Registration Statement No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
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THRUCOMM, INC.
(Exact Name of Registrant as Specified in its Charter)
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Florida 4899 59-3415131
(State or Other Jurisdiction of(Primary Standard Industrial(I.R.S. Employer
Incorporation or Organization)Classification Code Number)Identification Number)
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1641 Commerce Avenue, North, St. Petersburg, Florida 33716
(813) 576-1582
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
JOHN F. KOLENDA
Chairman and
Chief Financial Officer
Thrucomm, Inc.
1641 Commerce Avenue, North
St. Petersburg, Florida 33716
(813) 576-1582
(Name, Address, including Zip Code, and Telephone
Number, including Area Code, of Agent for
Service) Copies to:
MICHAEL T. WILLIAMS, ESQ. FRANK N. FLEISCHER, ESQ.
Michael T. Williams, P.A. Schifino & Fleischer, P.A.
3112 W. Kennedy Blvd. 201 N. Franklin Street, Suite 2700
Tampa, Florida 33609 Tampa, Florida 33602
(813) 871-5911 (813) 223-1535
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Approximate date of commencement of proposed sale to the public: At the
Effective Time of the Combination of Fastcom, Ltd., a Florida limited
partnership with the Registrant and Datalinc, Ltd., as described in the Consent
Statement/Prospectus included herein.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of | Amount to | Proposed | Proposed | Amount of
Each Class of | to be | Maximum | Maximum |Registration
Securities to be |Registered (1)| Offering | Aggregate | Fee
Registered | | Price per | Offering |
| | Unit | Price (3) |
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Mandatory Convertible | 1 Share of | (2) | $1,284,442 | $389.22
Preferred Stock, | each Series | | |
Series A-O | | | |
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(1) The number of shares to be registered is (1) share of each Series of the
Mandatory Convertible Preferred Stock, Series A-O, or a total of 15 shares.
(2) Not applicable.
(3) Maximum Aggregate Offering Price is reflected in accordance with Rule
457(f)(2), solely for the purpose of calculating the registration fee,
based upon the book value of the Limited Partnership Interests of Datalinc,
Ltd. as of December 31, 1996, the latest practicable date prior to the date
of filing of this Registration Statement plus one-third of the Capital
Contributions to Fastcom, Ltd. (as defined herein).
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further Amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Preliminary Prospectus Dated May 8, 1997
Subject to Completion
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities law of any such state.
THRUCOMM, INC.
DATALINC, LTD.
FASTCOM, LTD.
1641 Commerce Avenue North
St. Petersburg, FL 33716
REQUEST FOR WRITTEN CONSENT
NOTICE IS HEREBY GIVEN, to the limited partners ("Investors") of Datalinc,
Ltd., a Florida limited partnership ("Datalinc"), that in order to
facilitate the ability to obtain the additional capital needed to develop the
complementary businesses of Datalinc and Fastcom, Ltd., a Florida limited
partnership ("Fastcom"), and consistent with the business plans of Datalinc and
Fastcom, Integrated Communication Networks, Inc., a Florida corporation and the
General Partner of Datalinc ("ICN"), hereby requests the execution and delivery
of written consents (the "Consents") of the Investors to combine the businesses
of Datalinc and Fastcom into a single corporation, by consenting:
To approve and adopt the Agreement and Plan of Reorganization (the
"Reorganization Agreement"), by and among Thrucomm, Inc., a newly organized
Florida corporation ("Thrucomm"), Fastcom and Datalinc, (Fastcom and
Datalinc collectively referred to as the "Partnerships") providing for the
reorganization (the "Reorganization") of the businesses of the Partnerships
into Thrucomm by, among other things:
(A) The transfer of all of the assets and liabilities of Datalinc and
Fastcom into Thrucomm, upon the terms and conditions described in the
Reorganization Agreement;
(B) In exchange therefor, Datalinc will receive shares of Thrucomm's
Mandatory Convertible Preferred Stock, Series A-H, and Fastcom will
receive shares of Thrucomm's Mandatory Convertible Preferred Stock,
Series I-O (the Mandatory Convertible Preferred Stock, Series A-O
collectively referred to as the "Preferred Stock");
(C) The Preferred Stock will be held by Datalinc and Fastcom until
mandatory conversion (the "Mandatory Conversion"), at which time the
Preferred Stock will be converted into shares of Thrucomm's Common
Stock, no par value (the "Underlying Shares"); and
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(D) Upon Mandatory Conversion, ICN and Fastcom Management, Inc., a Florida
corporation which is the General Partner of Fastcom ("FMI"), will
distribute the Underlying Shares to Datalinc's Investors and other
equity owners (Datalinc's "Other Equity Owners") and to the investors
and other equity owners in Fastcom (respectively, Fastcom's
"Investors" and "Other Equity Owners"), and the Partnerships will
dissolve.
A copy of the Reorganization Agreement is attached as Exhibit A to the
accompanying Consent Statement/Prospectus, and is incorporated herein by
reference.
Approval and adoption of the Reorganization Agreement and Reorganization
will result in a loss of certain rights of Partners in Datalinc and Fastcom.
See "Risk Factors."
The Consent of Datalinc's Investors holding Limited Partnership Units (the
"Units") in Datalinc with more than fifty percent (50%) of all of the voting
rights of the outstanding Units is necessary to approve and adopt the
Reorganization Agreement. The Consent of Fastcom's Investors holding at least
two-thirds of all of the outstanding Units of Fastcom is necessary for Fastcom
to approve and adopt the Reorganization Agreement. Datalinc holds approximately
80% of the outstanding Units of Fastcom. Datalinc's General Partner, ICN, has
given Datalinc's Consent to the Reorganization. Accordingly, the Reorganization
Agreement has been approved by Fastcom, and no additional Consent of any other
Fastcom Investor is required.
Investors are not entitled to appraisal rights under Florida law in
connection with the Reorganization.
If you are in agreement with the proposed Reorganization, please complete,
date and sign the accompanying form of Consent and mail it promptly in the
enclosed pre-addressed envelope, which requires no postage if mailed in the
United States.
BY ORDER OF THE BOARD OF DIRECTORS OF
INTEGRATED COMMUNICATIONS NETWORKS, INC., THE
GENERAL PARTNER OF DATALINC, INC.
John F. Kolenda
Chairman of the Board
June __, 1997
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DATALINC, LTD.
FASTCOM, LTD.
CONSENT STATEMENT
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PROSPECTUS OF THRUCOMM, INC.
1 SHARE EACH OF MANDATORY CONVERTIBLE PREFERRED STOCK, SERIES A-O
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INTRODUCTION
This Consent Statement/Prospectus is being furnished to the limited
partners ("Investors") in Datalinc, Ltd., a Florida limited partnership
("Datalinc"), and Fastcom, Ltd., a Florida limited partnership (Fastcom)
(collectively, the Partnerships ) in connection with the
solicitation of Integrated Communication Networks, Inc., a Florida corporation
and the managing general partner of Datalinc ( ICN ) of the written consents
(the Consents ) of the Datalinc Investors, for the approval of the transfer of
all of the right, title and interests in the assets and liabilities of Datalinc
into Thrucomm, Inc., a newly organized Florida corporation ( Thrucomm or the
"Company"), in exchange for shares of Thrucomm s Mandatory Convertible Preferred
Stock, on the terms and conditions set forth in the Agreement and Plan of
Reorganization (the "Reorganization Agreement"), and as outlined herein. This
Consent Statement/Prospectus is being furnished, for informational purposes
only, to limited partners in Fastcom, (Fastcom's "Investors") by Fastcom
Management, Inc., a Florida corporation and the managing general partner of
Fastcom ( FMI ). Pursuant to the Reorganization Agreement, all of the right,
title and interests in the assets and liabilities of Fastcom are also being
transferred to Thrucomm in exchange for shares of Thrucomm's Mandatory
Convertible Preferred Stock. In effect, the businesses of the Partnerships shall
be consolidated and reorganized as a single corporate entity (the
"Reorganization").
This Consent Statement/Prospectus also constitutes the Prospectus of
Thrucomm for use in connection with the offer and issuance of 1 share each of
its Mandatory Convertible Preferred Stock, Series A-H, in exchange for all of
the assets and liabilities of Datalinc, and 1 share each of its Mandatory
Convertible Preferred Stock, Series I-O, in exchange for all of the assets and
liabilities of Fastcom (collectively, the Preferred Stock ). The Preferred Stock
will be held by Datalinc and Fastcom until mandatory conversion ("Mandatory
Conversion"), at which time the Preferred Stock will be converted into shares of
Thrucomm's Common Stock, no par value (the "Underlying Shares"), and distributed
to the Fastcom and Datalinc Investors.
THIS OFFER INVOLVES VARIOUS RISKS THAT SHOULD BE CONSIDERED BY THE
INVESTORS. SEE "RISK FACTORS AND MATERIAL CONSIDERATIONS," BEGINNING ON PAGE
14 OF THIS CONSENT STATEMENT/PROSPECTUS. IN PARTICULAR, PARTNERS SHOULD
CONSIDER THE FOLLOWING FACTORS:
Datalinc cannot predict when, if ever, a Mandatory Conversion Event will
occur. Accordingly, there is no guarantee that the Partnerships' Investors
or Other Equity Owners will receive any of the Underlying Shares of
Thrucomm's Common Stock. IF A MANDATORY CONVERSION EVENT DOES NOT OCCUR,
THE MOST LIKELY REASON WILL BE BECAUSE THRUCOMM WILL NOT HAVE OBTAINED THE
ADDITIONAL CAPITAL NECESSARY TO FURTHER DEVELOP ITS BUSINESS. IF A
MANDATORY CONVERSION EVENT DOES NOT OCCUR, THE PURPOSE OF THE
REORGANIZATION WILL NOT HAVE BEEN ACCOMPLISHED.
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The actual number and the value of the Underlying Shares, or other value
that Investors and Other Equity Owners may ultimately receive in a
Mandatory Conversion is not presently ascertainable, there is no guarantee
as to the value an Investor or other equity owner will receive, if any, if
the Datalinc Investors approve the Reorganization Agreement.
The General Partners did not engage an independent representative for the
Datalinc Investors to determine the relative values of the Partnerships in
the Reorganization. Although the General Partners believe the
Reorganization is fair to the Datalinc Investors, it is possible that the
Formula and other terms of the Reorganization may not be as favorable to
the Datalinc Investors as the terms that an independent representative
might have obtained for them.
Thrucomm will need additional funds to operate after the Reorganization.
Thrucomm anticipates that it will incur significant negative cash flow from
operations subsequent to the Reorganization. Other than funds generated
from the operation of the business and any funds available under a line of
credit, currently there are only limited alternative sources of financing
available to Thrucomm.
ADOPTION OF THE REORGANIZATION AGREEMENT REQUIRES THE CONSENT OF THE
LIMITED PARTNERS THEN OWNING OF RECORD MORE THAN FIFTY PERCENT (50%) OF THE
VOTING RIGHTS OF DATALINC. ADOPTION OF THE REORGANIZATION AGREEMENT ALSO
REQUIRES THE CONSENT OF THE LIMITED PARTNERS OWNING AT LEAST TWO-THIRDS OF THE
OUTSTANDING UNITS OF FASTCOM. DATALINC OWNS APPROXIMATELY 80% OF THE OUTSTANDING
UNITS OF FASTCOM. THROUGH ITS GENERAL PARTNER, DATALINC HAS ALREADY GIVEN ITS
CONSENT, WHICH IS SUFFICIENT TO GIVE FASTCOM'S APPROVAL OF THE REORGANIZATION
AGREEMENT AND NO ADDITIONAL CONSENT OF ANY OTHER FASTCOM INVESTOR IS REQUIRED..
THE OFFER IS SCHEDULED TO EXPIRE, UNLESS EXTENDED, AT 5:00 P. M., EASTERN
STANDARD TIME ON DECEMBER 31, 1997, IF THE REORGANIZATION AGREEMENT HAS NOT BEEN
APPROVED BY THE DATALINC INVESTORS.
NEITHER THE TRANSACTION CONTEMPLATED HEREIN NOR THE PREFERRED SHARES OF
THRUCOMM TO BE ISSUED IN CONNECTION THEREWITH HAVE BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION.
NEITHER HAS THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS CONSENT
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The approximate date on which this Consent Statement/Prospectus will first
be mailed to the Investors of the Partnerships is June __, 1997.
THE DATE OF THIS CONSENT STATEMENT/PROSPECTUS IS JUNE __, 1997.
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AVAILABLE INFORMATION
Under the rules and regulations of the Securities and Exchange Commission
(the Commission ), the solicitation of consents from Investors to approve and
adopt the Reorganization Agreement (as defined herein) constitutes an offering
of the Thrucomm Mandatory Convertible Preferred Shares and the underlying Common
Stock to be issued in connection with a Mandatory Conversion Event (as defined
herein). Accordingly, Thrucomm has filed with the Commission a Registration
Statement on Form S-4 under the Securities Act of 1933, as amended (the
Securities Act ) with respect to this offering (the Registration Statement ).
This Consent Statement/Prospectus constitutes the prospectus of Thrucomm that is
filed as part of the Registration Statement. As permitted by the rules and
regulations of the Commission this Consent Statement/Prospectus omits certain
information, exhibits and undertakings contained in the Registration Statement.
Such additional information may be inspected, without charge, at the offices of
the Commission, 450 Fifth Street, N. W., Washington, D.C. 20549 and the
Northeast Regional Office, Midwest Regional Office and Southeast Regional Office
at the following addresses: 7 World Trade Center, Suite 1300, New York, NY
10048, Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
IL 60661-2511 and 1401 Brickell Avenue, Suite 200, Miami, Florida 33131,
respectively. Copies can be obtained at prescribed rates from the Washington,
D.C. office. The Commission also maintains a Website that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission, and the address of such site is
http://www.sec.gov.
No person is authorized to give any information or to make any
representations other than those contained in this Consent Statement/Prospectus,
and if given or made, such information or representations should not be relied
upon as having been authorized. This Consent Statement/Prospectus does not
constitute an offer to sell, or a solicitation of an offer to purchase, the
securities offered by this Consent Statement/Prospectus, or the solicitation of
a Consent in any jurisdiction to or from any person to whom or from whom it is
unlawful to make such offer, solicitation of an offer or solicitation in such
jurisdiction.
Neither the delivery of this Consent Statement/Prospectus, nor any
distribution of securities pursuant to this Consent Statement/Prospectus shall,
under any circumstances, create any implication that there has been no change in
the information set forth herein or in the affairs of the parties as of the date
of this Consent Statement/Prospectus. However, if any material change occurs
during the period that this Consent Statement/Prospectus is required to be
delivered, this Consent Statement/Prospectus will be amended and supplemented
accordingly. All information in this Consent Statement/Prospectus regarding
Thrucomm, has been supplied by Thrucomm, and all information regarding Datalinc,
and Fastcom has been supplied by Datalinc, and Fastcom, respectively.
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TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . vi
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors and Material Considerations. . . . . . . . . . . . . . 1
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The General Partners. . . . . . . . . . . . . . . . . . . . . . . . 4
Background and Alternatives to the Reorganization . . . . . . . . . 5
The Reorganization Agreement. . . . . . . . . . . . . . . . . . . . 5
The Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . 6
Recommendation of the General Partner . . . . . . . . . . . . . . . 6
Opinion of the General Partners Financial Advisor. . . . . . . . . 7
Interests of Certain Persons in the Reorganization. . . . . . . . . 7
Certain Comparative Information . . . . . . . . . . . . . . . . . 9
Conditions, Termination, and Amendment of the Reorganization
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Summary of Tax Consequences . . . . . . . . . . . . . . . . . . . . 10
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . 10
Consent Procedures and Required Approvals . . . . . . . . . . . . . 10
Appraisal Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investor List . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . 12
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
THRUCOMM, INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Background of the Reorganization. . . . . . . . . . . . . . . . . . 20
The Reorganization Agreement. . . . . . . . . . . . . . . . . . . . 20
Operations After the Reorganization . . . . . . . . . . . . . . . . 22
Interests of Certain Persons in the Reorganization. . . . . . . . . 22
EQUITY OWNERSHIP OF THE PARTNERSHIPS . . . . . . . . . . . . . . . . . . 24
The Datalinc Investors. . . . . . . . . . . . . . . . . . . . . . . 25
Datalinc s Other Equity Owners. . . . . . . . . . . . . . . . . . . 26
The Fastcom Investors . . . . . . . . . . . . . . . . . . . . . . . 27
Fastcom s Other Equity Owners . . . . . . . . . . . . . . . . . . . 29
THE FORMULA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Determining the Values of Thrucomm, Datalinc and Fastcom. . . . . . 31
Allocation of the Valuations to Investors and Other Equity Owners . 32
Material Assumptions and Variances. . . . . . . . . . . . . . . . . 33
THRUCOMM OWNERSHIP TABLES. . . . . . . . . . . . . . . . . . . . . . . . 35
Notes to the Ownership Tables . . . . . . . . . . . . . . . . . . . 39
RECOMMENDATION OF THE GENERAL PARTNERS . . . . . . . . . . . . . . . . . 40
Reasons for Proposing and Recommending the Reorganization . . . . . 40
Opinion of the General Partners' Financial Advisor. . . . . . . . . 41
Lack of Independent Representative. . . . . . . . . . . . . . . . . 43
Fiduciary Duties of the General Partners. . . . . . . . . . . . . . 43
Access to Investor List and Partnership Records . . . . . . . . . . 44
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FAILURE TO APPROVE THE REORGANIZATION. . . . . . . . . . . . . . . . . . 44
CONSENT PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Requisite Consents. . . . . . . . . . . . . . . . . . . . . . . . . 45
Expiration Date and Effective Time. . . . . . . . . . . . . . . . . 45
Revocation of Consents. . . . . . . . . . . . . . . . . . . . . . . 46
Conditions of the Solicitation. . . . . . . . . . . . . . . . . . . 46
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
CERTAIN TAX CONSEQUENCES OF THE REORGANIZATION . . . . . . . . . . . . . 47
COMPARATIVE RIGHTS OF INVESTORS. . . . . . . . . . . . . . . . . . . . . 47
Distributions and Dividends . . . . . . . . . . . . . . . . . . . . 47
Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Restrictions on Transfers . . . . . . . . . . . . . . . . . . . . . 48
Right to Call Meetings. . . . . . . . . . . . . . . . . . . . . . . 49
Right to Investor List. . . . . . . . . . . . . . . . . . . . . . . 49
Assessments and Limited Liability . . . . . . . . . . . . . . . . . 49
Allocations and Dilution. . . . . . . . . . . . . . . . . . . . . . 50
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Redemption and Conversion . . . . . . . . . . . . . . . . . . . . . 50
Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . 50
Management and Compensation . . . . . . . . . . . . . . . . . . . . 51
Fiduciary Duties. . . . . . . . . . . . . . . . . . . . . . . . . . 51
Limits on Management s Liability. . . . . . . . . . . . . . . . . . 52
Continuation of Existence . . . . . . . . . . . . . . . . . . . . . 52
Anti-takeover Provisions. . . . . . . . . . . . . . . . . . . . . . 52
Liquidation Rights. . . . . . . . . . . . . . . . . . . . . . . . . 53
Right to Compel Dissolution . . . . . . . . . . . . . . . . . . . . 53
PRO FORMA CONDENSED FINANCIAL INFORMATION (Unaudited). . . . . . . . . . 53
Thrucomm Pro Forma Combined Balance Sheet . . . . . . . . . . . . . 55
Thrucomm Pro Forma Combined Statement of Operations . . . . . . . . 56
Thrucomm Pro Forma Combined Statement of Cash Flows . . . . . . . . 57
Thrucomm Pro Forma Adjustments. . . . . . . . . . . . . . . . . . . 58
Datalinc, Ltd. Management's Discussion and Analysis of
Financial Conditions and Results of Operations . . . . . . . . 59
Fastcom, Ltd. Management's Discussion and Analysis of
Financial Condition and Results of Development . . . . . . . . 63
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
FASTCOM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
The Electronics Fund Transfer ("EFT") Industry. . . . . . . . . . . 66
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ATMs - Synchronous & Asynchronous. . . . . . . . . . . . . . . 66
Point of Sale ("POS") - Synchronous & Asynchronous. . . . . . . . . 67
Overview of the Network . . . . . . . . . . . . . . . . . . . . . . 67
Remote Transceivers - DP1000 and DP100. . . . . . . . . . . . . . . 68
Cell Sites. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
The Network Control Center ("NCC"). . . . . . . . . . . . . . . . . 68
Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Interference Rejection - Licensed Compared to License Free. . . . . 69
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Multi-Drop Networks . . . . . . . . . . . . . . . . . . . . . . . . 69
Network Advantages Compared to Multi-Drop Networks. . . . . . . . . 70
Integrated Services Digital Packet Networks . . . . . . . . . . . . 70
Advantages of the Network Compared to Integrated Services Packet
Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Development of the Network. . . . . . . . . . . . . . . . . . . . . 71
Research and Development. . . . . . . . . . . . . . . . . . . . . . 71
Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Cell Site Leasing . . . . . . . . . . . . . . . . . . . . . . . . . 72
Site Layout . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Installation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Field Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . 73
Sale of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 73
Company Facilities. . . . . . . . . . . . . . . . . . . . . . . . . 74
DATALINC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Industry Background . . . . . . . . . . . . . . . . . . . . . . . . 75
Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . 76
Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
THRUCOMM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Thrucomm's Executive Officers and Directors . . . . . . . . . . . . 76
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . 79
Stock Option Plans. . . . . . . . . . . . . . . . . . . . . . . . . 79
Comparative Compensation Information. . . . . . . . . . . . . . . . 80
Certain Transactions with Management. . . . . . . . . . . . . . . . 81
Datalinc's Management Incentive Plan. . . . . . . . . . . . . . . . 82
PRINCIPAL STOCKHOLDERS OF THRUCOMM . . . . . . . . . . . . . . . . . . . 82
DESCRIPTION OF THRUCOMM'S SECURITIES . . . . . . . . . . . . . . . . . . 84
Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 84
The Mandatory Convertible Preferred Stock . . . . . . . . . . . . . 84
Transfer Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 87
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
INDEX TO FINANCIAL STATEMENT . . . . . . . . . . . . . . . . . . . . . .F-1
APPENDIX A - AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . . . . .A-1
APPENDIX B - OPINION OF MICHAEL DAVIS & CO., P.A. . . . . . . . . . . .B-1
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SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Consent Statement/Prospectus. Certain capitalized terms used in this
Summary are defined elsewhere in this Consent Statement/Prospectus; cross
references are provided. Also, attached hereto is a Glossary. This summary is
not intended to be a complete description of the matters covered in this Consent
Statement/Prospectus and is subject to and qualified in its entirety by
reference to the more detailed information and financial statements contained
elsewhere in this Prospectus, including the Exhibits hereto. Investors are urged
to read carefully the entire Consent Statement/Prospectus, including the
Exhibits.
