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EXHIBIT 99.1
CONFIDENTIAL
July 20, 1999
Board of Directors
LoreCom Technologies, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We understand that LoreCom Technologies, Inc., an Oklahoma corporation, ("LTI"),
has entered into definitive agreements to purchase or merge (the
"Purchase/Merger Agreements") 13 separate companies subsequent to a public
offering of its common shares which is planned to be underwritten by Capital
West Securities, Inc. (the "Public Offering"). LTI has Purchase/Merger
Agreements that have been executed and are subject to the completion of the
Public Offering and several standard conditions, including accuracy of the
representations and warranties made, performance of covenants included in the
Purchase/Merger Agreements, execution of employment and consulting agreements by
certain employees of the interconnect partners and no material adverse change in
the results of operations, financial condition or business of the 13 companies.
Further, any or all of the Purchase/Merger Agreements may be terminated before
the closing of the Public Offering:
o By the mutual consent of the boards of directors of LTI and the affected
interconnect partner;
o If the Public offering and the acquisitions are not closed by May 31, 1999;
o By the interconnect partner if its schedules to its Purchase/Merger
Agreement are amended to reflect a material adverse change and such
amendment is rejected by LTI; or
o If a material breach or default under the agreement by one party occurs and
is not waived.
Commercial Telecom Systems, Inc. has agreed to extend the May 31, 1999, deadline
to July 31, 1999. The remaining 12 companies have extended the May 31, 1999,
deadline to the date that LTI terminates its efforts to register its common
stock through the Public Offering. We have been informed that LTI fully expects
to complete the transactions as outlined in the Purchase/Merger Agreements. We
have been informed that LTI will purchase each of the 13 companies for a portion
of cash and a portion of common stock in LTI ("Consideration"). LTI has
negotiated the principal terms of the Purchase/Merger Agreements with each
individual company to form the ongoing concern that is named LoreCom
Technologies, Inc. The following is a listing of the 13 companies that will
either be purchased or merged in order to form LTI subsequent to the Public
Offering:
COMPANIES
Able Communication Incorporated
Access Communications Services, Inc.
American Telcom, Inc.
Banner Communications, Inc.
Commercial Telecom Systems, Inc.
Communications Services, Inc.
Electrical & Instrument Sales Corp.
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Nobel Systems, Inc.
▇▇▇▇▇▇▇ Office Machines, Inc.
The Phone Man Sales and Service, Inc.
Telkey Communications, Inc.
Terra Telecom, Inc.
▇▇▇▇▇▇ Business Systems, Inc.
We were provided with financial information regarding ten of the 13 companies.
The three companies where complete financial information was not provided
include Able Communication Incorporated, ▇▇▇▇▇▇▇ Office Machines, Inc., and The
Phone Man Sales and Service, Inc. Accordingly, we are unable to render any
opinion with respect to these three companies. However, given that the total
Consideration for the three companies is approximately 3.142% of the aggregate
purchase price for the 13 companies, we do not believe that it is material.
We understand that each of the 13 companies will be purchased with a portion of
cash and a portion of common stock in LTI. We have relied on the financial,
purchase, and projected information for each of the 13 companies and for LTI
from the Preliminary Prospectus dated June 25, 1999 ("Preliminary Prospectus")
which was provided to us by LTI management and Capital West Securities, Inc.
You have requested our opinion as investment bankers as to whether the
Consideration to be paid by LTI, pursuant to the Purchase Agreements, is fair to
LTI and its shareholders, from a financial point of view, as of the date hereof
(the "Opinion"). For the purposes of the Opinion set forth herein, we have,
among other things:
o Reviewed the financial terms of the Purchase/Merger Agreements as provided
in the Preliminary Prospectus;
o Reviewed the public filings of LTI and the financial information provided
regarding each of the ten companies;
o Compared LTI from a financial point of view with certain other companies in
the telecommunications equipment, service, and agency industries that we
deemed to be relevant. We also considered the financial terms, to the
extent publicly available, of selected recent business combinations in
these industries. We focused on two separate data sets of information
related to two different sets of generally comparable companies, including
but not limited, to significant reliance on general financial ratios as
well as a purchase price to revenue calculations;
o Reviewed LTI's audited financial statements along with those of the ten
other companies for which they have been provided in the Preliminary
Prospectus, which were audited by Deloitte & Touche LLP, Saxon & ▇▇▇▇, and
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, PLC;
o Reviewed certain internal operating and financial information relating to
LTI's business both historically and as forecasted by the management of
LTI; and
o Conducted such other studies, analyses, inquiries and investigations as we
deemed appropriate.
During our review, we relied upon and assumed, without independent verification,
the accuracy, completeness and fairness of the financial and other information
provided, and have further relied upon the assurances of LTI management that
they are unaware of any facts that would make the information provided to us to
be incomplete or misleading for the purposes of this Opinion.
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Our Opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. We are expressing no opinion as to whether the Public
Offering, as proposed, will ever be completed nor as to the price at which LTI
common stock will actually trade if the Public Offering is completed. We are
also expressing no opinion as to any income tax consequences of the underwriting
or any of the purchases and/or mergers. Our Opinion does not address the
relative merits of the underwriting nor any of the purchases and/or mergers, nor
does it address the Board's decision or any of the to be purchased and/or merged
companies' decision to proceed with the underwriting or any of the purchases
and/or mergers. Our Opinion does not constitute a recommendation to any
shareholder of LTI nor any recommendation to the companies to be purchased
and/or merged. We disclaim any obligation to advise the Board of LTI or any
person of any change in any fact or matter affecting our Opinion which may come
or be brought to our attention after the date of this Opinion.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, Inc. ("▇▇▇▇▇▇▇▇"), a National Association of
Securities Dealer member, as part of its investment banking services, is
regularly engaged in the valuation of businesses and securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. ▇▇▇▇▇▇▇▇ will receive a non-contingent fee from LTI relating to its
services in providing this Opinion. In an engagement letter dated June 1, 1999,
LTI has agreed to indemnify ▇▇▇▇▇▇▇▇ with respect to Houlihan's services as
follows:
If ▇▇▇▇▇▇▇▇ or any person or entity associated with ▇▇▇▇▇▇▇▇ becomes
involved in any way in any legal or administrative proceeding related
to the services performed hereunder or the report, LTI will indemnify,
defend and hold ▇▇▇▇▇▇▇▇ and any such person and / or entity harmless
from all damage and expenses (including reasonable attorney's fees and
expenses and court costs) incurred in connection therewith, except to
the extent that a court having jurisdiction shall have determined in a
final judgement that such loss, claim, damage or liability resulted
primarily from the gross negligence, bad faith, willful misfeasance, or
reckless disregard of the obligations or duties of ▇▇▇▇▇▇▇▇ hereunder.
Based on the foregoing and such other factors as we deem relevant, we are of the
opinion that the consideration to be paid by LTI for the ten companies that we
outlined above is fair to the shareholders of LTI, from a financial point of
view given market conditions, as of the date hereof.
Very truly yours,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & COMPANY, INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
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