross
revenues of such service. Gross revenues means the amount of the gross billings
to customers, less any amounts not collected due to failure to pay by the
customer. ICBL shall pay any amounts due hereunder one month in arrears.
3. Term.
(a) This Agreement shall have a term of 15 years commencing on the
date hereof and terminating on ________. ICBL, or Intermark
Associates V shall have the option to extend this Agreement
month to month exercisable by delivery of written notice by
either party at least 120 days prior to the end of the term.
Should there be a need to upgrade the system, ICBL and
Intermark V shall review this agreement in good faith and
negotiate the terms of any such upgrades.
(b) This Agreement may be terminated as follows:
(i) by ICBL upon 60 days notice in the event that Intermark Associates
V fails to provide reasonable access to ICBL to the Facility at any time;
(ii) by ICBL upon 60 days notice in the event that Intermark Associates
V allows a competitor of ICBL to provide cable television service to the
Facility, other than as may be required by applicable laws;
(iii) by Intermark Associates V upon 90 days notice in the event that
ICBL fails to provide the services required hereunder following written notice
delivered by Intermark Associates V to ICBL of such failure and ICBL fails to
cure such failure within 30 days.
In the event that this Agreement is terminated pursuant to clause (iii)
above, then Intermark Associates V shall pay to ICBL a fee equal to the fair
market value of the System. "Fair market value" shall be determined in good
faith by the parties at the time of termination, or in the event that the
parties fail to agree within 60 days of the termination date, then by an
independent third party with knowledge of the cable television business retained
by the parties.
4. Proprietary Rights In System. The parties hereby agree that the System, all
hardware, software and "know how" and other intellectual property related to the
System and any Internet access systems are the sole property of ICBL. Nothing
contained in this Agreement shall be construed as a transfer of any such
property rights by ICBL to Intermark Associates V.
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5. Compliance with Laws. ICBL shall ensure that the System shall comply in all
material respects with all federal, state and local laws and regulations at all
times during the term of this Agreement.
6. Miscellaneous
a. Notices. Any notice under this Agreement shall be in writing and
shall be effective when actually delivered in person or three days after being
deposited in the U.S. mail, registered or certified, postage prepaid and
addressed to the party at the address stated in this Agreement or such other
address as either party may designate by written notice to the other.
b. Waiver. Failure of either party at any time to require performance
of any provision of this Agreement shall not limit the party's right to enforce
the provision, nor shall any waiver of any breach of any provision be a waiver
of any succeeding breach of any provision or a waiver of the provision itself
for any other provision.
c. Assignment. Except as otherwise provided within this Agreement,
neither party hereto may transfer or assign this Agreement without prior written
consent of the other party; provided, however, ICBL shall have the right to
transfer and assigns its rights and obligations hereunder to a subsidiary.
d. Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State of South Carolina.
e. Titles and Captions. All article, section and paragraph titles or
captions contained in this Agreement are for convenience only and shall not be
deemed part of the context nor affect the interpretation of this Agreement.
f. Pronouns and Plurals. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the Person or Persons may require.
g. Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
h. Counterparts. This Agreement may be executed in several counterparts
and all so executed shall constitute one Agreement, binding on all the parties
hereto even though all the parties are not signatories to the original or the
same counterpart.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed this ____day of February, 1999.
INTERNET CABLE INTERMARK ASSOCIATES V, LLC
CORPORATION
By:_____________________________ By:_________________________________
Its: ____________________________ Its: _________________________________
3
February 3, 1999
Intermark Management Inc.
Intermark Building
3830 Forest Drive, Suite 202
Columbia, SC 29204.
Gentlemen:
Reference is made to the Cable System Installation Agreement dated as
of February ___, 1999 ("Keswick Agreement") between Internet Cable Corporation
("ICBL") and Intermark Associates V, LLC. ("Intermark V"). This letter shall
confirm our mutual agreement regarding the matters set forth below:
1. Share Issuance. In consideration for Intermark Management Corporation ("IMC")
consenting to its affiliate, Intermark V entering into the Keswick Agreement,
ICBL shall cause to be issued to IMC (or its assigns) 100,000 shares of its
Common Stock ("Shares"). IMC understands and agrees that the Shares have not and
will not be registered under the Securities Act of 1933, as amended, and
therefore, are "restricted securities". Intermark further understands that
Intermark may be required to hold the Shares indefinitely. The Shares shall bear
the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), AND MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, (II) TO THE EXTENT APPLICABLE, RULE 144 UNDER
THE ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION
OF SECURITIES), OR (III) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL
BE REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION
FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
ICC may place a stop order with its transfer agent for the shares to insure
compliance with rules and regulations of the Securities and Exchange Commission
("SEC").
IMC represents and warrants to ICBL that it is an "Accredited Investor"
as defined in Regulation D of the SEC.