RISK FACTORS AND MATERIAL CONSIDERATIONS
In addition to the information included in this Prospectus, the Investors
should carefully consider the following factors in determining whether to
approve the Reorganization. The risk factors summarized below are described in
further detail elsewhere in this Prospectus at Risk Factors and Material
Considerations.
RISKS ASSOCIATED WITH THE REORGANIZATION
Uncertainties in the Method of Determining the Values
The actual number and the value of the Underlying Shares, or other
value that Investors and Other Equity Owners may ultimately receive in a
Mandatory Conversion is not presently ascertainable. There is no guarantee as to
the value an Investor or Other Equity Owner will receive, if any, if the
Datalinc Investors approve the Reorganization Agreement.
No Assurance of a Mandatory Conversion Event
Datalinc cannot predict when, if ever, a Mandatory Conversion Event
will occur. Accordingly, there is no guarantee that the Partnerships' Investors
or Other Equity Owners will receive any of the Underlying Shares of Thrucomm's
Common Stock. If a Mandatory Conversion Event does not occur, the most likely
reason will be that Thrucomm did not obtain the additional capital necessary to
further develop its business. If a Mandatory Conversion Event does not occur,
the purpose of the Reorganization will not be accomplished.
Lack of Independent Representatives for Investors; Fairness Opinion
The General Partners did not engage an independent representative for
the Datalinc Investors. However, the General Partners believe the Reorganization
is fair to the Datalinc Investors. The General Partners have also obtained a
"fairness opinion" from Michael T. Davis & Company, P.A., an independent
certified public accountant, as to the fairness of the Formula, from a financial
point of view. It is still possible that the valuations and other terms of the
Reorganization may not be as favorable to the Datalinc Investors as the terms
that an independent representative might have obtained for them.
No Market for the Securities
There is no market for the Preferred Stock or the Underlying Shares of
Thrucomm's Common Stock. It is not anticipated that there will be a market for
the Preferred Stock. There can be no assurance that a trading market will
develop for the Underlying Shares of Common Stock.
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No Dissenters Rights
The Datalinc Investors are not entitled to appraisal rights under
Florida law in connection with the Reorganization. Accordingly, the approval of
the Reorganization by a Majority Vote of the Datalinc Investors will be binding
on all Datalinc Investors.
Conflicts of Interest and Control by Certain Persons
In considering the recommendation of the boards of directors of ICN,
FMI and Thrucomm (collectively, the "Directors"), Investors should be aware
that the Directors have personal financial interests in the Reorganization. The
Formula, especially its allocation of the Conversion Value of Thrucomm into
the Datalinc Value and the Fastcom Value, was determined by the Directors, and
their valuations of the Partnerships and Thrucomm involve inherent conflicts
of interest. As General Partners, ICN and FMI owe fiduciary duties to the
Partnerships and their Investors. See "The Formula - Determinating the Values
of Thrucomm, Datalinc and Fastcom."
Thrucomm Dividend Policy
Thrucomm has never paid cash dividends on its Common Stock or
Preferred Stock and does not anticipate paying any cash dividends in the
foreseeable future. Thrucomm intends to reinvest any funds that might otherwise
be available for the payment of dividends in further development of its business
following the Reorganization.
RISKS ASSOCIATED WITH THE CONSOLIDATION OF FASTCOM AND DATALINC
Losses From Datalinc's and Fastcom s Operations; Need for Additional Capital
Datalinc has experienced continual operating losses since its
inception, including a loss of $656,549 for fiscal year 1996, which includes a
portion of Fastcom's 1996 loss of $481,752. Fastcom has also experienced
continual operating losses since its inception, including a loss of $1,716,040
for fiscal year 1996. Thrucomm will need additional funds to operate after the
Reorganization. Thrucomm anticipates that it will incur significant negative
cash flow from operations subsequent to the Reorganization. Other than funds
generated from the operation of the Partnerships' businesses and any funds
available under Thrucomm's $600,000 line of credit (the "Line of Credit"),
currently there are only limited alternative sources of financing available to
Thrucomm. See "Management's Discussion and Analysis of Datalinc's Financial
Condition and Results of Operations - Liquidity and Capital Resources"). In
addition, Datalinc has guaranteed certain debt, most of which is due within one
year. Datalinc has also provided significant funding for the development of
Fastcom. These demands on Datalinc raise substantial doubt about its ability to
continue as a going concern. Fastcom is a development stage enterprise which
raises similar doubt about its ability to continue as a going concern.
Retention of Key Personnel
Thrucomm is substantially dependent upon the continued services and
management experience of John Kolenda, Chairman of the Board of Directors, and
Mark Gianinni, President. The loss of the services of Messrs. Kolenda or
Gianinni could have a material adverse effect upon Thrucomm.
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Technical Obsolescence
The communications industry has recently experienced significant
changes and technological developments. Such technological progress may result
in the development of techniques and equipment newer or more advanced than that
under development by Fastcom. In the event of such technological advances, the
equipment and software used by Fastcom may become, to some extent, less
efficient in providing services.
Final Agreement Concerning Fastcom's Proprietary Technology
Fastcom has reached final agreement with an engineering firm
concerning digital radios, but such agreement is not yet signed. See "Business -
Thrucomm Services - Digital Radios." If the agreement is not signed, Thrucomm
stockholders could be adversely affected.
Competition
Thrucomm's competition will be, as it currently is for the
Partnerships, traditional telephone line carriers, such as AT&T, MCI and to a
lesser extent, Sprint. Thrucomm will compete with many providers of data
communication services, all of which are larger, more established, more
experienced and better financed than the Partnerships and Thrucomm. Such firms
may be able to develop new products or communications systems superior to those
of Thrucomm, which could place Thrucomm at a significant competitive
disadvantage.
THE PARTIES
Datalinc, Ltd.
Datalinc is engaged in providing satellite-based communication
services to a variety of large corporate accounts with data centers based in
Ohio, Kentucky, and Indiana. Datalinc operates a satellite communication hub (
Hub ) located in Cincinnati, Ohio. A Hub links centralized computers, located in
the headquarters of a business, with other computers and data processing devices
located elsewhere in remote offices or stores. Data is transmitted to the Hub
via small satellite antenna dishes ( VSAT s ). The Hub system is used for a
variety of functions, such as verifying credit card transactions, order entry,
and inventory. The Hub has been in operation since November 1991.
Datalinc has eight groups of equity owners. The ownership structure of
Datalinc includes five series of limited partnership units: Series 100, 200,
300, 300E1, and 300E2 Limited Partnership Units (collectively, Datalinc s Units
, and the Limited Partners holding these Units shall hereafter be referred to as
Datalinc s
Investors ). The other three groups of equity ownership interests are Datalinc
s Management Incentive Plan, ICN and Certified Financial Group, Inc. (Datalinc s
"Other Equity Owners ). See Equity Ownership of the Partnerships, The General
Partners, and Interests of Certain Persons in the Reorganization.
Datalinc was organized as a Florida Limited Partnership in June 1989
and first began business in 1990. Its principal executive offices are located at
1641 Commerce Avenue North, St. Petersburg, FL 33716 and its telephone number is
(813) 576-1582. See Selected Financial Information and Business - Datalinc for a
more information regarding Datalinc.
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Fastcom, Ltd.
Fastcom is primarily engaged in the development of a wireless digital
communications network (the Network ) designed to meet the needs of the
electronic funds transfer ("EFT") industry. Fastcom was formed in 1994 to
develop, install, and operate the Network, formerly identified to Investors as
DATAPAC and/or THRUCOMM. The Network transmits authorization requests for debit
and credit cards at point of sale locations ("POS"), automated teller machine (
ATM ) transactions and similar transactions, and it transmits the corresponding
acceptances or rejections of such requests. Fastcom utilizes Datalinc s Hub as
its control center in this transmission process. The Network is based upon
Fastcom s proprietary radio technology. It is designed to displace current
terrestrial carriers (land lines), primarily telephone companies, by providing
better performance, and for certain users, a significantly lower-cost
alternative to terrestrial delivery systems. As of the date of this Consent
Statement/Prospectus, Fastcom has one customer using the Network and four
potential customers in the pilot stage. Datalinc initiated the development of
the technology used in the Network. The technology was contributed to Fastcom in
exchange for a limited partnership interest.
Fastcom has seven groups of equity owners. The ownership structure of
Fastcom includes three series of limited partnership units: Series 100, 100 EA,
and 200 Limited Partnership Units (collectively, Fastcom s
Units , and the Limited Partners holding these Units shall hereafter be
referred to as Fastcom s Investors ). The other four groups of equity owners are
FMI, Certified Financial Group, Inc., Datalinc, and Information Leasing
Corporation (collectively, Fastcom s Other Equity Owners ). Presently, Datalinc
owns 84.247% of the total equity interests of Fastcom, which represents 83.405%
of the limited partnership interests of Fastcom. See Equity Ownership of the
Partnerships, "The General Partners" and Interests of Certain Persons in the
Reorganization.
Fastcom was organized as a Florida Limited Partnership in March 1994.
Its principal executive offices are located at 1641 Commerce Avenue North, St.
Petersburg, FL 33716 and its telephone number is (813) 576-1582. See Selected
Financial Information" and "Business - Fastcom," for more information regarding
Fastcom.
Thrucomm, Inc.
Thrucomm is a wholly-owned subsidiary of Datalinc and was formed for
the sole purpose of consolidating the businesses of Datalinc and Fastcom and
reorganizing the Partnerships as a single corporate entity.
This will be accomplished by a "tax-free" reorganization
of
Thrucomm through the contribution of all of the assets
and liabilities of both of the Partnerships to Thrucomm, in receipt for the
Preferred Stock of Thrucomm. Thrucomm currently has no business activity, but
will begin operations upon the approval of the Reorganization by Datalinc's
Investors.
Thrucomm was organized as a Florida corporation in April 1997. Its
principal executive offices are located at 1641 Commerce Avenue North, St.
Petersburg, FL 33716 and its telephone number is (813) 576-1582. No Common Stock
has been issued pending the reorganization.
THE GENERAL PARTNERS
Integrated Communication Networks, Inc.
ICN is the managing general partner of Datalinc (Datalinc's "General
Partner"). ICN has the general responsibility for the management of, and the
ultimate authority affecting the business of, Datalinc. The Common Stock of
ICN is owned 50% by John Kolenda and 50% by Mark Gianinni.
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ICN was organized as a Florida corporation in June 1989. Its principal
executive offices are located at 1641 Commerce Avenue North, St. Petersburg, FL
33716 and its telephone number is (813) 576-1582. See "Equity Ownership of the
Partnerships" for more information regarding ICN.
Fastcom Management, Inc.
FMI is the managing general partner of Fastcom (Fastcom's "General
Partner"). FMI has the general responsibility for the management of, and the
ultimate authority affecting the business of, Fastcom. The Common Stock of FMI
is owned 50% by John Kolenda and 50% by Mark Gianinni.
FMI was organized as a Florida corporation in March 1994. Its
principal executive offices are located at 1641 Commerce Avenue North, St.
Petersburg, FL 33716 and its telephone number is (813) 576-1582. See Equity
Ownership of the Partnerships for more information regarding FMI.
BACKGROUND AND ALTERNATIVES TO THE REORGANIZATION
Background
The current business strategy of Fastcom is to finish the development
of the technology of the Network, to continue its marketing activities for the
Network, and to begin to deploy multiple sites in limited geographic areas. Both
Datalinc and Fastcom have experienced continual losses since their inceptions,
and additional capital is needed to implement the Partnerships' business plans.
Investment bankers and other investment professionals with whom the Partnerships
have recently discussed alternatives for additional liquidity have advised the
Partnerships that the complementary businesses of Datalinc and Fastcom would be
better served if the Partnerships were combined into a single corporate
structure. Traditionally, corporations have had greater success raising capital
than Partnerships. The consolidation and reorganization of the Partnerships into
a corporation should enhance the Partnerships' ability to raise some or all of
their needed capital from institutional investors, venture capital firms and
investment bankers, or a capital infusion by a strategic partner. The
continuation of the Partnerships as separate entities would restrict the
Partnerships' abilities to take advantage of these alternative opportunities for
capital formation.
While a liquidation is always an alternative available to the
Partnerships, the potential for growth in the wireless data communications
industry, and therefore the potential for future profitability of the Network
and the Hub are the primary reasons the General Partners rejected the
liquidation alternative at this time. Moreover, on a book value basis, a
liquidation of the Partnerships at this time would result in no return to the
Investors or the Other Equity Owners. See "Recommendation of the General
Partners."
THE REORGANIZATION AGREEMENT
Thrucomm, Fastcom, and Datalinc (collectively, the Parties ) have entered
into a Reorganization Agreement that provides for the consolidation of the
businesses of Datalinc and Fastcom, through a tax-free incorporation of their
assets and liabilities into a single corporate entity, Thrucomm. Pursuant to the
Reorganization Agreement, Datalinc and Fastcom shall transfer all of their
rights, title and interests in the assets and liabilities of the Partnerships to
Thrucomm. In exchange therefor, Datalinc will receive one (1) share of each
series of Thrucomm's Mandatory Convertible Preferred Stock, Series A-H, and
Fastcom will receive one (1) share of each series of Thrucomm's Mandatory
Convertible Preferred Stock, Series I-O.
The Preferred Stock will be held by Datalinc and Fastcom until Mandatory
Conversion, at which time the Preferred Stock will be converted into Underlying
Shares of Thrucomm's Common Stock. Following a Mandatory Conversion, Datalinc
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and Fastcom shall distribute the Underlying Shares to the Datalinc and Fastcom
Investors and the Partnerships will dissolve. Investors of the Partnerships will
become shareholders of Thrucomm, in effect, a corporate consolidation of the
businesses of the Partnerships.
The Preferred Stock
The Preferred Stock shall be mandatorily convertible into shares of
Thrucomm's Common Stock upon the earliest to occur of one of the following
events: (i) the completion of an initial public offering of Thrucomm's Common
Stock, raising a minimum of $15,000,000 in gross offering proceeds (an IPO ),
(ii) the sale of all or substantially all of the assets of Thrucomm (a Sale ),
or (iii) the merger of Thrucomm into a non-affiliated entity, whereby Thrucomm
is not the surviving entity (a Merger ) (collectively, the Mandatory Conversion
Events ). However, because the ultimate holders of the Underlying Shares of
Common Stock will have the right to vote for or against a Sale or Merger, in the
event of a Sale or Merger the Preferred Stock shall be mandatorily convertible
into shares of Thrucomm's Common Stock prior to a Sale or Merger based upon the
aggregate consideration to be received as a result of the proposed Sale or
Merger. In the event that a majority of the holders of the Common Stock
thereafter do not approve the proposed Sale or Merger, the number of Underlying
Shares of Common Stock then outstanding will remain outstanding based upon the
aggregate consideration that was proposed to be received as a result of that
proposed Sale or Merger and there shall be no further right to convert into
Underlying Shares of Thrucomm.
The precise number of Underlying Shares that will be issued upon Mandatory
Conversion is not presently ascertainable, because the number of Underlying
Shares will vary depending upon the valuation of Thrucomm for an IPO, Sale, or
Merger. The Directors have developed a formula, as set forth in the Certificate
of Rights and Preferences of the Preferred Stock (the "Formula"), for
calculating the proportionate number of Underlying Shares or other consideration
that Investors and Other Equity Owners will receive upon the occurrence of a
Mandatory Conversion Event. The Formula is designed to allocate Underlying
Shares or other consideration in a manner which is as consistent as possible
with the rights and preferences that each group of Investors or Other Equity
Owners now has under the Partnership Agreements. Due to the complexity of the
Formula, set forth in this Consent Statement/Prospectus are the Thrucomm
Ownership Tables, which provide examples of the application of the Formula and
assumptions at various Conversion Values of Thrucomm at the time of Mandatory
Conversion. See Description of the Securities - The Preferred Stock, "The
Formula Determining the Values of Thrucomm, Datalinc and Fastcom and
Thrucomm Ownership Tables.
Whereas the actual number of Underlying Shares and the aggregate value of
such shares depends upon the valuation of the business of Thrucomm at Mandatory
Conversion, there is no guarantee as to the value of Thrucomm Common Stock which
the Investors or Other Equity Owners will ultimately receive. In addition, there
can be no assurance that a Mandatory Conversion Event will occur or that
Investors will ever receive any of the Underlying Shares. See "Risk Factors and
Material Considerations."
