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Sample Operational Plan EcoClear Inc

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					EcoClear Inc.
Operational Plan
Company Structure and Ownership EcoClear Inc. was established as a joint venture between New Endeavour Pty. Ltd. and ABF Pty. Ltd. to launch EcoClear into the US market. The management team has since secured two investors and the expanded ownership structure is set out below. EcoClear Inc. is a Delaware company currently registered as Scanex Inc. (the name is in the process of being changed). Lloyd Beck, former CEO of General Motors (Australia) has been appointed as independent Chairman of the Board. ABF Pty. Ltd. consists of the product's inventor and three investors who have launched EcoClear on the Australian market. ABF have assigned the North American rights of the product to EcoClear Inc. and invested $85,000 for a 14% equity share and $1 royalty per unit sold from year two. An option arrangement has been established for the rights to other markets after consideration of the management groups' initial performance in the US. New Endeavour Pty. Ltd. is owned equally by the management team. This team has worked closely with ABF since mid 1995 as consultants in the product's initial development and marketing research. The management team has a complementary mix of business expertise, new venture initiation experience and a proven ability to raise capital. New Endeavour Pty. Ltd. has a management contract with EcoClear Inc. that guarantees control, provided the worst case financial scenario is attained or exceeded. Degloss Investments, a Hong Kong based business group has invested $100,000. Port Bargo Pty. Ltd., a group of Australian professionals wishing to invest in new venture opportunities, have invested $100,000. In addition to this they have agreed to provide a line of credit up to $100,000 as a standby facility to finance the worst case scenario. The interest rate would be equivalent to the Australian government 90-day bill rate plus a risk premium of 8%. The management team has underwritten this potential source of funds with personal guarantees. A New Investor is sought, preferably with expertise in the US pool industry, to contribute $300,000. Details and the expected yield for this investment are on page 25 of the plan. Key Management Personnel The management team of EcoClear Inc. for the fast year, is detailed in the organizational chart below. The organizational chart for year two and beyond can be found in Appendix D along with detailed resumes of the management team. Andrew Maxwell. As Chief Executive Officer, Andrew's responsibilities include overall strategy, marketing and the development of strong relationships with key stakeholders. Andrew will relocate to the US in July 1996. He has prior new venture start up experience in international markets. As National Marketing manager (Retail Business) with Shell Australia, he was an integral part of a team that launched 60

Circle K convenience stores nationally. He has worked as a business development manager in Papua New Guinea dealing with US mining companies. More recently Andrew started Cambodia's only national brewery and established the largest food and liquor wholesaler in that country. Andrew has worked as a Government advisor to assist entrepreneurs start and grow their business. Kim Goriss is the V.P. Finance and is initially responsible for overseeing R&D in Australia. Kim will relocate to the US in January 1998. Currently Kim is consulting to the State Department of Public Works and Housing as a financial analyst within the Financial Policy and Management Division. Kim has had extensive experience in international markets including the Middle East, India, Singapore, P.N.G., China, Taiwan and Australia. His roles as project manager in the oil exploration industry provided extensive experience in financial planning. Due to the technical nature of this work, Kim is well qualified to oversee R&D operations having been responsible for up to 30 technicians, geophysicists and other technical staff. Prue Kellahan is the V.P. Legal Liaison. Prue's responsibilities are to coordinate dealings with the external patent attorney and general legal counsel. Prue has an impressive combination of academic qualifications and business experience. She has a law degree, Masters of Accounting and Master of Business Administration and is currently completing a program that will allow her to be admitted to the Bar. This is supplemented by experience in her family's construction company. Kel Constructions is a developer of hotels and resorts in the North of Australia and has swimming pool construction experience. Prue has been responsible for the development and oversight of the legal and accounting departments in this company during her time at university and has an ongoing role. Action Plan The following table outlines the management team's action plan.
Action Production Dies Cast Initial Investors Signed Relocation Preparation NSF Approval Manufacturer Meetings US Patent Application Promotional Material CEO relocates to US U.L. Approval US Onsite Testing Pool Consultant Report Engineer's Report Market Research Report Draft Agreement Commencement Date Expected Completion Completed Completed Completed May 96 July 96 Ongoing December 97 June 96 July 96 October 96 Ongoing August 96 September 96 August 96 November 96 March 96 February 96 May 96 May 96 May 96 June 96 June 96 July 96 July 96 July 96 August 96 August 96 August 96 April 96