2. First Offer Option. In consideration of the services provided hereunder by
ICBL to Intermark V IMC hereby grants to ICBL the right and option to provide
cable television systems at other facilities owned by IMC and its affiliates, as
well as related telecommunications services such as Internet access. At
facilities managed by IMC, it shall use its best efforts to assist ICBL in
providing services to such management facility, which efforts will include
recommending ICBL to the owner of such facilities. IMC hereby agrees that it
shall provide the rights and option to provide such services at other owned
facilities prior to engaging any other cable television provider.
Notwithstanding the foregoing, the parties agree that Intermark shall have the
right to retain a third party at other facilities in the event that IMC, in good
faith, determines that ICBL is unable to deliver such services competitively.
ACCEPTED AND AGREED:
February ___, 1999
INTERMARK MANAGEMENT, INC. INTERNET CABLE CORPORATION
By: _____________________________ By: ________________________________
Name: Mark T. Stuckey Name: Timothy R. Karnes
Title: President Title: President
AGREEMENT
This Agreement is entered into on this ____ day of ___________ 1999, by and
between Shangri-La Vacation and Exchange, a Corporation, and Internet Cable
Corp., a Corporation.
In consideration of the mutual promises set forth hereunder, the sufficiency of
which is hereby acknowledged, Shangri-La Vacation and Exchange and Internet
Cable Corp. agree to the following:
Article 1. THE WORK OF THIS CONTRACT
Phase I ICBL will provide for a team of four engineers to travel to
China for two weeks. ICBL will do an evaluation of the hotel sites. ICBL would
complete a strategic plan complete with budgeting for hardware, installation,
timelines for Phase 2. ICBL plan would incorporate TV Programming, Movie on
Demand, and High Speed Internet Access for all the hotels. Internet Access would
be provided to each room.
Phase 2 Engineers would return to China to complete the infrastructure,
install systems into the hotels and provide for central monitoring.
At the end of Phase 1 an addendum specifically detailing costs to SVE
will be created and mutually accepted by both parties. This addendum will
outline the compensation to ICBL.
The contractor shall fully execute the Work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others.
Article 2. DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
The date of commencement shall be the date of signing of the Agreement.
The Contractor shall have 30 days to show substantial completion of Phase One
and a maximum of 60 days for submission of reports and budgets for Phase 2. The
completion date of Phase 2 shall be indicated in the budgets submitted and shall
become valid and enforceable when approved.
Article 3. CONTRACT SUM
The Exchange shall pay to the Contractor the sum of USD 80,000 for
Phase I.
The Exchange shall pay to the Contractor the sum TBD after the
submission of an acceptable budget.
Article 4. PAYMENTS
The Exchange shall pay to the Contractor the sum of USD 40,000 within
ten days of the signing of this contract and USD 40,000 upon submission of the
report and budgets.
Subsequent payments will be made in accordance with the submitted proposal and
budget.
Article 5. DUTIES OF PARTIES
The Exchange shall be responsible to provide lodging for the
contractors employees while in China and arrange inner-China transportation. The
exchange shall also make available to the Contractor any and all information and
documents that the Contractor shall require to complete its report.
Internet Cable Corp. (ICBL) will perform a study of the existing
telecommunication facilities used by members of the Shangri-La Vacation and
Exchange. ICBL will then design a system capable of integrating High Speed
Internet Access, TV Programming, Video on Demand, and Reservations Service. It
is intended that Shangri-La Vacations and Exchange will install the recommended
<PAGE>
system under the guidance of ICBL. ICBL will operate a central location and
provide the aforementioned services to the Shangri-La Member at an established
price. Shangri-La will own all systems placed in members properties and be
responsible for upkeep. ICBL will supply content of the system and
administration from its wholly owned facility.
Article 6. TERMINATION
This agreement may be terminated as follows: ICBL may terminate this agreement
after the completion of Phase 1 if the report filed indicates that the project
is not viable for SVE.
No modifications shall be binding unless in written form and consented
to by both parties.
This contract may be terminated for cause.
Article 7. MISCELLANEOUS
SVE warrants that is has budgeted $65,000 USD for the installation and
development of high-speed Internet access into all member hotels. This upgrade
includes the creation of a centralized reservation system and monitoring station
for the network.
Time shall be of the essence in the performance of this Agreement.
If any part of this Agreement is held unenforceable for any reason, the
remaining portion of this Agreement shall remain in full force and effect, and
shall be carried out in a manner which is consistent with the intentions of the
parties hereto.
If any legal action or proceeding, including any arbitration of disputes,
arising out of, or relating to, this Agreement is brought by either party, the
prevailing party as determined by the Court or Arbitrator, shall be entitled to
receive from the non-prevailing party, in addition to any other relief that may
be granted, reasonable attorney's fees, costs and expenses incurred in the
action or proceeding by the prevailing party.
This Agreement is entered into on this _____ day of _________, 1999, in the City
of Incline Village, State of Nevada.
______________________________________ Title ___________________________
Shangri-La Vacation and Exchange
______________________________________ Title ___________________________
Internet Cable Corp.