RECOMMENDATION OF THE GENERAL PARTNER
Datalinc s General Partner recommends that the Datalinc Investors consent
to the Reorganization. This recommendation is based on a number of factors
summarized herein. In considering the Reorganization, ICN and FMI (collectively,
the General Partners ) have reviewed the financial conditions, result of
operations and cash flows of each of the Partnerships, on a historical and
prospective basis. They also considered the potential growth of the Partnerships
and the wireless communications business. The General Partners concluded, after
consultation with financial advisors, that the ability of the Partnerships to
access additional capital is restricted without the consolidation of the
Partnerships and the reorganization into a corporation, and that it would be in
the best interests of the Partnerships to reorganize as a single corporation.
The General Partners took into account the advantages and disadvantages of the
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Reorganization and concluded that the advantages outweighed the disadvantages
and Investors will benefit on a whole from any future growth of the combined
businesses. The Partnerships Units have no liquidity for the foreseeable future,
and the General Partners concluded that the Reorganization could increase the
potential for future liquidity for the Investors. The recommendation of the
General Partners is consistent with the business plans of both Partnerships, and
with the investment objectives of the Investors. In the course of reaching its
decision to approve the Reorganization Agreement, the General Partners consulted
with a financial advisor as to the fairness of the Formula from a financial
point of view. For a discussion of the factors considered by the General
Partners in reaching their recommendation, see "The Recommendation of the
General Partners."
OPINION OF THE GENERAL PARTNERS FINANCIAL ADVISOR
Michael Davis & Company, P.A. ("Michael Davis & Co.") has rendered its
opinion to the General Partners that the Formula as provided in the
Reorganization Agreement is fair from a financial point of view. A copy of such
opinion, dated May 1, 1997, is attached hereto as Appendix B and should be read
in its entirety with respect to assumptions made, matters considered and
limitations of the review undertaken by Michael Davis & Co. in rendering such
opinion. See "The Reorganization - Opinion of the General Partners' Financial
Advisor."
INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION
Certified Financial Group, Inc.
Certified Financial Group, Inc. is the parent and sole stockholder of
CFG Securities Corp, a member of the National Association of Securities Dealers,
Inc. ( CFG ). CFG was engaged to sell limited partnership interests of Datalinc
in connection with Datalinc's private offerings of its Series 200, 300, 300E1
and 300E2 Limited Partnership Units. Similarly, CFG was engaged as the
broker/dealer for the private placement of Fastcom s Series 100 and Series 200
Limited Partnership Units. In consideration of such services to Datalinc and
Fastcom, CFG and its assigns received options to acquire an aggregate 3.828%
limited partnership interest in Datalinc, from ICN, for $1 (the "Datalinc
Option"), and an aggregate 2.4% limited partnership interest in Fastcom, from
the Datalinc limited partnership interest, for $240,000 (the "Fastcom Option"
and collectively, the "CFG's Options"). Joseph F. Bert is President of Certified
Financial Group, Inc. and serves on the Board of Directors of ICN, FMI and
Thrucomm.
Certified Financial Group, Inc. was organized as a Florida corporation
in May 1989. CFG is a duly organized and validly existing Virginia corporation.
Certified Financial Group, Inc. is wholly-owned by Joseph F.Bert. Its principal
executive offices are located at 2180 W. State Road, Suite 1150, Longwood, FL
32779 and its telephone number is (407) 869-9800. See Certain Transactions -
Relationship with Certified Financial Group, Inc., "Equity Ownership of the
Partnerships" and "The Formula - CFG Units") for more information regarding CFG
and its Options.
Blue Chip/Datalinc Corporation
Datalinc, ICN, and Messrs. Kolenda and Gianinni, entered into
agreements with Blue Chip/Datalinc Corporation ("Blue Chip"), pursuant to which
Blue Chip agreed to purchase certain of Datalinc's Series 300 Limited
Partnership Units (the Blue Chip Agreements ). Under the Blue Chip Agreements,
Blue Chip received certain rights, interests, and preferences from ICN and
Messrs. Kolenda and Gianinni, which are in addition to those of other Investors
of those Units. To distinguish certain of the Series 300 Units purchased by Blue
Chip pursuant to the Blue Chip Agreements from other Series 300 Units purchased
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by other Investers , certain of the Series 300 Units have been designated herein
as the Series 300E1 and the Series 300E2 Limited Partnership Units. See "Equity
Ownership of the Partnerships."
Blue Chip s combined interests in Datalinc, after preferred
distributions, represents 13.76% of the ownership interests, and 28.752% of th
voting power of Datalinc. Z. David Patterson, Blue Chip s President,serves on
the Board of Directors of ICN, FMI and Thrucomm.
Blue Chip is a Delaware corporation, originally organized as an Ohio
corporation in February 1992, for the sole purpose of providing financing to
Datalinc. Blue Chip is a wholly-owned subsidiary of Blue Chip Capital Fund
Limited Partnership, a Delaware limited partnership ("Blue Chip Capital Fund").
The General Partner of Blue Chip Capital Fund is Blue Chip Venture Company, a
corporation which is owned 50% by Z. David Patterson. The principal executive
offices of Blue Chip, Blue Chip Capital Fund, and Blue Chip Venture Company are
located at 2000 PNC Center, 201 East Fifth Street, Cincinnati, Ohio 45202 and
their telephone number is (513) 723-2300. See "Interests of Certain Persons in
the Reorganization" and "Equity Ownership of the Partnerships" for more
information regarding Blue Chip.
Information Leasing Corporation
In November of 1995, Datalinc and Fastcom entered into an agreement
with Information Leasing Corporation ( ILC ) pursuant to which ILC leases to
Fastcom certain Network equipment, including radio equipment and personal earth
stations, and Fastcom subleases such equipment to its customers through
integrated service agreements between Fastcom and the customers. Fastcom
guarantees the integrated service agreements to ILC and ILC in turn uses such
integrated service agreements as collateral for the leases and equipment.
By agreement with ILC, Fastcom granted ILC one position on the Board
of Directors of FMI, subject to increase if necessary to maintain its initial
representation on the Board. ILC received an equity interest in Fastcom equal to
1% of the total equity of Fastcom for the first $1 million of equipment financed
under ILC leases. ILC transferred such 1% interest to Vincent Rinaldi and two of
his associates. Vincent Rinaldi, is President of ILC and serves as a director of
Thrucomm and FMI. See "Interests of Certain Persons in the Reorganization" and
"Equity Ownership of the Partnerships" for more information regarding ILC. ILC
is entitled to an additional .5% for each $3 million of equipment financed
thereafter, up to a total of 5% of the equity of Fastcom or its successors. As
of December 31, 1996, ILC had no equity interests in Fastcom, but as of May 1,
1997, ILC had acquired the 1% equity interest in Fastcom based upon $1 million
of equipment financed.
ILC was organized as an Ohio corporation in March 1984. Its principal
executive offices are located at 1023 West 8th Street, Cincinnati, Ohio 45203
and its telephone number is 513-421-9191. ILC was acquired in stock-for-stock
merger by Provident Bancorp, Inc. in December, 1996. ILC is now wholly-owned
subsidiary of Provident Bancorp, Inc.
Interlocking Boards
The Boards of Directors of Fastcom and Thrucomm are comprised of the
same six individuals, and five of such individuals, including Messrs. Kolenda,
Gianinni and Patterson, comprise the Board of Directors of ICN. See "Interests
of Certain Persons in the Reorganization - Conflicts of the General Partners and
the Board of Directors of Thrucomm" and "Management."
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Compensation Agreements and Other Employment Benefits
The current management agreements between ICN and Datalinc, and
between FMI and Fastcom (the Management Agreements ), will be terminated and
replaced by employment agreements between Thrucomm and Messrs. Kolenda and
Gianinni. Such employment agreements are currently being negotiated.
However, the Board of Directors of Thrucomm has
approved
base annual salaries of $150,000 for both Messrs.
Kolenda and Gianinni. In addition, Thrucomm has an Incentive and Non-Statutory
Stock Option Plan as well as a Non-Employee Directors' Non-Statutory Stock
Option Plan (collectively, the "Stock Option Plans ). All directors of the
Thrucomm Board shall be eligible to participate in the Stock Option Plans. See
Management Compensation and Stock Option Plans.
CERTAIN COMPARATIVE INFORMATION
The rights of the Investors and Other Equity Owners in the Partnerships are
presently governed by Florida Revised Uniform Limited Partnership Act (1986),
and the Amended Agreement of Limited Partnership of Datalinc Ltd., and/or the
Amended and Restated Agreement of Limited Partnership of Fastcom, Ltd. Until
Mandatory Conversion, Investors will not be shareholders of Thrucomm. Investors
will continue as limited partners of Datalinc and/or Fastcom, and their rights
as limited partners will remain unchanged until Mandatory Conversion.
After Mandatory Conversion, however, the Partnerships will be liquidated
and the Underlying Shares will be distributed to the Investors and Other Equity
Owners in the Partnerships. Thereafter, the Investors shall be shareholders of
Thrucomm, and as such, their rights as shareholders will be governed by the
Florida Business Corporation Act, Thrucomm s Articles of Incorporation, and its
Bylaws. Investors will lose certain rights which they have under the Partnership
Agreements, including the right to approve the issuance of additional equity.
See "Risk Factors and Material Considerations" and Comparative Rights of
Investors .
CONDITIONS, TERMINATION, AND AMENDMENT OF THE REORGANIZATION AGREEMENT
Consummation of the Reorganization is subject to a number of conditions,
including, among others: (i) the Reorganization Agreement shall have been
approved and adopted by the requisite vote of Datalinc Investors; (ii) the
Registration Statement filed with the Securities and Exchange Commission, of
which this Consent Statement/Prospectus forms a part, shall have become
effective and no stop order suspending such effectiveness shall have been issued
and remain in effect; (iii) no preliminary or permanent injunction or other
order or decree by any federal or state court or any action by any state or
federal governmental agency preventing the consummation of the Reorganization
shall have been issued or taken and remain in effect; and (iv) all consents,
orders and approvals legally required shall have been obtained and be in effect
at the Effective Time.
The Reorganization Agreement may be terminated (i) at any time by the
mutual consent of the Parties; (ii) unilaterally by any of the Parties if the
Reorganization has not been consummated prior to December 31, 1997, unless such
date is extended by mutual consent of the Parties; or (iii) unilaterally by any
of the Parties if any Party is unable to satisfy any of its pre-closing
covenants and obligations under the Reorganization Agreement.
Subject to compliance with applicable law, the Reorganization Agreement
may be amended at any time prior to or after its approval by Datalinc Investors
by a written agreement executed by all of the Parties. See Exhibit A to this
Consent Statement/Prospectus.
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SUMMARY OF TAX CONSEQUENCES
The Reorganization will be treated as a transfer of the assets of the
Partnerships to Thrucomm and the assumption of the Partnerships' liabilities by
Thrucomm in exchange for the Preferred Stock. Immediately after such transfer,
the persons who control Datalinc will control Thrucomm. Accordingly, other than
with respect to Datalinc Investors with a negative basis requiring recognition
of gain in the year in which the Reorganization is effected, no gain or loss
will be recognized by the Datalinc Investors or the Fastcom Investors as a
consequence of the Reorganization. The Investors have received an opinion from
Schifino & Fleischer, P.A., special counsel to Thrucomm, dated as of the date of
this Consent Statement/Prospectus (the Tax Opinion ), to the effect that as a
consequence of the Reorganization, other than with respect to Datalinc Investors
with a negative basis above, (i) the Investors will not recognize any gain or
loss in the transfer of the assets and assumption of the liabilities of the
Partnerships and (ii) the Investors will not recognize any gain or loss in the
subsequent distribution of the Underlying Shares. The Tax Opinion is based on
current law and various other assumptions as set forth in the copy of the Tax
Opinion which has been filed as an exhibit to the Registration Statement of
which this Consent Statement/Prospectus forms a part. See "The Proposed
Reorganization - Certain Tax Consequences of the Reorganization."
ACCOUNTING TREATMENT
It is intended that the Reorganization will be accounted for as transaction
among parties considered to be under common control treated similar to a pooling
of interest except for Fastcom's Series 100EA Units and the MIP Interests,
which are treated as a purchase. Accordingly, historical cost basis is used
for all Datalinc Investors and Datalinc's interest in Fastcom. The historical
basis of the Fastcom Series 100EA Investors and the MIP Interests have been
stepped up to fair market value to reflect the purchase method on these
minority interests in Fastcom. Fastcom's General Partner believes that
the equity interests of the Series 100 Units, Series 200 Units and CFG's Options
are recorded at historical basis and reflect fair value.
CONSENT PROCEDURES AND REQUIRED APPROVALS
Datalinc
The members of the Board of Directors of ICN, without dissent or
abstention, approved the Reorganization on behalf of Datalinc. Datalinc s
Partnership Agreement requires the Majority Vote of Limited Partners to approve
the Reorganization. The term Majority Vote is defined in Datalinc s Partnership
Agreement as the affirmative vote or written consent of the Limited Partners
then owning of record more than fifty percent (50%) of the outstanding voting
rights of Datalinc. If an Investor does not Consent to the Reorganization but
the Reorganization is approved by the requisite vote of other Limited Partners,
such Limited Partner is bound by such approval. The Board of Directors of ICN,
Datalinc s General Partner, believes that the proposed transaction is fair to
Investors and that approval of the Reorganization is in the best interests of
Datalinc and the Investors, and the General Partner unanimously recommends a
vote FOR approval and adoption of the Reorganization Agreement. See "Consent
Procedures and Required Approvals" and Recommendation of the General Partners.
Fastcom
Pursuant to Fastcom s Partnership Agreement, the affirmative vote or
written consent of the Limited Partners owning at least two-thirds ( ) of the
outstanding Units of Fastcom is necessary to approve and adopt the
Reorganization Agreement. Datalinc owns approximately 80% of all of the
outstanding Units of Fastcom and ICN, has given Datalinc s written consent to
Fastcom for the approval of the Reorganization Agreement. Datalinc s consent
alone is sufficient to give Fastcom's approval to the Reorganization. The Board
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of Directors of FMI approved the Reorganization without dissent or abstention.
See "Consent Procedures and Required Approvals" and Recommendation of the
General Partners.
Thrucomm
The Board of Directors of Thrucomm approved the Reorganization
Agreement without dissent or abstention.
APPRAISAL RIGHTS
The Investors are not entitled to appraisal rights under Florida law in
connection with the Reorganization. See "The Proposed Reorganization - Absence
of Appraisal Rights."
INVESTOR LIST
The Investors may obtain a list of Investors, at no charge, by making a
written request to ICN or FMI at their principal executive offices.
EFFECTIVE TIME
After all of the conditions set forth in the Reorganization Agreement have
been satisfied or waived, the Reorganization will become effective (the
Effective Time ). See "Consent Procedures and Required Approvals - Expiration
Date and Effective Time."
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SELECTED FINANCIAL INFORMATION
The following tables set forth certain selected financial information for
Datalinc and Fastcom. The selected financial information is derived from and
should be read in conjunction with the audited consolidated financial statements
of Datalinc and of Fastcom and the related notes thereto included in this
Consent Statement/Prospectus.
DATALINC, LTD.
(In thousands)
Year ended December 31,
------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
Statement of Operations Data:
Net access fees $ 508 $ 895 $ 1,516 $ 1,702 $ 2,094
Net equipment sales
& installation fees 1,420 1,254 2,728 467 3,738
------- ------- ------- ------- -------
Total revenue 1,928 2,149 4,244 2,169 5,832
Operating expenses
Cost of hub access services 703 847 1,101 1,171 1,349
Cost of equipment sales 1,104 1,033 2,386 285 3,315
Selling, general &
administrative 700 834 825 563 711
Research and development,
net of refund 0 223 (80) 0 0
Depreciation & amortization 560 469 397 327 473
(Income) loss from affiliate 0 0 567 (147) 482
Interest expense 33 31 8 97 159
------- ------- ------- ------- -------
Net loss $(1,172) $(1,288) $ (960) $ (127) $ (657)
======= ======= ======= ======= =======
Earnings per share (a)
Balance Sheet Data:
Cash and cash equivalents $109 $ 524 $ 11 $ 78 $ 25
Working capital (deficit) (255) 815 54 (538) (1,022)
Total assets 2,308 2,645 1,882 3,132 3,042
Total debt obligations,
less current portion 114 33 208 424 730
Total partners' equity 1,301 2,090 1,130 1,004 347
Book value per share (a) - - - - -
(a) As Datalinc is a partnership, no earnings per share or book value per share
amounts are presented.
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FASTCOM, LTD.
(In thousands)
For the nine
months from
inception through
December 31, Year ended December 31,
---------------- --------- ---------
1994 1995 1996
Statement of Operations Data:
Revenues - - $ 69
Expenses:
Operating, general &
administrative $ 253 $ 654 1,306
Research and development 309 278 365
Depreciation and amortization 2 27 107
Interest expense 2 11 7
--------- --------- ---------
Net loss $ (566) $ (970) $ (1,716)
========= ========= =========
Earnings per shares (a) - - -
Balance Sheet Data:
Cash and cash equivalents $ 1 $ 0 $ 12
Working capital (deficit) (563) (1,334) (1,632)
Total assets 125 205 1,028
Total debt obligations,
less current portion 0 0 142
Total partners' deficit (492) (1,129) (827)(b)
Book value per share (a) - - -
(a) As Fastcom is a partnership, no earnings per share or book value per share
amounts are presented.
(b) Net of $2,155,000 Mandatory Redeemable Partnership Interests of Fastcom's
Series 200 Investors.
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RISK FACTORS
THE REORGANIZATION AND THE BUSINESS TO BE CONDUCTED BY THRUCOMM SUBSEQUENT
TO THE CONSUMMATION OF THE REORGANIZATION INVOLVE CERTAIN ELEMENTS OF RISK. In
addition to the other information contained in this Consent
Statement/Prospectus, Datalinc Investors should review carefully the following
considerations regarding the Reorganization and the business of Thrucomm in
deciding whether to give their Consent for the Reorganization. Certain
capitalized terms used in this section are defined elsewhere in this Consent
Statement/Prospectus; cross references have been provided.
1. NO ASSURANCE OF MANDATORY CONVERSION EVENT
The Preferred Stock is mandatorily convertible into shares of Thrucomm's
Common Stock upon the earliest to occur of the following Mandatory Conversion
Events: (i) the completion of an Initial Public Offering of Thrucomm's Common
Stock raising a minimum of $15,000,000 of gross offering proceeds (the "IPO");
(ii) the sale of all or substantially all of the assets of Thrucomm (the
"Sale"); or (iii) the merger of Thrucomm into a non-affiliated entity, whereby
Thrucomm is not the surviving entity (the "Merger"). Datalinc cannot predict
when, if ever, a Mandatory Conversion Event will occur. Accordingly, there is no
guarantee that the Partnerships' Investors or Other Equity Owners will receive
any of the Underlying Shares of Thrucomm's Common Stock. IF A MANDATORY
CONVERSION EVENT DOES NOT OCCUR, THE MOST LIKELY REASON WILL BE THAT THRUCOMM
WILL NOT HAVE OBTAINED THE ADDITIONAL CAPITAL NECESSARY TO FURTHER DEVELOP ITS
BUSINESS. IF A MANDATORY CONVERSION EVENT DOES NOT OCCUR, THE PRIMARY PURPOSE OF
THE REORGANIZATION WILL NOT HAVE BEEN ACCOMPLISHED.