Product Test Program (Aust.) June 95

Product Manufacture

March 97

Ongoing

Technology and R&D Key Future Research & Development Activities For the first two years R&D services will be supplied by ABF's technical team in Australia, at ABF's expense in 1997, and thereafter at EcoClear Inc.'s expense. R&D efforts for this period will be monitored by Kim Goriss. From 1998 the R&D function will be located permanently in the US. (Refer to Appendix E for the R&D schedule). The key R&D targets are: Inline Debris Mulcher: Positioned prior to the filter pump, this would eliminate the need for a skimmer basket and provide better flow rates. Commercial Pool Market: The original product requires a capacity increase to ensure it's suitability to this market. Other Industry Uses: EcoClear's water filtration technology has potential uses in a number of major markets, including filtration in aquaculture, irrigation, airconditioning and brewing. The individual market requirements need to be further researched and prototype products produced. Initial interest has been shown in the areas of agriculture and aquaculture, and these areas will be targeted first. Key Success Factors 1. Secure a licensing agreement with a major manufacturer of pool products; 2. Maintain protection of the company's intellectual property; and 3. Maintain a harmonious and productive working relationship amongst the management team, shareholders and licensee. Risk Reduction Strategies EcoClear Inc. recognizes the risks associated with this new venture and has chosen to implement the following strategies as a means of risk reduction. Risk #1: Failure to secure a license agreement in a timely manner.      In-depth analysis of the target market; Relationship with target market initiated and meetings arranged; Personal selling of the opportunity by US based CEO; Use of professional negotiator and expert legal counsel; Line of credit established to finance any license agreement delays.

Risk #2: Infringement of Intellectual Property.    Inventor has logged the process prior to, and following, the inventive step; In-depth independent search of prior art; Confidentiality agreements required;

      

Exclusive licensing agreement specifically covering trade secrets and knowhow involved with the products' design; Licensee obliged to prosecute patent infringements; Patent protection via the Patent Cooperation Treaty and national application in the US and selected other countries; US Patent Attorney to prosecute any infringement by the licensee; Patent Insurance, (defense and indemnity) with total cover of $1,000,000; A Patent Protection Trust Fund will be established from cashflow; Trademark and Business Name registration in progress.

Risk #3: Disharmony between the management, shareholders and licensee.       Proven working relationship amongst members of the management team; CEO has a long standing relationship with Degloss and Port Bargo; All parties bound to a 'no-exit' agreement for three years; License agreement with significant benefits accruing to both parties; Shareholders' agreement to protect the interests of minority shareholders; Management performance contract.

Other Risk Reduction Strategies The financial viability of EcoClear Inc. rests on a conservative assessment of -the US pool market and does not include potential revenues from new roll out products in the future. Market penetration has been estimated on the US market only, and does not include opportunities in Canada, Mexico, South America or other markets. Operating costs will be kept to a minimum with a flat organizational structure and strict budgetary controls. Salary and benefits in the initial years will be below market rates. The transfer of R&D to the US in year two reduces the reliance on ABF for continued product development. As other applications for the product are brought to market the dependence on the pool market will be reduced. Harvest and Exit Strategies Harvest strategies available to the management team are salaries, dividends and capital gain. Management salaries will be below market value initially and will be increased to reflect performance in subsequent years. Dividends will be declared in year two and beyond, at the rate of 50% of net profit. Investors harvest via dividends and receive capital gains on exit. Individual investors may sell down their shareholding after year three. Four exit strategies have been identified and are listed in order of preference.     The shareholding will be valued and offered to the remaining shareholders in proportion to their existing holdings; Equity may be sold to an external party upon majority approval; Sale of the entire business; or Initial Public Offering.


				
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