2. NUMBER OF UNDERLYING SHARES OR OTHER CONSIDERATION NOT PRESENTLY
ASCERTAINABLE
The number of Underlying Shares or other consideration that will be
allocated to the Investors and Other Equity Owners cannot be ascertained until
the occurrence of a Mandatory Conversion Event. The Mandatory Conversion Event
will determine the valuation of Thrucomm. In an IPO, the Conversion Value of
Thrucomm will be based upon the amount of equity sold in the offering and the
gross proceeds received therefor, and it may bear no relationship to Thrucomm's
ultimate value or earning potential. However, because the ultimate holders of
the Underlying Shares of Common Stock will have the right to vote for or against
a Sale or Merger, in the event of a Sale or Merger the Preferred Stock shall be
mandatorily convertible into shares of Thrucomm's Common Stock prior to a Sale
or Merger based upon the aggregate consideration to be received as a result of
the proposed Sale or Merger. In the event that a majority of the holders of the
Common Stock thereafter do not approve the proposed Sale or Merger, the number
of Underlying Shares of Common Stock then outstanding will remain outstanding
based upon the aggregate consideration that was proposed to be received as a
result of that proposed Sale or Merger and there shall be no further right to
convert into Underlying Shares of Thrucomm.
Because the actual number and value of the Underlying Shares, or other
consideration that Investors and Other Equity Owners may ultimately receive in a
Mandatory Conversion is not presently ascertainable, there is no guarantee as to
the value an Investor or Other Equity Owner will receive, if any, if the
Datalinc Investors approve the Reorganization Agreement.
3. NO INDEPENDENT REPRESENTATIVE FOR THE DATALINC INVESTORS
ICN, FMI and Thrucomm have established the relative values of Datalinc and
Fastcom in a Mandatory Conversion. The Conversion Value of Thrucomm will be
allocated to Datalinc and Fastcom as follows: (i) thirty percent (30%) to
Datalinc and seventy percent (70%) to Fastcom, assuming a Conversion Value of
$30 million; (ii) twenty-five percent (25%) to Datalinc and seventy-five percent
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(75%) to Fastcom, assuming a Conversion Value of $60 million; and (iii) twenty
percent (20%) to Datalinc and eighty percent (80%) to Fastcom, assuming a
Conversion Value of $90 million. In addition there are equations for
establishing the values of Datalinc and Fastcom if the Conversion Value of
Thrucomm is somewhere in between. In any event, the minimum Datalinc Value will
be $9,000,000, and the Fastcom Value will always be the difference between the
Conversion Value of Thrucomm and the Datalinc Value. The method for allocating
the Conversion Value of Thrucomm among Fastcom and Datalinc is based upon the
business judgement and the conclusions of the General Partners of Datalinc and
Fastcom, and of Thrucomm, including the belief that most of any Conversion Value
of Thrucomm in excess of $30 million is attributable to the business of Fastcom,
rather than Datalinc. See "The Formula - Determining the Values of Thrucomm,
Datalinc and Fastcom."
The General Partners did not engage an independent representative for the
Investors to determine the values of the Partnerships in the Formula for the
following reasons: (i) the General Partners have obtained the opinion of Michael
T. Davis & Company, P. A., an independent certified public accountant, to the
effect that the Reorganization is fair, from a financial point of view, to the
Datalinc Investors compared with the Fastcom Investors; (ii) Datalinc owns a
significant percentage of Fastcom and will receive approximately 80% of the
value the General Partners assigned to Fastcom; and (iii) more than doubling of
the Datalinc Value in the Formula, for comparison purposes, has no material
effect on the Datalinc Investors equity interest in Thrucomm. However, the
Investors did not have the benefit of independent representation and it is
possible that the valuations and other terms of the Reorganization may not be as
favorable to the Datalinc Investors as the terms that an independent
representative might have obtained for them.
4. OPERATING LOSSES OF DATALINC AND FASTCOM; NEED FOR ADDITIONAL FUNDS AFTER
REORGANIZATION; LIMITED ALTERNATIVE SOURCES OF FINANCING
Datalinc has experienced continual operating losses since its inception,
including a loss of $656,549 for fiscal year 1996, which includes a portion of
Fastcom's loss of $481,752. Fastcom has also experienced continual operating
losses since its inception, including a loss of $1,716,040 for fiscal year 1996.
In addition, Datalinc has guaranteed certain debt, most of which is due within
one year. Datalinc has also provided significant funding for the development of
Fastcom. These demands on Datalinc raise substantial doubt about its ability to
continue as a going concern. Fastcom is a development stage enterprise which
raises similar doubt about its ability to continue as a going concern. There can
be no assurances that the business of Thrucomm after the Reorganization will
operate profitably. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Thrucomm will need additional funds to operate after the Reorganization.
Thrucomm anticipates that it will incur significant negative cash flow from its
operations subsequent to the Reorganization. Other than funds generated from the
operation of the business and any funds available under Thrucomm's Line of
Credit, currently there are only limited alternative sources of financing
available to Thrucomm. Although Thrucomm anticipates securing such funds in
connection with a Mandatory Conversion Event, there is no assurance that a
Mandatory Conversion Event will occur. If Thrucomm is not able to obtain
additional funds or obtain such funds on terms and conditions acceptable to
Thrucomm, the business of Thrucomm and in particular the development of the
Network may be adversely affected. See "Business" and "Management's Discussion
and Analysis of Datalinc's Financial Condition and Results of Operations -
Liquidity and Capital Resources" and "Management's Discussion and Analysis of
Fastcom's Financial Condition and Results of Development."
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5. ISSUANCE OF ADDITIONAL COMMON OR PREFERRED STOCK; DILUTION
The Thrucomm Board is empowered, without stockholder approval, to issue
authorized and unissued Common Stock and Preferred Stock, which Preferred Stock
may have dividend, liquidation, conversion, voting or other rights which could
adversely affect the rights of the Investors, including dilution through a
reduction in the number of Underlying Shares issued to them upon Mandatory
Conversion of the Preferred Stock. In the event of issuance, additional
Preferred Stock could be utilized, under certain circumstances, as a method of
discouraging and delaying or preventing a change of control of Thrucomm.
Fastcom is currently attempting to raise additional interim funds through
the sale of equity. If any such sale occurs before the Reorganization, it is
anticipated that Thrucomm will issue additional shares of Preferred Stock in the
Reorganization to persons providing such equity financing, which will result in
dilution to all of the Investors and Other Equity Owners.
Thrucomm may need interim financing after the Reorganization and before a
potential investment by an institutional investor, venture capital firm or a
public offering by an investment banking firm. A sale of equity by Thrucomm
after the Reorganization may also result in dilution to the Datalinc and Fastcom
Investors.
6. NO DIVIDENDS FROM THRUCOMM
Thrucomm has never paid cash dividends on its Common Stock or Preferred
Stock and does not anticipate paying any cash dividends in the foreseeable
future. Thrucomm intends to reinvest any funds that might otherwise be available
for the payment of dividends in further development of its business following
the Reorganization. See "The Proposed Reorganization - Operations after the
Reorganization - Change in Organizational and Related Tax Status; Dividend
Policy " and "Description of Thrucomm Securities - Dividend Policy."
7. INTEREST OF CERTAIN PERSONS IN THE REORGANIZATION
The Boards of Directors of FMI and Thrucomm are comprised of the same six
individuals, and five of such individuals, including John Kolenda, Mark Gianinni
and David Patterson, comprise the Board of Directors of ICN.
Pursuant to the Blue Chip Agreements by and among Blue Chip, ICN, John
Kolenda, and Mark Gianinni, Messrs. Kolenda and Gianinni, who are also the sole
stockholders of ICN, have agreed to vote their stock such that they and a
designee of Blue Chip, which is an affiliate of Mr. Patterson, comprise the
majority of the Board of Directors of ICN. Blue Chip will be given the right to
designate one member of the Board of Directors of Thrucomm. As such, these
individuals will continue to control the business and affairs of the combined
business of Thrucomm, Datalinc and Fastcom. Board members will directly or
indirectly receive Preferred Stock as a result of the consummation of the
Reorganization. See "Principal Stockholders of Thrucomm."
In addition, pursuant to the Blue Chip Agreements, among other
provisions,
Blue Chip has certain
preferential rights, which affect, among other matters, the number of Underlying
Shares to be issued to it upon conversion of the Preferred Stock, Series D and
E, and certain registration rights for such Underlying Shares, and rights of
first refusal to purchase equity interests offered by Thrucomm.
The current Management Agreements between Datalinc and ICN and between FMI
and Fastcom will be terminated and replaced by employment agreements between
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Thrucomm and Messrs. Kolenda and Gianinni, pursuant to which they will receive
compensation in an amount which is greater than that which they are currently
receiving as a result of the Management Agreements. See "Management -
Comparative Compensation Information." In addition, all Directors will be able
to participate in Thrucomm's Incentive Stock Option Plans. See "Management -
Incentive Stock Option Plans."
All of the foregoing constitute conflicts of interest of the Directors in
connection with the Reorganization and the continuation of the business of the
Partnerships through Thrucomm after the Reorganization.
8. CHANGE IN ORGANIZATIONAL AND RELATED TAX STATUS
Since their respective inceptions, the businesses of Datalinc and Fastcom
have been operated as partnerships under the Internal Revenue Code. Upon the
consummation of the Reorganization, the businesses of Datalinc and Fastcom will
be operated in a single C corporation and will become subject to federal and
state income taxes. Unlike distributions in the current Partnerships, dividends,
if any, from Thrucomm, a corporation, will be subject to tax at the corporate
level and at the individual shareholder level. See "Comparative Rights of
Investors" and "Certain Tax Consequences of the Reorganization." However, upon
the consummation of the Reorganization, but before the occurrence of a Mandatory
Conversion Event, the Investors will remain limited partners of their respective
Partnerships.
9. SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Mandatory Conversion, all Underlying Shares issued
thereunder to Datalinc Investors and Fastcom Investors, who are not affiliates
of Thrucomm, will be issued pursuant to Section 3(a)(9) of the Securities Act,
and thus are immediately eligible for sale under Rules 144 and 145 of the
Securities Act. Under Rules 144 and 145 of the Securities Act, affiliates of
Thrucomm may, every three months, sell in ordinary brokerage transactions or in
transactions directly with a market maker, an amount equal to the greater of one
percent of the issuer's outstanding common stock or the average weekly trading
volume during the four calendar weeks prior to the sale.
Under the terms of the Blue Chip Agreements, Blue Chip has certain
registration rights for the Underlying Shares which it will receive upon
Mandatory Conversion of the Series D and E Preferred Stock. The effect of
registering such shares is that, subject to applicable law, such shares, when
properly issued by Thrucomm, shall be freely tradeable securities.
10. NO MARKET FOR SECURITIES; VOLATILITY OF STOCK PRICE
There is no market for the Preferred Stock or the Underlying Shares to be
issued upon Mandatory Conversion thereof. It is not anticipated that there will
be a market for the Preferred Stock.
There can be no assurances that an established trading market will develop
for the Underlying Shares. The market price of the Underlying Shares could be
subject to significant fluctuations in response to Thrucomm's operating results
and other factors. In addition, the stock market in recent years has experienced
extreme price and volume fluctuations that either have been unrelated or
disproportionate to the operating performance of companies. These fluctuations,
as well as general economic and market conditions, may adversely affect the
market price of the Underlying Shares.
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11. CERTAIN PROVISIONS OF THRUCOMM'S ARTICLES OF INCORPORATION
Thrucomm's Articles of Incorporation provide, among other things, that
officers and directors of Thrucomm will be indemnified to the fullest extent
permitted under Florida law. In addition, Thrucomm has not opted out of the
provisions of Sections 607.0901 and 607.0902 of the Florida Business Corporation
Act and other laws relating thereto. Thrucomm will be subject to the
anti-takeover provisions of Florida law which provide that certain transactions
between Thrucomm and an "interested shareholder" or any affiliate or associate
of an "interested shareholder" be approved by the affirmative vote of the
holders of two-thirds of the voting shares, other than shares beneficially owned
by the "interested shareholder." An "interested shareholder," is any person who
is the beneficial owner of more than 10 percent of the outstanding shares of all
classes or series of the corporation entitled to vote generally in the election
of directors. Thrucomm will also be subject to the provisions of Florida law
which provide for, subject to the approval of Thrucomm's shareholders, the
denial of corporate control to an acquirer of "control shares" of an "issuing
public corporation" acquired in a "control share acquisition," by extinguishing
the voting rights of such shares, as such terms are defined under Section
607.0902 of the Florida Business Corporation Act. See "Comparison of Rights of
Investors - Anti-takeover Provisions."
12. RELIANCE ON KEY PERSONNEL
Thrucomm is substantially dependent upon the continued services and
management experience of John Kolenda, Chairman of the Board of Directors, and
Mark Gianinni, President. The loss of the services of Messrs. Kolenda or
Gianinni could have a material adverse effect upon Thrucomm. Datalinc carries
"key man" life insurance policies in the amount of $2,000,000 on Mr. Gianinni
and $1,000,000 on Mr. Kolenda, which will be transferred to Thrucomm in
connection with the Reorganization. See "Management."
13. UNCERTAINTIES REGARDING MANAGEMENT'S COMPENSATION AFTER INVESTORS' CONSENT
After approval of the Reorganization Agreement, the Management Fee
contracts with ICN and FMI will terminate and Messrs. Kolenda and Gianinni will
enter into employment agreements with Thrucomm, the terms of which are subject
to negotiation. The Board of Directors of Thrucomm has, however, approved base
annual salaries of $150,000 for both Messrs. Kolenda and Gianinni.
Presently, Investors are not able to fully compare the compensation
currently payable to the General Partners with the compensation to be payable
to Messrs. Kolenda and Gianinni by Thrucomm after the Reorganization, and the
effects of such future compensation arrangements are presently, unascertainable.
See "Management - Comparative Compensation Information."
14. CONTROL BY CERTAIN STOCKHOLDERS
After the Effective Time of the Reorganization, all outstanding voting
securities of Thrucomm will be owned by Datalinc. The power to vote such
securities rests entirely with the Board of Directors of ICN. By virtue of the
foregoing and the terms of the Blue Chip Agreement, until the Preferred Stock is
converted and the Underlying Shares are distributed, Messrs. Kolenda, Gianinni
and Patterson will be able to effectively control the election of the Board of
Directors of Thrucomm and thereby direct its policies.
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15. CERTAIN RISKS RELATED TO THE BUSINESS OF THRUCOMM AFTER THE
REORGANIZATION
The business operated by Thrucomm after the Reorganization will be subject
to the same risks as the businesses currently operated by Datalinc and Fastcom
prior to the Reorganization, including those set forth below.
a. TECHNOLOGICAL OBSOLESCENCE
The communications industry has recently experienced significant
changes and technological developments. Such technological progress may result
in the development of techniques and equipment newer or more advanced than that
used by Fastcom. In the event of such technological advances, the equipment and
software used by Fastcom may become, to some extent, less efficient in providing
services.
b. COMPETITION
Thrucomm will compete with many providers of data communication
services, most of which are larger and more established, experienced and better
financed than Thrucomm. Those firms may be able to develop new products or
communications systems superior to those of Thrucomm, which could place Thrucomm
at a significant competitive disadvantage.
c. GOVERNMENTAL REGULATION
Thrucomm's operations will be subject to regulation by the Federal
Communications Commission. See "Business - Government Regulation." There is no
assurance that the requirements to comply with existing or future laws, statutes
and regulations will not adversely affect the business and operations of
Thrucomm.
d. FINAL AGREEMENT CONCERNING DIGITAL RADIOS
Fastcom has reached final agreement with the engineering firm
concerning digital radios, but such agreement is not yet signed. See "Business -
Fastcom - Research and Development." If the agreement is not signed, Investors
could be adversely affected.
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THRUCOMM, INC.
---------------------
THE REORGANIZATION
BACKGROUND OF THE REORGANIZATION
The current business strategy of Fastcom is to finish the development of
the technology of the Network, to continue its marketing activities for the
Network, and to begin to deploy multiple sites in limited geographic areas. Both
Datalinc and Fastcom have experienced continual losses since their inceptions,
and additional capital is needed to implement the Partnerships' business plans.
Investment bankers and other investment professionals with whom the Partnerships
have recently discussed alternatives for additional liquidity have advised the
Partnerships that the complementary businesses of Datalinc and Fastcom should be
combined into a single corporate structure. Traditionally, corporations have had
greater success raising capital than partnerships. The consolidation and
reorganization of the Partnerships into a corporation should enhance the
Partnerships' ability to raise some or all of their needed capital from
institutional investors, venture capital firms and investment bankers, or a
capital infusion by a strategic partner.
The potential for growth in the wireless data communications industry, and
therefore the potential for future profitability of the Network and the Hub, are
the primary reasons for rejecting a liquidation. Moreover, on a book value
basis, a liquidation at this time would result in no return to Investors or
Other Equity Owners of the Partnerships. See "The Proposed Reorganization -
Reasons for the Reorganization" and "Recommendation of the Datalinc General
Partner."
THE REORGANIZATION AGREEMENT
The following is a brief summary of certain terms and provisions of the
Reorganization Agreement. This summary does not purport to be complete, and it
is qualified in its entirety by reference to the Reorganization Agreement, which
is attached to this Consent Statement/Prospectus as Appendix A and is
incorporated herein by reference. All Investors are urged to read the
Reorganization Agreement in its entirety. The Reorganization was initiated by
the General Partners of Fastcom and Datalinc and by the Board of Directors of
Thrucomm, all of which participated in structuring this transaction.
The Reorganization
Thrucomm, Fastcom and Datalinc have entered into a Reorganization
Agreement that provides for the consolidation of the businesses of Datalinc and
Fastcom, and the reorganization of the Partnerships into a single corporate
entity, for the reasons including the completion of the technology of the
Network, and the facilitation of the ability to obtain the additional capital
needed to develop the complimentary businesses of Datalinc and Fastcom. As soon
as practicable after the Effective Time, Datalinc and Fastcom shall transfer all
of their rights, title and interests in the assets and liabilities of the
Partnerships to Thrucomm. In exchange therefor, Datalinc will receive one (1)
share of each series of Thrucomm's Preferred Stock, Series A-H, and Fastcom will
receive one (1) share of each series of Thrucomm's Preferred Stock, Series I-O.
The Preferred Stock will be held by the Partnerships, and the Datalinc and
Fastcom Investors shall remain Limited Partners in Fastcom and/or Datalinc.
Whereas Datalinc currently owns the only outstanding share of Thrucomm's
Common Stock, Thrucomm will remain a 100% controlled subsidiary of Datalinc
and Datalinc s sole other asset will be the Preferred Stock, Series A-H.
Fastcom's sole asset will be the Preferred Stock, Series I-O. Datalinc and
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Fastcom will cease operations of the Hub and the Network, and Thrucomm will
continue the Partnerships former businesses under a single corporate management.
Fastcom and Datalinc will hold the Preferred Stock until the
occurrence of a Mandatory Conversion Event, at which time the Preferred Stock
will be converted into the Underlying Shares of Thrucomm's Common Stock.
Following a Mandatory Conversion, Datalinc and Fastcom will commence dissolution
of the Partnerships and the assets of the Partnerships, the Underlying Shares,
shall be distributed to the Investors. Upon dissolution of the Partnerships and
the distribution of the Underlying Shares, Datalinc s and Fastcom s Investors
will become shareholders of Thrucomm. Thrucomm will be the corporate
consolidation of the businesses and equity owner of the former Partnerships.
Conditions Precedent to the Reorganization
The respective obligations of Datalinc, Fastcom and Thrucomm to effect
the Reorganization are subject to a number of conditions unless waived, to the
extent legally permitted. Such conditions include: (i) the Reorganization shall
have been approved and adopted by the requisite vote of Datalinc Investors; (ii)
the Registration Statement, of which this Consent Statement/Prospectus form a
part, shall have become effective and no stop order suspending such
effectiveness shall have been issued and remain in effect; (iii) no preliminary
or permanent injunction or other order or decree by any federal or state court
or any action by any state or federal governmental agency preventing the
consummation of the Reorganization shall have been issued or taken and remain in
effect; and (iv) all consents, orders and approvals legally required shall have
been obtained and be in effect at the Effective Time.
Right to Terminate, Amend or Waive Conditions
The Reorganization Agreement provides that it may be terminated: (i)
at any time by the mutual consent of the Parties; (ii) unilaterally by any of
the Parties if the Reorganization has not been consummated prior to December 31,
1997, unless such date is extended by mutual consent of the Parties; or (iii)
unilaterally by any of the Parties if any Party is unable to satisfy any of its
pre-closing covenants and obligations under such Reorganization Agreement.
Subject to compliance with applicable law, the Reorganization Agreement may be
amended at any time prior to or after its approval by the Investors by a written
agreement executed by all of the Parties. However, the provisions relating to
the Formula may not be amended after the Effective Time in a manner to reduce or
modify in any material respect the value to be received by the Investors without
the further approval of Investors entitled to vote thereon.
Absence of Appraisal Rights
Investors of Datalinc and Fastcom are not entitled to appraisal rights
under Florida law in connection with the Reorganization.
Accounting Treatment
It is intended that the Reorganization will be accounted for as
transaction among parties considered to be under common control treated similar
to a pooling of interest except for Fastcom's Series 100EA Units and the MIP
Interests, which are treated as a purchase. Accordingly, historical cost basis
is used for all Datalinc Investors and Datalinc's interest in Fastcom. The
historical basis of the Fastcom Series 100EA Investors and the MIP Interests
have been stepped up to fair market value to reflect the purchase method on
these minority interests in Fastcom. Fastcom's General Partner
believes that the equity interests of the Series 100 Units, Series 200 Units and
CFG's Options are recorded at historical basis and reflect fair value.
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Expenses
The Reorganization Agreement provides that, whether or not the
Reorganization is consummated, all expenses incurred in connection with the
Reorganization Agreement and the transactions contemplated thereby will be borne
equally by Datalinc and Fastcom.
Operations After the Reorganization
Operating and Investment Strategies
It is not anticipated that there will be any material change in the
operating or investment strategies, including those with respect to borrowings,
of Datalinc or Fastcom before the Reorganization and Thrucomm after the
Reorganization. Datalinc has experienced continual operating losses since its
inception, including a loss of $656,549 for fiscal year 1996, which includes a
portion of Fastcom's loss of $481,752. Fastcom has also experienced continual
operating losses since its inception, including a loss of $1,716,040 for fiscal
year 1996. There can be no assurances that the business of Thrucomm after the
Reorganization will operate profitably. There will be no change in Thrucomm's
current directors or executive officers. See "Management" for information as to
the executive officers and directors of Thrucomm. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Need for Additional Funds after Reorganization; Alternative Sources of
Financing
Thrucomm will need additional funds to continue operations subsequent
to the closing of the Reorganization. Thrucomm anticipates that it will incur
significant negative cash flow from operations after the Reorganization. Other
than funds generated from the operation of the business and any funds available
under the Line of Credit, Thrucomm s sources of financing are limited and the
Reorganization has been proposed to enhance the Partnerships' abilities to
secure additional financing. Although Thrucomm anticipates securing such funds
in connection with a Mandatory Conversion Event, there is no assurance that a
Mandatory Conversion Event will occur. However, the Board of Directors of
Thrucomm believe that the acquisition of additional financing will be
facilitated by the Reorganization, and that the failure to effect the
Reorganization could have a material adverse effect on the ability to develop
the Network. If Thrucomm is not able to obtain additional funds or obtain such
funds on terms and conditions acceptable to it, the business of Thrucomm and, in
particular the development of the Network, may be adversely affected. See "Risk
Factors," "Business" and "Management's Discussion and Analysis of Datalinc's
Financial Condition and Results of Operations" and "Management's Discussion and
Analysis of Fastcom's Financial Condition and Results of Development."
INTERESTS OF CERTAIN PERSONS IN THE REORGANIZATION
Conflicts of General Partners and the Board of Directors of Thrucomm
In considering the recommendation of the Directors of ICN, FMI and
Thrucomm, Investors should be aware that the Directors have personal financial
interests in the Reorganization. The Board of Directors of Thrucomm and FMI are
composed of the same individuals: John Kolenda, Mark Gianinni, Joseph Bert, Z.
David Patterson, R. Brandon Harrison, and Vincent Rinaldi. The Board of
Directors of ICN is composed of five of the same Directors; Mr. Rinaldi,
excepted. See "Certain Relationships".
The determination of the Formula, especially the allocation of the
Conversion Value of Thrucomm into the Datalinc Value and the Fastcom Value was
made by the Boards of ICN, FMI and Thrucomm, and their determination involves
inherent conflicts of interest. As General Partners, ICN and FMI owe fiduciary
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duties to the Partnerships and the Investors. While the General Partners believe
that they have fulfilled these obligations in their determination of the
Formula, which is supported in part by the Fairness Opinion of Michael Davis &
Company, P.A., no degree of objectivity or professional competence can eliminate
the inherent conflicts of interest.
Certain members of the Partnerships' management and of the Board of
Directors of ICN may be deemed to have interests in the Reorganization in
addition to their interests, if any, as equity owners of the Partnerships
generally. These interests include, among others, (i) certain management fees
shall be replaced with proposed employment agreements (which are being
negotiated); (ii) all of the members of the Boards of Directors of ICN and FMI
are directors of Thrucomm; and (iii) provisions to indemnify present and former
directors, officers and agents of Thrucomm from and after the Reorganization
against certain liabilities arising prior to the Reorganization to the fullest
extent permitted under Florida law, the Thrucomm articles, and the Thrucomm
By-laws.
Blue Chip/Datalinc Corporation
Blue Chip, a Delaware corporation, was initially organized as an Ohio
corporation in February 1992, for the sole purpose of providing financing to
Datalinc. On April 30 and September 1,1993, Datalinc, ICN, and Messrs. Kolenda
and Gianinni, entered into agreements with Blue Chip, pursuant to which Blue
Chip agreed to purchase one hundred eighty (180) of Datalinc's Series 300E1
Limited Partnership Units, and two hundred (200) Series 300E2 Limited
Partnership Units. Under the Blue Chip Agreements, Blue Chip received certain
rights, interests, and preferences, in addition to those it holds as an Investor
in the Series 300E1 and the Series 300E2 Units.
Pursuant to the Blue Chip Agreements, Blue Chip shall be entitled to
receive from ICN a return on its investment equal to three times the amount of
its total Capital Contribution of $1,900,000. In the event the aforementioned
condition was not satisfied by December 31, 1996 (which it was not), Blue Chip
shall be entitled to receive from ICN in lieu of an amount equal to three times
its investment, an amount equal to an average of 35% per annum rate of return on
Blue Chip's Capital Contribution, less any distributions, plus Blue Chip's
Capital Contribution, which totals in excess of $6,000,000, as of May 1, 1997.
Blue Chip has provided ICN with a letter extending the Blue Chip Agreements. ICN
has agreed to escrow certain Distributions otherwise payable to ICN as an
assurance that Blue Chip will receive the specified return on its investment.
Blue Chip's return on its Capital Contribution is payable solely from ICN's
Distributions and not out of Distributions reserved to the Investors. In
addition, ICN has agreed to certain restrictions on its right to transfer its
interest in Datalinc. Messrs. Kolenda and Gianinni have agreed to elect a
nominee of Blue Chip to the Board of Directors of ICN and they have agreed to
certain restrictions on their right to transfer their stock in ICN, and to
certain employment restrictions. Blue Chip has been granted certain registration
rights in the event Datalinc or its successor should register its securities
under the Securities Act, and certain rights of first refusal to purchase
interests in Datalinc and ICN.
Blue Chip s combined interests in Datalinc, after preferred
distribution, represents 13.76% of the ownership interests, and 28.752% of the
voting power of Datalinc. Z. David Patterson, Blue Chip s President, serves on
the Board of Directors of ICN, FMI and Thrucomm.
Certified Financial Group, Inc.
CFG was engaged to sell limited partnership interests of Datalinc in
connection with Datalinc's private offerings of its Series 200, 300, 300E1 and
300E2 Limited Partnership Units. Similarly, CFG was engaged as the broker/dealer
for the private placement of Fastcom's Series 100 and Series 200 Limited
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Partnership Units. In consideration of such services to Datalinc and Fastcom,
CFG received options to acquire an aggregate 3.828% limited partnership interest
in Datalinc from ICN for $1 (the "Datalinc Option"), and an aggregate 2.4%
limited partnership interest in Fastcom from Datalinc for $240,000 (the "Fastcom
Option" and collectively, the "CFG's Options"). The CFG Options are for limited
partnership interests in the Partnerships from the interests of ICN and Datalinc
and are not dilutive of the limited partnership interests of the Investors.
Joseph F. Bert, President of Certified Financial Group, Inc., the parent and
sole stockholder of CFG,
serves on the Board of Directors of ICN,
FMI and Thrucomm. See "Equity Ownership of the Partnerships" and "The Formula -
CFG Units") for more information regarding CFG and its Options.
Information Leasing Corporation
In November of 1995, Datalinc and Fastcom agreed (the ILC Agreement )
to enter into a master leasing agreement ( MLA ) with ILC. Under the MLA, ILC
leases to Fastcom certain Network equipment, including radio equipment and
personal earth stations. Fastcom enters into integrated service agreements with
its customers pursuant to which it subleases such Network equipment listed on
the lease schedule and provides integral services to the customer based on its
use of certain Hub access equipment. The Partnerships conditionally assign the
integrated service agreements to ILC or ILC s lender and ILC conditionally
assigns certain rights under MLA to the lender, if any. The customer is directed
to make one periodic payment, which covers both the equipment and the services,
to ILC or the lender, which will act as a paying agent. The paying agent in turn
distributes the lessee's payment, as agreed between the parties, and retains the
portion allocable to amortize ILC s recourse or non-recourse debt on the
equipment, or pays it to ILC as appropriate. In addition, the ILC Agreement
provides that Fastcom will grant ILC one position on the Board of Directors of
FMI. The number of directorships that ILC will have the right to hold is subject
to increase if necessary to maintain its initial representation on the Board.
ILC was also granted the right to receive an equity interest in Fastcom, or its
successors, equal to 1% of the total equity of Fastcom for the first $1 million
of equipment financed under ILC leases, and an additional .5% for each $3
million of equipment financed thereafter, up to a total of 5% of the equity of
Fastcom. No equity will be earned if less than $1 million of lease financing is
provided, but after the $1 million level is reached in lease financings,
additional equity will be given to ILC on a pro rated basis at the .5% rate for
each $3 million. As of May 1, 1997, ILC had acquired a 1% equity interest in
Fastcom.
ILC was acquired in a stock-for-stock acquisition by Provident
Bancorp, Inc. of Cincinnati, Ohio, in December, 1996. Vincent Rinaldi, the
former owner of 50% of ILC, has remained with ILC serving as its President and
Chief Executive Officer. Pursuant to the ILC Agreement, Mr. Rinaldi serves as a
director of Thrucomm and Fastcom.
EQUITY OWNERSHIP OF THE PARTNERSHIPS
The following is a summary of the equity interests of the various Investors
and Other Equity Owners of Datalinc and Fastcom, before giving effect to the
Reorganization. Certain capitalized terms used herein are defined in the
Confidential Private Placement Memorandums provided to the Datalinc Investors in
connection with their subscriptions for Datalinc s Series 100, 200, 300, 300E1
and/or 300E2 Limited Partnership Units, in the Confidential Private Placement
Memorandums provided to the Fastcom Investors in connection with their
subscriptions for Fastcom's Series 100, 100EA, and 200 Limited Partnership Units
and in the Amended Agreement of Limited Partnership of Datalinc, Ltd., the
Amended and Restated Agreement of Limited Partnership of Fastcom, Ltd.
(singularly, Datalinc's or Fastcom's Partnership Agreement," and collectively,
the "Partnership Agreements"), and as defined in the Datalinc, Ltd. Management
Incentive Plan (the "Plan"). The descriptions in this Consent
Statement/Prospectus with respect to the aforementioned documents are not
designed to be complete and are therefore qualified in their entirety by
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reference to the respective documents. See "The Formula - Determining the Values
of Thrucomm, Datalinc and Fastcom and Thrucomm Ownership Tables for information
regarding the equity interests of the Investors and Other Equity Owners after
Reorganization and Mandatory Conversion.
THE DATALINC INVESTORS
Series 100 Units
On December 31, 1989, Datalinc completed an offering of $1,632,000 of
its Series 100 Limited Partnership Units (17 units) (Datalinc's "Series 100
Units"), to finance the development of the Cincinnati Hub (Datalinc's Series 100
Offering ). Investors in the Series 100 Offering (Datalinc's Series 100
Investors ) are entitled to receive a 10% per annum, cumulative, non-compounded
Preferred Return on their Adjusted Capital Investment, commencing December 31,
1991, the Closing Date of the Series 200 Offering. The term Adjusted Capital
Investment means an Investor's total cash Capital Contributions to Datalinc,
less all Distributions of any kind from Datalinc. In addition, the Series 100
Investors are entitled to 37.85% of any Distributions from Cash Flow, Sale
Proceeds and Refinancing Proceeds of Datalinc, until they have received
Distributions of any type in an amount equal to their total cash Capital
Contributions, plus their aggregate Preferred Return ($2,502,400 as of May 1,
1997). Thereafter, the Series 100 Investors shall receive 18.107% of any
Distributions from Datalinc. As of the date of this Prospectus, there have not
been any Distributions to any of Datalinc s Investors or Other Equity Owners.
Series 100 Investors presently control 37.85%
of the voting power of the Datalinc Investors. Series 100 Investors
will receive, upon Mandatory Conversion, the Underlying Shares of Thrucomm s
Mandatory Convertible Preferred Stock, Series A (the Series A Preferred Stock ).
Series 200 Units
On December 31, 1991, Datalinc completed an offering of $1,142,500 of
its Series 200 Limited Partnership Units (228.5 units) (Datalinc's "Series 200
Units"), to finance completion of the Cincinnati Hub (Datalinc's Series 200
Offering). Investors in the Series 200 Offering (Datalinc's Series 200
Investors) are entitled to receive a 10% per annum, cumulative, non-compounded
Preferred Return on their Adjusted Capital Investment, which accrues from
November 18, 1991, the date that escrow was broken on the Series 200 Offering.
In addition, Series 200 Investors are entitled to 17.28% of any Distribution
from Cash Flow, Sale Proceeds and Refinancing Proceeds of Datalinc, until they
have received Distributions of any type in an amount equal to their total cash
Capital Contributions, plus their aggregate Preferred Return ($1,765,423 as of
May 1, 1997). Thereafter, the Series 200 Investors shall receive 8.270% of any
Distributions from Datalinc. Series 200 Investors presently control 17.28% of
the voting power of the Datalinc Investors. Series 200 Investors will receive,
upon Mandatory Conversion, the Underlying Shares of Thrucomm s Mandatory
Convertible Preferred Stock, Series B (the Series B Preferred Stock ).
Series 300 Units
On December 31, 1992, Datalinc completed a partial offering of
$717,500 of its Series 300 Limited Partnership Units (143.5 units) (Datalinc's
"Series 300 Units"), to finance marketing efforts for the Cincinnati Hub, as
well as the investigation of the Network (Datalinc's Series 300 Offering ).
Investors in the Series 300 Offering (Datalinc's Series 300 Investors ) are
entitled to receive an 8% per annum, cumulative, non-compounded Preferred Return
on their Adjusted Capital Investment, commencing September 16, 1992, the date
that escrow was broken on the Series 300 Offering. In addition, the Series 300
Investors are entitled to receive 10.86% of any Distribution from Cash Flow,
Sale Proceeds and Refinancing Proceeds of Datalinc, until they have received
Distributions of any type in an amount equal to their total cash Capital
Contributions, plus their aggregate Preferred Return ($982,942 as of May 1,
1997). Thereafter, the Series 300 Investors shall be entitled to receive 5.196%
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of any Distributions from Datalinc. Series 300 Investors presently control
10.86% of the voting power of the Datalinc Investors. Series 300 Investors will
receive, upon Mandatory Conversion, Underlying Shares of Thrucomm s Mandatory
Convertible Preferred Stock, Series C (the Series C Preferred Stock ).
Series 300E1 Units
On July 1, 1993, Datalinc completed an offering of $1,207,500 of its
Series 300E1 Limited Partnership Units (241.5 units) (Datalinc's Series 300E1
Units"), to finance marketing efforts of the Cincinnati Hub, as well as the
investigation of the Network (Datalinc's Series 300E1 Offering ). Investors in
the Series 300E1 Offering (Datalinc's Series 300E1 Investors ) are entitled to
receive an 8% per annum, cumulative, non-compounded Preferred Return on their
Adjusted Capital Investment, which accrues from the first day of the month
following acceptance of their individual Subscription Agreements. In addition,
Investors in the Series 300E1 Offering are entitled to receive 18.27% of any
Distributions from Cash Flow, Sale Proceeds and Refinancing Proceeds of
Datalinc, until they have received Distributions of any type in an amount equal
to their total cash Capital Contributions, plus their aggregate Preferred Return
(approximately $1,585,850 as of May 1, 1997). Thereafter, the Series 300E1
Investors shall be entitled to receive 8.744% of any Distributions from
Datalinc. Series 300E1 Investors presently control 18.27% of the voting power of
the Datalinc Investors. Blue Chip owns 180 units or 74.534% of the Series 300E1
Units. Series 300E1 Investors will receive, upon Mandatory Conversion, the
Underlying Shares of Thrucomm s Mandatory Convertible Preferred Stock, Series D
(the Series D Preferred Stock ).
Series 300E2 Units
On December 1, 1993, Datalinc completed an offering of $1,040,000 of
its Series 300 Limited Partnership Units (208 units) (Datalinc's Series 300E2
Units"), to finance marketing efforts of the Cincinnati Hub, and the
investigation of the Network (Datalinc's Series 300E2 Offering ). Investors in
the Series 300E2 Offering (Datalinc's Series 300E2 Investors ) are entitled to
receive an 8% per annum, cumulative, non-compounded Preferred Return on their
Adjusted Capital Investment, which accrues from the first day of the month
following acceptance of their individual Subscription Agreements. In addition,
Series 300E2 Investors have the right to receive 15.74% of any Distributions
from Cash Flow, Sale Proceeds and Refinancing Proceeds of Datalinc, until they
have received Distributions of any type in an amount equal to their total cash
Capital Contributions plus their aggregate Preferred Return (approximately
$1,345,067 as of May 1, 1997). Thereafter, they will be entitled to 7.533% of
any Distributions from Datalinc. Series 300E2 Investors presently control 15.74%
of the voting power of the Datalinc Investors. Blue Chip owns 200 units or
96.154% of the outstanding Series 300E2 Units. Series 300E2 Investors will
receive, upon Mandatory Conversion, the Underlying Shares of Thrucomm s
Mandatory Convertible Preferred Stock, Series E (the Series E Preferred Stock ).
DATALINC'S OTHER EQUITY OWNERS
Management Incentive Plan
On June 1, 1996, the General Partner of Datalinc approved the
establishment of the Datalinc, Ltd. Management Incentive Plan and reserved up to
5% of Datalinc's equity interests for issuance pursuant to the Plan (the MIP
Interests). At present, 430 MIP Interests, representing 4.3% of the equity
ownership of Datalinc, have been granted to key employees of Datalinc (the
Participants). The rights of Participants in the Plan shall vest: (i) 33 % on
the first anniversary date of the grant; (ii) 66 % on the second anniversary
date of the grant; and (iii) 100% on the third anniversary date. Assuming all of
the MIP Interests are fully vested, they shall be entitled to receive 4.30% of
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any amount set aside for Distribution to Investors and Other Equity Owners,
after the Datalinc Investors have received their respective Capital
Contributions and Preferred Returns. To the extent that one Series of Datalinc
Investors has received a return of all its cash Capital Contributions, plus
Preferred Return, Distributions of Cash Flow, Sale Proceeds and Refinancing
Proceeds to such Series will be reduced by one-half, and the MIP Interests shall
be entitled to receive 2.15% of the Distribution from such Investors and 2.15%
from the General Partner and CFG. The MIP Interests have no voting rights. The
MIP Interests shall be converted, upon Mandatory Conversion, into the Underlying
Shares of Thrucomm s Mandatory Convertible Preferred Stock, Series F (the
Series F Preferred Stock ).
CFG's Option
Assuming CFG exercises the Datalinc Option, CFG will entitled to
receive 3.828% of any Distribution from Cash Flow, Sale Proceeds and Refinancing
Proceeds of Datalinc, after the Datalinc Investors have received their
respective Capital Contributions and Preferred Returns, and assuming all of the
MIP Interests are fully vested. To the extent that one Series of Datalinc
Investors has received a return of all its cash Capital Contributions, plus
Preferred Return, Distributions of Cash Flow, Sale Proceeds and Refinancing
Proceeds to such Series will be reduced by one-half, and CFG shall be entitled
to receive 7.656% of the remaining amount, in order to give effect to the 50/50
distribution ratio that comes into effect following the return of cash Capital
Contributions and the payment of the Preferred Returns to all Datalinc
Investors. CFG will receive, upon Mandatory Conversion, the Underlying Shares of
Thrucomm s Mandatory Convertible Preferred Stock, Series G (the Series G
Preferred Stock).
ICN
ICN, the General Partner of Datalinc, is entitled to receive 44.022%
of any Distribution from Cash Flow, Sale Proceeds and Refinancing Proceeds of
Datalinc, after the Datalinc Investors have received their respective Capital
Contributions and Preferred Returns, and assuming all of the MIP Interests are
fully vested. To the extent that one Series of Datalinc Investors has received a
return of all its cash Capital Contributions, plus Preferred Return,
Distributions of Cash Flow, Sale Proceeds and Refinancing Proceeds to such
Series will be reduced by one-half, and the General Partner shall be entitled to
receive 88.044% of the remaining amount, in order to give effect to the 50/50
distribution ratio that comes into effect following the return of cash Capital
Contributions and the payment of the Preferred Returns to all Datalinc
Investors. The General Partner will receive, upon Mandatory Conversion, the
Underlying Shares of Thrucomm s Mandatory Convertible Preferred Stock, Series H
(the Series H Preferred Stock ).
THE FASTCOM INVESTORS
Series 100 Units
On March 31, 1996, Fastcom completed an offering of $445,000 of its
Series 100 Limited Partnership Units, (44.5 units), (Fastcom's "Series 100
Units") to finance the development of the Network (Fastcom s Series 100 Offering
). Investors in the Series 100 Offering (Fastcom's Series 100 Investors ) are
entitled to a 15% per annum, cumulative, non-compounded Preferred Return on
their Adjusted Capital Investment, which accrues from March 31, 1996, the
Closing Date of the Series 100 Offering. The right to receive a Preferred Return
shall terminate if, within three years from the Closing Date of the Series 100
Offering, Fastcom or a successor entity, such as Thrucomm, has done either of
the following: (i) made aggregate Distributions of any kind to the Series 100
Investors in an amount equal to their Adjusted Capital Investment, or (ii) has
completed a successful public offering (a Cut-Off Event ).
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Fastcom's Series 100 Investors are entitled to 100% of any
Distributions from Cash Flow, Sale Proceeds, and Refinancing Proceeds, until
they have received an amount equal to their cash Capital Contribution plus the
aggregate Preferred Return, if and when such Preferred Return is payable.
Following the return of total cash Capital Contributions to all of the Fastcom
Investors, plus Preferred Return, if any, and after Fastcom has paid all of the
Initial Distributions, as defined below, to its Other Equity Owners, the Series
100 Investors shall be entitled to receive 2.225% of any Distributions of Cash
Flow, Sale Proceeds, and Refinancing Proceeds of Fastcom. As of the date of this
Prospectus, there have not been any Distributions of any kind to any Fastcom
Investors or Other Equity Owners.
If Fastcom or its successor makes a successful public offering by
March 31, 1999, but the market value of the securities owned by the Series 100
Investors is less than their Adjusted Capital Investment ($445,000 as of May 1,
1997), the Series 100 Investors shall be entitled to receive securities with a
first priority dividend and/or with such other payment preferences as may be
necessary to ensure that they recoup the shortfall between the public offering
price and their Adjusted Capital Investment. In addition, the Series 100
Investors are entitled to a minimum guaranteed return on their investment, which
is measured as a 30% discount on the value of Fastcom at the time of an IPO, a
sale of all or substantially all of the assets of Fastcom, or a merger with a
non-affiliated entity. Any adjustment in the equity interest of the Series 100
Investors, shall result in a corresponding decrease in Datalinc s equity
interest in Fastcom. The Series 100 Investors will receive, upon Mandatory
Conversion, the Underlying Shares of Thrucomm s Mandatory Convertible Preferred
Stock, Series I (the Series I Preferred Stock ).
Series 100EA Units
Fastcom issued its Series 100EA Limited Partnership Units (11.125
units) (Fastcom s Series 100EA Units ) as a bonus to its Series 100 Investors,
in a ratio of .25 of a Series 100EA Unit for each Series 100 Unit purchased in
its Series 100 Offering. After the Series 100 Investors have received the return
of their total cash Capital Contributions and Preferred Return, if any, they
shall be entitled to 100% of the next Distributions of any type from Cash Flow,
Sale Proceeds, and Refinancing Proceeds, until they have received an amount
equal to 25% of the amount distributed to them in connection with the Series 100
Units. Following the return of total cash Capital Contributions to all of the
Fastcom Investors, plus Preferred Return if any, and after Fastcom has paid all
of the Initial Distributions, as defined below, to its Other Equity Owners, the
Series 100EA Units shall be entitled to .556% of any subsequent Distributions of
Cash Flow, Sale Proceeds and Refinancing Proceeds of Fastcom. The Series 100EA
Units will be converted, upon Mandatory Conversion, into the Underlying Shares
of Thrucomm s Mandatory Convertible Preferred Stock, Series J (the Series J
Preferred Stock ).
Series 200 Units
On September 30, 1996, Fastcom completed an offering of $2,155,000 of
its Series 200 Limited Partnership Units, (215.5 units), (Fastcom's "Series 200
Units") to finance the development of the Network (Fastcom s Series 200 Offering
). Investors in the Series 200 Offering (Fastcom's Series 200 Investors ) are
not entitled to a Preferred Return. After Fastcom's Series 100 Investors have
received a return of their total cash Capital Contributions, plus Preferred
Return, if any, and after they have also received an additional 25% of such
amount as a return on the 100EA Units, the Series 200 Investors shall be
entitled to 100% of any Distributions from Cash Flow, Sale Proceeds and
Refinancing Proceeds, until they have received an amount equal to their total
cash Capital Contribution of $2,155,000. After the Fastcom Investors have
received the return of their respective Capital Contributions, Preferred Return,
if applicable, and payment on the Series 100EA Units, and after Fastcom has paid
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all of the Initial Distributions, as defined below, to its Other Equity Owners,
the Series 200 Investors shall be entitled to receive 11.972% of any subsequent
Distributions of Cash Flow, Sale Proceeds and Refinancing Proceeds of Fastcom.
Similarly to the Series 100 Investors, the Series 200 Investors are
entitled to a minimum guaranteed return on their investment, which is measured
as a 30% discount on the value of Fastcom at the time of an IPO, a sale of all
or substantially all of the assets of Fastcom, or a merger with a non-affiliated
entity. Any adjustment in the equity interest of the Series 200 Investors, shall
result in a corresponding decrease in Datalinc s equity interest in Fastcom. The
Series 200 Investors will receive, upon Mandatory Conversion, the Underlying
Shares of Thrucomm s Mandatory Convertible Preferred Stock, Series K (the Series
K Preferred Stock ).
The Series 200 Investors also have an option (the "Mandatory Redemption
Option") to require Fastcom and/or Datalinc to repurchase any or all of their
Series 200 Units on December 31, 2000, if they have not received Distributions
of any type in an amount equal to their total cash Contribution by such date, in
an amount equal to their Adjusted Capital Investment.
Datalinc
Datalinc shall not be entitled to any Distributions of Fastcom, until after
the Investors in the Series 100, and the Series 200 Units have received the
return of their respective Capital Contributions, Preferred Return, if
applicable, and payment on the Series 100EA Units. Thereafter, Datalinc shall be
entitled to 100% of any Distributions of Cash Flow, Sale Proceeds and
Refinancing Proceeds of Fastcom, until it has received $14,248,099 (Datalinc s
Initial Distribution ), an amount equal to: (i) the aggregate cash Capital
Contributions of the Fastcom Investors, $2,600,000; (ii) divided by 14.753%,
which is the sum of the equity interests of the Fastcom Investors, after the
return of their cash Capital Contributions, plus Preferred Return, if any, and
after payment on the Series 100EA Units; (iii) multiplied by 80.847%, which is
Datalinc's equity interest in Fastcom, assuming CFG exercises its Option, and
assuming ILC s equity interest in Fastcom is 1%. Following payment of all of the
Initial Distributions, Datalinc shall be entitled to 80.847% of any subsequent
Distributions. Datalinc will receive, upon Mandatory Conversion, the Underlying
Shares of Thrucomm s Mandatory Convertible Preferred Stock, Series L (the Series
L Preferred Stock ).
FASTCOM'S OTHER EQUITY OWNERS
CFG's Option
CFG has an option to acquire a 2.4% interest in Fastcom for $240,000 (CFG s
"Option"). If CFG exercises its Option, at any time before consummation of a
Mandatory Conversion Event, and after Fastcom has paid its Investors their total
cash Contributions and Preferred Returns, if applicable, made the payment on its
Series 100EA Units, and after Fastcom has paid Datalinc s Initial Distribution,
CFG shall be entitled to 100% of any Distributions of Cash Flow, Sale Proceeds
and Refinancing Proceeds of Fastcom, until it has received $422,965 (CFG s
Initial Distribution ). CFG's Initial Distribution is determined as follows: (i)
the aggregate cash Capital Contributions of the Fastcom Investors, $2,600,000;
(ii) divided by 14.753%, which is the sum of the equity interests of the Fastcom
Investors, after the return of their cash Capital Contributions, plus Preferred
Return, if any, and after payment on the Series 100EA Units; (iii) multiplied by
2.40%, which is CFG's equity interest in Fastcom. Following payment of all of
the Initial Distributions, CFG shall be entitled to 2.4% of any subsequent
Distributions. If CFG s equity interest is not acquired by CFG, all allocations
or Distributions payable to CFG shall be paid to Datalinc. Assuming CFG
exercises its Option, CFG will receive, upon Mandatory Conversion, the
Underlying Shares of Thrucomm s Mandatory Convertible Preferred Stock, Series M
(the Series M Preferred Stock ).
29
<PAGE>
FMI
FMI, the General Partner of Fastcom, shall be entitled to receive
Distributions from Fastcom, only after Fastcom has paid its Investors their
total cash Contributions and Preferred Returns, if applicable, made the payment
on its Series 100EA Units, and after Fastcom has paid Datalinc s and CFG s
Initial Distributions. Thereafter, FMI shall be entitled to 100% of any
Distributions of Cash Flow, Sale Proceeds and Refinancing Proceeds of Fastcom,
until it has received $176,235, (FMI s Initial Distribution ). FMI s Initial
Distribution is determined as follows: (i) the aggregate cash Capital
Contributions of the Fastcom Investors, $2,600,000; (ii) divided by 14.753%,
which is the sum of the equity interests of the Fastcom Investors, after the
return of their cash Capital Contributions, plus Preferred Return, if any, and
after payment on the Series 100EA Units; (iii) multiplied by 1%, which is FMI s
percent equity interest in Fastcom. Following payment of all of the Initial
Distributions, FMI shall be entitled to 1.0% of any subsequent Distributions of
Cash Flow, Sale Proceeds and Refinancing Proceeds. FMI will receive, upon
Mandatory Conversion, the Underlying Shares of Thrucomm s Mandatory Convertible
Preferred Stock, Series N (the Series N Preferred Stock ).
Information Leasing Corporation
Pursuant to the ILC Agreement, ILC is entitled to receive a 1% equity
interest in Fastcom for the first $1 million of Network equipment financed under
ILC leases, and an additional .5% equity interest in Fastcom for each $3 million
of equipment financed thereafter, up to a total of 5% of the equity of Fastcom.
No equity will be earned if less than $1 million of lease financing is provided,
but after the $1 million level is reached in lease financings, additional equity
will be given to ILC on a pro rated basis at the .5% rate for each $3 million.
ILC shall be entitled to receive Distributions from Fastcom, only
after Fastcom has paid its Investors their total cash Contributions and
Preferred Returns, if applicable, made the payment on its Series 100EA Units,
and after Fastcom has paid Datalinc s, CFG s, and FMI s Initial Distributions.
Thereafter, ILC shall be entitled to 100% of any Distributions of Cash Flow,
Sale Proceeds and Refinancing Proceeds of Fastcom, until it has received
$176,235 (ILC s Initial Distribution ). ILC s Initial Distribution is determined
as follows: (i) the aggregate cash Capital Contributions of the Fastcom
Investors, $2,600,000; (ii) divided by 14.753%, which is the sum of the equity
interests of the Fastcom Investors, after the return of their cash Capital
Contributions, plus Preferred Return, if any, and after payment on the Series
100EA Units; (iii) multiplied by 1%, which is ILC s equity interest in Fastcom.
Following payment of all of the Initial Distributions, ILC shall be entitled to
1.0% of any subsequent Distributions of Cash Flow, Sale Proceeds and Refinancing
Proceeds. ILC will receive, upon Mandatory Conversion, the Underlying Shares of
Thrucomm s Mandatory Convertible Preferred Stock, Series O (the Series O
Preferred Stock ).
THE FORMULA
The General Partners of Datalinc and Fastcom, and the Board of Directors of
Thrucomm have developed a formula for determining Investors and Other Equity
Owners future ownership interest in Thrucomm, assuming approval of the
Reorganization and the occurrence of a Mandatory Conversion Event (the
"Formula"). Set forth below is a description of how the Formula would work upon
a Mandatory Conversion Event, the material assumptions upon which the Formula is
based, and the material differences between an Investor s rights, interests and
preferences under the Formula from those he or she currently has under the
Partnership Agreements.
30
<PAGE>
DETERMINING THE VALUES OF THRUCOMM, DATALINC AND FASTCOM
The value of Thrucomm will be established upon the occurrence of a
Mandatory Conversion Event (the "Conversion Value" of Thrucomm). The General
Partners have established percentages and equations for subsequently allocating
the Conversion Value of Thrucomm to each of the Partnerships. Set forth below is
an explanation of the manner in which the values of the Parties are determined,
or estimated for the purpose of providing examples of the operation of the
Formula.
Conversion Value of Thrucomm
If the Mandatory Conversion Event is an IPO, the aggregate value of
Thrucomm would be equal to the gross proceeds of the offering multiplied by
three (assuming one-third of Thrucomm is sold in the offering). For example, if
the gross proceeds of an IPO is $15,000,000, the aggregate value of Thrucomm
would be equal to:
$15,000,000 x 3 = $45,000,000.
Based upon the Formula, the value of the Underlying Shares to be
received by the Investors and Other Equity Owners, the Conversion Value of
Thrucomm, would be an aggregate of $30 million ($45,000,000 - $15,000,000 =
$30,000,000). For illustration purposes only, ICN, FMI and the Company have
provided examples of the operation of the Formula at Conversion Values of $30
million, $60 million, and $90 million. If Mandatory Conversion should occur as a
result of a Sale or Merger, the Conversion Value of Thrucomm would be equal to
the aggregate consideration proposed to be received in that Sale or Merger. The
actual Conversion Value of Thrucomm cannot be determined prior to the occurrence
of a Mandatory Conversion Event. However, because the ultimate holders of the
Underlying Shares of Common Stock will have the right to vote for or against a
Sale or Merger, in the event of a Sale or Merger the Preferred Stock shall be
mandatorily convertible into shares of Thrucomm's Common Stock prior to a Sale
or Merger based upon the aggregate consideration to be received as a result of
the proposed Sale or Merger. In the event that a majority of the holders of the
Common Stock thereafter do not approve the proposed Sale or Merger, the number
of Underlying Shares of Common Stock then outstanding will remain outstanding
based upon the aggregate consideration that was proposed to be received as a
result of that proposed Sale or Merger and there shall be no further right to
convert into Underlying Shares of Thrucomm. See Thrucomm Ownership Tables.
Datalinc and Fastcom Values
To determine the values of Datalinc and Fastcom for use in the
Formula, (respectively, the Datalinc Value and the Fastcom Value ) the
Conversion Value of Thrucomm will be divided and apportioned
to each of the Partnerships as follows: (i) thirty percent (30%) to Datalinc and
seventy percent (70%) to Fastcom, assuming a Conversion Value of $30 million;
(ii) twenty-five percent (25%) to Datalinc and seventy-five percent (75%) to
Fastcom, assuming a Conversion Value of $60 million; and (iii) twenty percent
(20%) to Datalinc and eighty percent (80%) to Fastcom, assuming a Conversion
Value of $90 million.
If however, the Conversion Value of Thrucomm is less than $30 million,
the Datalinc Value would be established at $9 million. If the Conversion Value
of Thrucomm is more than $30 million, but less than $60 million, the Datalinc
Value will be determined by application of the following equation, which
allocates 20 percent of the excess of the Conversion Value over $30 million to
Datalinc:
Datalinc Value = $9,000,000 + Conversion Value of Thrucomm - $30,000,000
-------------------------------------------
5
31
<PAGE>
If the Conversion Value of Thrucomm is more than $60 million, the Datalinc Value
will be determined by the application of the following equation, which allocates
10 percent of the excess of the Conversion Value over $60 million to Datalinc:
Datalinc Value = $15,000,000 + Conversion Value of Thrucomm - $60,000,000
-------------------------------------------
10
In any event, the minimum Datalinc Value shall be $9,000,000. In all cases, the
Fastcom Value shall be equal to the Conversion Value of Thrucomm, less the
Datalinc Value. This method for allocating the Conversion Value of Thrucomm
among Fastcom and Datalinc is based upon the business judgement and the
conclusion of the General Partners and the Board of Directors of Thrucomm that
most of any Conversion Value of Thrucomm in excess of $30 million is
attributable to the business of Fastcom, rather than Datalinc.
ALLOCATION OF THE VALUATIONS TO INVESTORS AND OTHER EQUITY OWNERS
After the Datalinc Value and the Fastcom Value have been established,
the second step in the Formula is to allocate a portion of the Datalinc or
Fastcom Value to each Investor and to the Other Equity Owners, in accordance
with the rights and preferences of the Preferred Stock, which preserves the
rights and preferences that the Investors and Other Equity Owners currently have
under the Partnership Agreements. For a description of the rights and
preferences of Investors and Other Equity Owners under the Partnership
Agreements, see "Equity Ownership of the Partnerships." For a description of the
rights and preferences of the Preferred Stock, see "Description of the
Securities - The Preferred Stock." The following are examples of the application
of the Formula to certain Investors or Other Equity Owners. See also "Thrucomm
Ownership Tables."
Allocations to Datalinc Investors
The following is a description of the manner in which the Formula
would allocate a portion of the Datalinc and Fastcom Values to Datalinc s Series
100 Units. Assuming, for illustration purposes only, a $30 million Conversion
Value of Thrucomm, the Datalinc Value would be $9,000,000, and the Fastcom Value
would be $21,000,000. A Datalinc Series 100 Investor would receive Underlying
Shares, cash or other consideration worth $330,188 for each Series 100 Unit he
32
<PAGE>
or she owns (See Column L of Thrucomm s Ownership Tables). The value of a Series
100 Unit was calculated as follows: (i) $2,502,400, which is an amount equal to
the Dividend on the Series A Stock (See Column D); (ii) plus $148,173, which is
an amount equal to (a) the Datalinc Value, (b) minus the sum of the Dividends on
the Series A-E Preferred Stock (Column G), (c) multiplied by 18.107%, which is
the equity interest of Datalinc s Series 100 Investors (See Column A); (iii)
plus $2,962,618, which is the 18.107% of Datalinc s share of the Fastcom Value
(See Column H); (iv) divided by 17, the number of outstanding Series 100 Units.
See Thrucomm s Ownership Tables. Dividends on the Series A-E Preferred Stock
(Column D) shall be equal to the cash Capital Contributions, plus aggregate
Preferred Return of Datalinc s Investors, as of the time of the Mandatory
Conversion Event. See Description of the Securities - The Mandatory Convertible
Preferred Stock - Dividends.
Allocations to Fastcom Investors
The following is a description of the manner in which the Formula
would allocate a portion of the Fastcom Value to Fastcom s Series 100 Units.
Assuming, for illustration purposes only, a $30 million Conversion Value of
Thrucomm, the Fastcom Value would be $21,000,000. A Fastcom Series 100 Investor
would receive Underlying Shares of Series I Preferred Stock, cash, or other
value worth $11,661 for each Series 100 Unit he or she owns (See Column L of
Thrucomm s Ownership Tables). The value of a Series 100 Unit was calculated as
follows: (i) $21,000,000, the Fastcom Value; (ii) multiplied by 2.471%, which is
the Adjusted Ownership Interest of the Series I Preferred Stock (Column A);
(iii) divided by 44.5, which is the number of outstanding Fastcom Series 100
Units. The ownership interest of the Series I Preferred Stock is adjusted in
order to ensure that Fastcom's Series 100 Investors receive their guaranteed
minimum return. See "Equity Ownership of the Partnerships - The Fastcom
Investors - Series 100 Investors," and "Description of the Securities -
Mandatory Convertible Preferred Stock Adjusted Ownership Interest."
Allocations to the MIP Interests
At the time of a Mandatory Conversion Event, the value of a MIP
Interest shall be equal to: (i) one, (ii) divided by the total number of MIP
Interests granted under the Plan (presently 430 Units), (iii) multiplied by the
total value of the Series F Preferred Stock. Assuming, for illustration purposes
only, a $30 million Conversion Value of Thrucomm, the total value of the Series
F Stock would be $738,742, as of May 1, 1997 (Column I), and each MIP Interest
would be convertible into Underlying Shares or other value worth $1,718 per
Interest. See Thrucomm Ownership Tables for other examples of the value of the
Series F Stock at various Conversion Values of Thrucomm. See also, "Description
of Securities - The MIP Interests."
MATERIAL ASSUMPTIONS AND VARIANCES
Set forth below are the material assumptions on which the Formula is based,
and any differences between the Formula and the terms of the Partnership
Agreements. The Formula for distributing the Underlying Shares or other value to
the Investors and Other Equity Owners, upon Mandatory Conversion and dissolution
of the Partnerships, is designed to preserve the rights and preferences of the
Investors and Other Equity Owners as set forth in the Partnership Agreements and
in the Reorganization Agreement. Where the Formula differs from the Partnership
Agreements, the differences were intended to facilitate calculations. The
General Partners believe that such differences are not significant.
Datalinc Series 300E1 and 300E2 Units
Series 300E1 and 300E2 Investors are each entitled to a Preferred
Return on their cash Capital Contributions, which accrues from the first day of
the month following acceptance of each Investor s Subscription Agreement. The
Formula, however, uses June 1, 1993 and September 1, 1993, respectively, to
calculate the dividends on the Series D and E Preferred Stock. These dates were
chosen because they represent the date of the most significant investment in
each Offering, and because it is impractical to use the individual dates of each
Subscription Agreement in the Series 300E1 and 300E2 Offerings. The General
Partners believe that any difference between the dates used in the Formula and
the dates conferred by Datalinc's Partnership Agreement would be insignificant.
See The Datalinc Investors - Series 300E1 Units and Series 300E2 Units and
Thrucomm Ownership Tables.
33
<PAGE>
Fastcom s Series 100 Units
The Series 100 Investors are entitled to a 15% per annum Preferred
Return on their cash Capital Contributions. However, the right to receive this
Preferred Return shall terminate if, by March 31, 1999, the Series 100 Investors
have received an amount equal to their capital investment, or Fastcom (or its
successor) has made a successful public offering, a Cut-Off Event as defined in
the Partnership Agreement for the Series 100 Units. The Formula assumes that a
Mandatory Conversion Event is a Cut-Off Event which terminates the Preferred
Return of Fastcom s Series 100 Units. Accordingly, the Series I Preferred Stock
does not have any dividends, and the Formula does not factor any dividends into
its calculation of the Underlying Shares or other value to be distributed upon
the Mandatory Conversion of the Series I Preferred Stock. See Description of the
Securities - The Preferred Stock Dividends, The Fastcom Investors - Series 100
Units, and "Thrucomm's Ownership Tables."
Fastcom's Series 200 Units
The Series 200 Investors have an option to require Datalinc and/or
Fastcom to repurchase any or all of their Series 200 Units on December 31, 2000,
under certain conditions. The Formula assumes a Mandatory Conversion Event
occurs before the Series 200 Option is exercisable. After Mandatory Conversion,
the Partnerships will dissolve and the Series 200 Option shall expire. See
"Equity Ownership of the Partnerships - The Fastcom Investors - Series 200
Units."
CFG Units
The Formula assumes the exercise of the CFG Options to acquire a
3.828% ownership interest in Datalinc and a 2.4% ownership interest in Fastcom,
respectively. CFG may exercise the CFG Options at any time up until the
consummation of a Mandatory Conversion Event. After Mandatory Conversion, the
CFG Options will expire upon the dissolution of the Partnerships. If CFG does
not exercise the CFG Options the equity interests underlying the Datalinc Option
shall revert to ICN, and the equity interests underlying the Fastcom Option
shall revert to Datalinc. See Equity Ownership of the Partnerships.
[Balance of Page Intentionally Left Blank]
34
<PAGE>
THRUCOMM OWNERSHIP TABLES
The following Tables set forth, by way of example, the Investors and Other
Equity Owners estimated equity interests in Thrucomm, upon the occurrence of a
Mandatory Conversion Event, as of May 1, 1997. The Tables illustrate the
operation of the Formula, for three distinct Conversion Values of Thrucomm: $30
million, $60 million, and $90 million. If Mandatory Conversion occurs on a date
other than May 1, 1997, there would be changes to the Preferred Returns and
Capital Contributions, as set forth in Column D. There may be additional
adjustments as well. These Tables are for illustration purposes only and are not
to be construed as projections. No assurance is given that the values used in
the Tables are reflective of any possible future Conversion Values of Thrucomm.
Investors actual equity interests in Thrucomm can only be determined at the time
of Mandatory Conversion.
35
<PAGE>
THRUCOMM INC.
MANDATORY CONVERSION EVENT
OWNERSHIP SHARE ESTIMATE
VALUE - $30 M
AS OF MAY 1, 1997
A B C D E
Pref- Pre Valua Earned Partner
Capital Units ferred Conver tion Pref Alloca
Contrib Purch stock Owner sion Alloca ferred tion
uted - $ ased Series % Value tion Return $
-------- ------ ------- ----- ------ ------- ------- -------
FASTCOM,LTD I $21M $21M
SERIES 100 (3) 445,000 44,500 J 2.471 (1) 518,910
SERIES 100 EA 0 11,125 K 0.556 116,760
SERIES 200 (4) 2,155,000 215,500 M 14.660 3,078,600
CFG 240,000 (2) N 2.400 504,000
FMI O 1.000 210,000
ILC L 1.000 210,000
DATALINC 77.913 16,361,730
------- ----------
100.000 21,000,000
DATALINC, LTD. $ 9M $ 9M
SERIES 100 1,632,000 17,000 A 18.107 2,502,400 2,502,400
SERIES 200 1,142,500 228,500 B 8.270 1,765,423 116,760
SERIES 300 717,500 143,500 C 5.196 982,942 982,942
SERIES 300E1 1,207,500 241,500 D 8.744 1,585,850 1,585,850
SERIES 300E2 1,040,000 208,000 E 7.533 1,345,067 1,345,067
MIP 0 403,000 F 4.300
CFG (6) G 3.828
ICN H 44.022
------- --------- ----------
100.000 $8,181,682 $8,181,682
======= ========== ==========
ASSUMPTIONS:
(1) Date Of Conversion Event Is Prior To Series 100 Fastcom Preferred Return
Provision.
(2) CFG Exercises Option To Purchase 2.4% Of Fastcom For $ 240,000.
(3) At $ 30 Million The Series 100 Fastcom Ownership Is Adjusted From 2.225% To
2.471% To Achieve The Minimum Guaranteed Return.
(4) At $ 30 Million The Series 200 Fastcom Ownership Is Adjusted From 11.972% To
14.660% To Achieve The Minimum Guaranteed Return.
(5) Series 100 Fastcom Investors Received At No Additional Cost 1/4 Unit Of
Series 100EA For Each Ach Unit Of Series 100 Purchased.
(6) CFG Exercises Option To Purchase 3.828% Of Datalinc For $1.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO BE CONSTRUED AS
A PROJECTION OF PARTNERSHIP VALUE.
36-a
<PAGE>
THRUCOMM INC.
MANDATORY CONVERSION EVENT
OWNERSHIP SHARE ESTIMATE
VALUE - $30 M
AS OF MAY 1, 1997
F G H I J K L
Unallo Valua
cated tion Remainder Aggre Thru $ Value
Prefer Balance Datalinc gate comm Price per Ltd.
red Alloca Alloca Grand Owner Paid/ Partner
Return tion tion Total ship % Unit Unit
------- ------- ----------- --------- ----- -------- --------
FASTCOM, LTD.
SERIES 100 (3) $ 518,910 1.7% $ 10,000 $ 11,661
SERIES 100 EA 116,760 0.4% (5) 10,495
SERIES 200 (4) 3,078,600 10.3% 10,000 14,286
CFG 504,000 1.7%
FMI 210,000 0.7%
ILC 210,000 0.7%
DATALINC $(16,361,730)
DATALINC, LTD.
SERIES 100 $ 148,173 $ 2,962,618 5,613,191 18.7% 96,000 330,188
SERIES 200 67,675 1,353,115 3,186,213 10.6% 5,000 13,944
SERIES 300 42,520 850,155 1,875,617 6.3% 5,000 13,071
SERIES 300E1 71,554 1,430,670 3,088,074 10.3% 5,000 12,787
SERIES 300E2 61,644 1,232,529 2,639,240 8.8% 5,000 12,689
MIP 35,188 703,554 738,742 2.5%
CFG 31,325 626,327 657,652 2.2%
ICN 360,240 7,202,761 7,563,001 25.2%
--------- ------------ --------- -----
$ 818,318 $ 16,361,730 $30,000,000 100.0%
========= ============ =========== ======
36-b
<PAGE>
THRUCOMM INC.
MANDATORY CONVERSION EVENT
OWNERSHIP SHARE ESTIMATE
VALUE -$60 M
AS OF MAY 1, 1997
A B C D E
Pref- Pre Valua Earned Partner
Capital Units ferred Conver tion Pref Alloca
Contrib Purch stock Owner sion Alloca ferred tion
uted - $ ased Series % Value tion Return $
-------- ------ ------- ----- ------ ------- ------- -------
FASTCOM,LTD I $ 45M $ 45M
SERIES 100 (3) 445,000 44,500 J 2.225 (1) 1,001,250
SERIES 100 EA 0 11,125 K 0.556 250,200
SERIES 200 (4) 2,155,000 215,500 M 11.972 5,387,400
CFG 240,000 (2) N 2.400 1,080,000
FMI O 1.000 450,000
ILC L 1.000 450,000
DATALINC 80.847 36,381,150
------- ----------
100.000 45,000,000
DATALINC, LTD. $ 15M $ 15M
SERIES 100 1,632,000 17,000 A 18.107 2,502,400 2,502,400
SERIES 200 1,142,500 228,500 B 8.270 1,765,423 116,760
SERIES 300 717,500 143,500 C 5.196 982,942 982,942
SERIES 300E1 1,207,500 241,500 D 8.744 1,585,850 1,585,850
SERIES 300E2 1,040,000 208,000 E 7.533 1,345,067 1,345,067
MIP 0 403,000 F 4.300
CFG (6) G 3.828
ICN H 44.022
------- --------- ----------
100.000 $8,181,682 $8,181,682
======= ========== ==========
ASSUMPTIONS:
(1) Date Of Conversion Event Is Prior To Series 100 Fastcom Preferred Return
Provision.
(2) CFG Exercises Option To Purchase 2.4% Of Fastcom For $ 240,000.
(3) At $ 60 Million The Series 100 Fastcom Ownership needs no Adjustment From
2.225% To Achieve The Minimum Guaranteed Return.
(4) At $ 60 Million The Series 200 Fastcom Ownership need no Adjustment From
11.972% To Achieve The Minimum Guaranteed Return.
(5) Series 100 Fastcom Investors Received at No Additional Cost 1/4 Unit Of
Series 100EA For Each Ach Unit Of Series 100 Purchased.
(6) CFG Exercises Option To Purchase 3.828% Of Datalinc For $1.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO BE CONSTRUED AS
A PROJECTION OF PARTNERSHIP VALUE.
37a
<PAGE>
THRUCOMM INC.
MANDATORY CONVERSION EVENT
OWNERSHIP SHARE ESTIMATE
VALUE -$60 M
AS OF MAY 1, 1997
F G H I J K L
Unallo Valua
cated tion Remainder Aggre Thru $ Value
Prefer Balance Datalinc gate comm Price per Ltd.
red Alloca Alloca Grand Owner Paid/ Partner
Return tion tion Total ship % Unit Unit
------- ------- ----------- --------- ----- -------- --------
FASTCOM, LTD.
SERIES 100 (3) $1,001,250 1.7% $ 10,000 $ 22,500
SERIES 100 EA 250,200 0.4% (5) 22,490
SERIES 200 (4) 5,387,400 9.0% 10,000 25,000
CFG 1,080,000 1.8%
FMI 450,000 0.7%
ILC 450,000 0.8
DATALINC $(36,381,150)
DATALINC, LTD.
SERIES 100 $1,234,593 $ 6,587,535 10,324,528 17.2% 96,000 607,325
SERIES 200 536,875 3,008,721 5,338,019 8.9% 5,000 23,361
SERIES 300 354,280 1,890,365 3,227,587 5.4% 5,000 22,492
SERIES 300E1 596,194 3,181,168 5,363,212 8.9% 5,000 22,208
SERIES 300E2 513,624 2,740,592 4,599,283 7.7% 5,000 22,112
MIP 293,188 1,564,388 1,857,576 3.1%
CFG 261,006 1,392,670 1,653,675 2.8%
ICN 3,001,560 16,015,710 19,017,270 31.7%
--------- ------------ --------- -----
$6,818,318 $ 36,381,149 $60,000,000 100.0%
========= ============ =========== ======
37b
<PAGE>
THRUCOMM INC.
MANDATORY CONVERSION EVENT
OWNERSHIP SHARE ESTIMATE
VALUE - $90 M
AS OF MAY 1, 1997
A B C D E
Pref- Pre Valua Earned Partner
Capital Units ferred Conver tion Pref Alloca
Contrib Purch stock Owner sion Alloca ferred tion
uted - $ ased Series % Value tion Return $
-------- ------ ------- ----- ------ ------- ------- -------
FASTCOM,LTD I $ 72M $ 72M
SERIES 100 (3) 445,000 44,500 J 2.225 (1) 1,602,000
SERIES 100 EA 0 11,125 K 0.556 400,320
SERIES 200 (4) 2,155,000 215,500 M 11.972 8,619,840
CFG 240,000 (2) N 2.400 1,728,000
FMI O 1.000 720,000
ILC L 1.000 720,000
DATALINC 80.847 58,209,840
------- ----------
100.000 72,000,000
DATALINC, LTD. $ 18M $ 18M
SERIES 100 1,632,000 17,000 A 18.107 2,502,400 2,502,400
SERIES 200 1,142,500 228,500 B 8.270 1,765,423 116,760
SERIES 300 717,500 143,500 C 5.196 982,942 982,942
SERIES 300E1 1,207,500 241,500 D 8.744 1,585,850 1,585,850
SERIES 300E2 1,040,000 208,000 E 7.533 1,345,067 1,345,067
MIP 0 403,000 F 4.300
CFG (6) G 3.828
ICN H 44.022
------- --------- ----------
100.000 $8,181,682 $8,181,682
======= ========== ==========
ASSUMPTIONS:
(1) Date Of Conversion Event Is Prior To Series 100 Fastcom Preferred Return
Provision.
(2) CFG Exercises Option To Purchase 2.4% Of Fastcom For $ 240,000.
(3) At $ 90 Million The Series 100 Fastcom Ownership needs no Adjustment From
2.225% To Achieve The Minimum Guaranteed Return.
(4) At $ 90 Million The Series 200 Fastcom Ownership need no Adjustment From
11.972% To Achieve The Minimum Guaranteed Return.
(5) Series 100 Fastcom Investors Received at No Additional Cost 1/4 Unit Of
Series 100EA For Each Ach Unit Of Series 100 Purchased.
(6) CFG Exercises Option To Purchase 3.828% Of Datalinc For $1.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO BE CONSTRUED AS
A PROJECTION OF PARTNERSHIP VALUE.
38a
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THRUCOMM INC.
MANDATORY CONVERSION EVENT
OWNERSHIP SHARE ESTIMATE
VALUE - $90 M
AS OF MAY 1, 1997
F G H I J K L
Unallo Valua
cated tion Remainder Aggre Thru $ Value
Prefer Balance Datalinc gate comm Price per Ltd.
red Alloca Alloca Grand Owner Paid/ Partner
Return tion tion Total ship % Unit Unit
------- ------- ----------- --------- ----- -------- --------
FASTCOM, LTD.
SERIES 100 (3) $1,602,000 1.8% $ 10,000 $ 36,000
SERIES 100 EA 400,320 0.4% (5) 35,984
SERIES 200 (4) 8,619,840 9.6% 10,000 39,999
CFG 1,728,000 1.9%
FMI 720,000 0.8%
ILC 720,000 0.8
DATALINC $(58,209,840)
DATALINC, LTD.
SERIES 100 $1,777,803 $ 10,540,056 14,820,259 16.5% 96,000 871,780
SERIES 200 811,975 4,813,954 7,391,352 8.2% 5,000 32,347
SERIES 300 510,160 3,024,583 4,517,385 5.0% 5,000 31,482
SERIES 300E1 858,514 5,089,868 7,534,232 8.4% 5,000 31,198
SERIES 300E2 739,614 4,384,947 6,469,628 7.2% 5,000 31,104
MIP 422,188 2,503,023 2,925,211 3.3%
CFG 375,845 2,228,273 2,604,117 2.9%
ICN 4,322,220 25,625,137 29,947,356 33.3%
--------- ------------ --------- -----
$9,818,318 $ 58,209,841 $90,000,000 100.0%
========= ============ =========== ======
38b
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Notes to the Ownership Tables
The following explanations and assumptions apply to the corresponding
Columns in each Table.
Column A. Sets forth Investors and Other Equity Owners percentage equity
interest in Datalinc and Fastcom. Contains Adjusted Ownership
Interests for Fastcom Series 100 and 200, if necessary to ensure
their Minimum Guaranteed Values of Fastcom.
Column B. Sets forth the Conversion Value of Thrucomm and the allocation of
such Value between Datalinc and Fastcom.
Column C. Sets forth the allocation of the Conversion Value of Thrucomm
between Datalinc and Fastcom.
Column D. Sets forth the Dividends on the Series A-E Preferred Stock, which
is based on the sum of the total cash Capital Contributions and
aggregate Preferred Returns of Datalinc s Investors. Assumes the
Preferred Return provision of the Fastcom Series 100 Units has
terminated.
Column E. The allocation of the Fastcom Value to Fastcom's Investors and
Other Equity Owners, in accordance with the rights and preferences
of the Series I-O Preferred Stock.
Column F. Sets forth the amount remaining of Dividends which cannot be
satisfied out of the Datalinc Valuation, if any, after subtracting
Column D from Column C.
Column G. If the Datalinc Value exceeds the aggregate Dividends on the
Series A-E Preferred Stock, the positive difference will be further
allocated to Datalinc's Investors and Other Equity Owners.
Column H. Reflects the allocation of Datalinc s share of the Fastcom Value
to Datalinc s Investors and Other Equity Owners, resulting from
Datalinc s equity interest in Fastcom.
Column I. The sum of Columns E, G, and H.
Column J. Sets forth Investors and Other Equity Owners percentage equity
interest in Thrucomm, based upon the amounts in Column I.
Column K. The amount paid for each Partnership Unit.
Column L. The resulting value of each Partnership Unit at the time of
Mandatory Conversion.
No fractional shares will be issued upon conversion.
39
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RECOMMENDATION OF THE GENERAL PARTNERS
REASONS FOR PROPOSING AND RECOMMENDING THE REORGANIZATION
The Board of Directors of ICN and FMI, without dissent or abstention,
approved the Reorganization Agreement on behalf of Datalinc and Fastcom. Both
ICN and FMI have recommended that their Investors consent to the
Reorganization. This recommendation is based on a number of factors
discussed herein, and in greater detail in the fairness discussion
appearing below.
Reasons for Proposing the Reorganization
Datalinc has recently experienced positive cash flow from operations
for the last two years, however, both Datalinc and Fastcom have continued to
experience net operating losses since their inceptions and the Partnerships need
additional capital to further develop their businesses. Fastcom, in particular,
needs additional capital to finish developing the technology of the Network, to
continue its marketing activities for the Network, and to begin the deployment
of multiple sites in limited geographic areas. The General Partners believe the
proposed Reorganization will facilitate the raising of future capital needs.
Whereas Datalinc owns the majority of the equity interests in Fastcom, Datalinc
Investors have an economic interest not only in the further development of
Datalinc's business, but also in the success of Fastcom's business. ICN
believes that combining the Partnerships in order to develop further the
business of Fastcom is also in the best interests of the Datalinc Investors.
Reasons for Recommending the Reorganization
In evaluating and determining to approve the Reorganization, the
Boards of Directors of ICN
,
FMI and Thrucomm considered a variety of factors and based their opinion as to
the fairness of the transaction contemplated by the Reorganization Agreement
primarily on the following factors:
(i) The financial terms of the Reorganization, including the
Formula, its method for allocating the Conversion Value of Thrucomm to Datalinc
and Fastcom, and the terms of the Preferred Stock.
(ii) The future prospects of Datalinc and Fastcom, the
prospects of the wireless communications and EFT industries, economic and
general market conditions, and the risks associated with achieving those
prospects. The future anticipated growth of Datalinc over a five-year period was
deemed by the General Partners to be significantly less than that of the
business of Fastcom because the market for the products of Fastcom is
anticipated to be significantly larger, the earnings potential for Fastcom's
products significantly greater, and the competition for Fastcom less than that
for Datalinc's business. Accordingly, the Formula allocates most of any of the
excess of the illustrative $30 million Conversion Value of Thrucomm to Fastcom
rather than Datalinc.
(iii) The possible alternatives to the proposed Reorganization
including the prospect of continuing the businesses of the Partnerships as
separate entities, the range of values to the Investors of such alternatives,
and the timing and likelihood of the occurrence of such alternatives. In
particular, the Directors considered several alternatives for additional
liquidity, including a sale of all or substantially all of the assets, a merger,
an underwritten public offering through an investment banker and a capital
infusion from various sources including institutional investors, venture capital
firms or a strategic partner. The General Partners have been advised by
investment bankers and other investment professionals that several of these
alternatives for raising capital, such as the ability to attract institutional
investors, strategic partners or to make an underwritten offering through an
40
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investment banker, are more viable for corporations than partnerships. Based on
such advice, the General Partners have concluded that the Reorganization is in
the best interests of the Partnerships and their Investors, because it places
the Partnerships in a better position to take advantage of the potential
alternatives for obtaining additional capital, and because several of these
alternatives increase the opportunities for future liquidity for their
Investors.
(iv) The financial advice of Michael Davis & Co. that the
Formula as set forth in the proposed Reorganization Agreement, is fair from a
financial point of view. The opinion of Michael Davis & Co. is set forth in
Appendix B to the Consent Statement/Prospectus.
(v) The disadvantages of the Reorganization, including the loss
of certain tax advantages, anti-dilution protections, and certain other rights,
as more fully discussed in this Consent Statement/Prospectus at "Comparative
Rights of Investors." In particular, the Directors considered that the
Reorganization may be, in retrospect, unnecessary if a sale of the assets is the
alternative which ultimately transpires. However, the General Partners presently
know of no third party interested in purchasing the assets of the Partnerships
and there can be no assurances that the terms of such a purchase and sale
agreement would be as favorable as the terms of another alternative after the
Reorganization. Accordingly, the General Partners have concluded that the
increased flexibility and enhanced capital formation opportunities associated
with the Reorganization outweigh the disadvantages of the Reorganization.
(vi) Information with respect to the financial conditions,
results of operations, cash flows, net book value and liquidation values of each
of the Partnerships, on a historical and prospective basis.
(vii) The non-financial terms and the structure of the proposed
Reorganization, in particular, the fact that the Reorganization qualifies as a
tax-free reorganization to the Investors, other than with respect to Investors
with a negative basis which will require recognition of a gain in the year in
which the Reorganization is effected.
Each of the above factors support, directly or indirectly, the
determination by the General Partners as to the fairness of the proposed
Reorganization. The General Partners did not quantify or attempt to assign
relative weights to the specific factors considered in reaching its
determination, however, the General Partners placed special emphasis on the
terms of the Formula and the receipt of a favorable fairness opinion from its
financial advisor. See - "Opinion of the General Partners' Financial Advisor."
OPINION OF THE GENERAL PARTNERS' FINANCIAL ADVISOR
General
The General Partners retained Michael Davis & Co. to act as the
financial adviser in connection with the Reorganization. Michael Davis & Co. has
rendered an opinion to the General Partners that, based on the matters set forth
in such opinion, the Formula is fair from a financial point of view. The text of
such opinion is set forth in Appendix B to this Consent Statement/Prospectus and
should be read in its entirety by the Investors.
The Formula in the Reorganization Agreement was determined by the
General Partners. No limitations were placed by the Board of Directors of ICN
or FMI upon Michael Davis & Co. with respect to the investigations made or the
procedures followed by Michael Davis & Co. in rendering their opinion.
41
<PAGE>
In connection with rendering their opinion, Michael Davis & Co.
performed a variety of financial analyses. However, the preparation of a
fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of those
methods to the particular circumstances, and therefore, such an opinion is
not readily susceptible to summary description. Michael Davis & Co., in
conducting their analysis and in arriving at their opinion, has not
conducted a physical inspection of any of the properties, assets or liabilities
of the Partnerships. Michael Davis & Co. has relied upon the accuracy and
completeness of the financial and other information that was provided to them by
the Partnerships or that was publicly available. Their opinion is based on
economic, market and other conditions as in effect on, and the information made
available to them as of the date of, their analysis.
Valuation Methodologies
The General Partners engaged the services of Michael Davis & Co. to
render a fairness opinion regarding the Formula as set forth in the
Reorganization Agreement, from a financial point of view.
Michael Davis & Co. has delivered a written opinion dated as of May
1, 1997, that the Formula is fair from a financial point of view to Investors.
There were no limitations imposed by the General Partners on Michael Davis & Co.
in connection with their rendering of the fairness opinion. The full text of the
Michael Davis & Co. opinion, which sets forth assumptions made and matters
considered, is attached as Appendix B to this Consent Statement/Prospectus.
Investors are urged to read such opinion in its entirety. The Michael Davis &
Co. opinion is directed only to the Formula in the Reorganization Agreement and
does not constitute a recommendation to any Investors as to how such Investor
should vote on the Reorganization Agreement. The summary information regarding
the Michael Davis & Co. opinion and procedures followed in rendering such
opinion set forth in this Consent Statement/Prospectus is qualified in its
entirety by reference to the full text of such opinion.
In arriving at their opinion, Michael Davis & Co. conducted the
following tasks: (i) reviewed the Reorganization Agreement; (ii) reviewed
audited historical financial statements as well as financial forecasts and other
such data for the Partnerships; (iii) reviewed this Consent Statement/Prospectus
and the financial data contained herein; (iv) conducted limited discussions with
certain representatives and advisors of the Partnership concerning the financial
condition, business and prospectus of each respective Partnership; and (v)
reviewed such other financial studies and analysis and performed such other
investigations and took into account such other matters as Michael Davis & Co.
deemed necessary.
In connection with rendering their opinion, Michael Davis & Co.
performed a variety of financial analyses. The following is a summary of such
analyses, but does not purport to be a complete description of the analyses.
The preparation of a fairness opinion is a complex process involving subjective
judgments and is not necessarily susceptible to partial analyses or summary
description. Michael Davis & Co. believes that its analyses must be considered
as a whole and that selecting portions of such analyses and the factors
considered therein, without considering all factors and analyses, could create
an incomplete view of the analyses and the processes underlying the Michael
Davis & Co. opinion.
In performing their analyses, Michael Davis & Co. made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters, many of which cannot be predicted and are beyond
the control of the Partnerships or Michael Davis & Co. The analyses performed
by Michael Davis & Co. and the estimates or illustrations contained
therein are not necessarily indicative of actual future results or actual
values, which may be significantly more or less favorable than suggested by
such analyses and estimates or illustrations. Additionally,analyses related to
and estimates or illustrations of values do not purport to be appraisals or
reflect the prices at which the Partnerships or their securities may actually
42
<PAGE>
be sold. Because such analyses and estimates or illustrations are inherently
subject to uncertainty, Michael Davis & Co. gives no assurance that such
estimates or illustrations can or will be realizable at such values.
Return on Investment - Sensitivity Analysis
In determining the fairness of the Formula, from a financial point
of view, Michael Davis & Co. reviewed a sensitivity analysis (the "Sensitivity
Analysis") prepared by the General Partners. Although the Directors concluded
the Datalinc Value should be at least $9 million, for comparative purposes, the
Sensitivity Analysis varies the Datalinc and Fastcom Values from those values
under the Formula and then compares an Investor's or Other Equity Owner's return
on investment under the Formula, with their return on investment using increased
and decreased Datalinc Values. The term "return on investment" is measured by
value received in excess of capital contributed divided by capital contributed.
Whereas Datalinc owns approximately 80 percent of Fastcom and has the deciding
vote concerning the Reorganization, Michael Davis & Co. did not review the
Sensitivity Analysis as applied to Fastcom.
For illustration purposes, assuming a Conversion Value of $30
million and a Datalinc Value of $20 million, (instead of the $9 million Datalinc
Value under the Formula) the return on investment to the Datalinc Investors
would be an aggregate 189.81%, compared with 185.78% under the Formula, or a
1.41% increase over in their return on investment under the Formula.
For further illustrative purposes, assume under the Sensitivity
Analysis a Conversion Value of $90 million and Datalinc Value of $10 million
(instead of $18 million under the Formula), the return on investment to the
Datalinc Investors would be an aggregate 596.92%, compared with 609.70% under
the Formula, or a 1.80% decrease in their return on investment. Similarly, a
Datalinc Value of $40 million would yield a 644.83% aggregate return on
investment or a 4.95% increase over the Formula, under this illustration.
Other Valuation Methods
Michael Davis & Co. used the audited financial statements of
Datalinc and Fastcom to determine the Net Book Values to be $347,242 and
($827,396), respectively, and the Liquidation Values of Datalinc and Fastcom
were estimated at $347,242 and $0, respectively, as of December 31, 1996.
Without a capital infusion there is substantial doubt as to each Partnership's
ability to continue as a going concern.
LACK OF INDEPENDENT REPRESENTATIVE
The General Partners did not engage an independent representative for the
Investors to determine the values of the Partnerships in the Formula for the
following reasons: (i) the General Partners have obtained the opinion of Michael
Davis & Co., an independent certified public accountant, to the effect that the
Formula is fair from a financial point of view; (ii) Datalinc owns a significant
percentage of Fastcom and will receive approximately 80% of any Fastcom value;
(iii) more than doubling the Datalinc Value in the Formula, for comparison
purposes, has no material effect on the Datalinc Investors ownership interest in
Thrucomm after Mandatory Conversion. However, the Investors did not have the
benefit of independent representation and the valuations and other terms of the
Reorganization may not be as favorable as the terms that an independent
representative might have obtained.
FIDUCIARY DUTIES OF THE GENERAL PARTNERS
The General Partners fiduciary duties to the Investors include legal
responsibilities of loyalty, care and good faith. As the General Partners of the
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Partnership, ICN and FMI may not profit by any conduct or transaction in
contravention of its fiduciary obligations to the Investors. Rights of action by
and on behalf of the Investors for any breach of these duties are provided under
Florida s limited partnership laws, which is the choice of law provided in the
Partnership Agreements. Under Florida law, a limited partner may bring action
against a general partner, upon a showing of the breach of its fiduciary duty,
to recover his capital contribution or to seek an accounting and dissolution of
the partnership. Simple negligence or an error in judgment not amounting to a
breach of fiduciary duty would constitute a defense to the limited partner s
action. ICN and FMI believe that each has complied with its fiduciary duties in
the management of each of the Partnerships and in connection with the
structuring of the Reorganization.
ACCESS TO INVESTOR LIST AND PARTNERSHIP RECORDS
Datalinc and Fastcom will provide free of charge to any Investor, upon
written request, a current alphabetized listing of all Investors names and
addresses of the Investors in the Partnership in which the requesting Investor
owns Partnership Units. Investors are afforded this right under the Partnership
Agreements and federal and state law. Investors also have the right under the
Partnership Agreements to inspect the books and records of his or her
Partnership at all reasonable times.
FAILURE TO APPROVE THE REORGANIZATION
The purpose of the Reorganization, consistent with the business plans of
Datalinc and Fastcom, is to facilitate the ability of the Partnerships to obtain
the additional capital needed to develop the complimentary businesses of the
Partnerships and to potentially increase future opportunities for liquidity for
the Investors and Other Equity Owners. Failure to consummate the Reorganization
may have material adverse consequences on the businesses of the Partnerships and
on the ability of the Investors and Other Equity Owners to eventually realize
liquidity for their investments. The purpose of the Reorganization is to enhance
the ability to obtain additional liquidity. The Reorganization itself will not
provide liquidity.
In the event that the Investors of Datalinc fail to approve and adopt the
Reorganization Agreement, as set forth in this Consent Statement/Prospectus, the
assets of the Partnerships will not be transferred to Thrucomm and the Preferred
Shares will not be issued to the Partnerships. The Partnerships would continue
in their respective businesses as heretofore operated. If the Investors fail to
approve the Reorganization, the General Partners may continue to explore other
alternatives, such as the sale of the Partnerships assets to a third party.
However, there can be no assurances that the General Partners could find a third
party interested in purchasing the assets or that the terms and conditions of
such a purchase and sale agreement would be as favorable as the terms of the
Reorganization. Neither can there be any assurances that the Partnerships or
Thrucomm will be able to obtain additional capital from another source in a
reasonable time and at a reasonable cost.
CONSENT PROCEDURES
GENERAL
Datalinc Investors are being asked to give their written consent to a
proposal to approve and adopt the Reorganization Agreement (the "Solicitation").
Only those persons who are registered owners of Datalinc's Units may execute and
deliver a Consent. Datalinc Investors who wish to consent should mail, hand
deliver, send by overnight courier or fax (confirmed by physical delivery) their
properly completed and executed Consents to ICN at the address of its principal
executive offices as set forth herein and on the form of Consent.
44
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Based on the Partnership Agreements, Datalinc Investors shall be entitled
to the following number of votes: the Series 100 Investors have 37.85%
of the votes, or 2.226 votes per Series 100 Unit; the Series 200 Investors have
17.28% of the votes, or .0756 vote per Series 200 Unit; the Series 300 Investors
have 10.86% of the votes, or .0757 votes per Series 300 Unit; the Series 300E1
Investors have 18.27% of the voting power, or 0.757 votes per Unit; and the
Series 300E2 Investors have 15.74% of the votes, or .0757 votes per Unit. Any
matters as to which the Investors are authorized to take action under Datalinc's
Partnership Agreement or under the law may be acted upon by the Investors
without a meeting; and any such action shall be valid and effective as action
taken by the Investors at a meeting assembled, provided that written consents to
such action by the Investors are signed by Investors who hold the requisite
number of Units required to authorize such action, and that the Consents are
delivered to Datalinc's General Partner.
REQUISITE CONSENTS
Datalinc
The members of the Board of Directors of ICN, without dissent or
abstention, approved the Reorganization on behalf of Datalinc. Datalinc s
Partnership Agreement requires the Majority Vote of Limited Partners to approve
the Reorganization. The term Majority Vote is defined in Datalinc s Partnership
Agreement as the affirmative vote or written consent of the Limited Partners
then owning of record more than fifty percent (50%) of the outstanding voting
rights of Datalinc. If an Investor does not consent to the Reorganization, but
the Reorganization is approved by the requisite vote of other Limited Partners,
such Limited Partner is bound by such approval. The Board of Directors of ICN,
Datalinc s General Partner believes that the proposed transaction is fair to
Investors and that approval of the Reorganization is in the best interests of
Datalinc and the Investors, the ICN Board unanimously recommends a vote FOR
approval and adoption of the Reorganization Agreement. See
Recommendation of the General Partners.
Fastcom
Pursuant to Fastcom s Partnership Agreement, the affirmative vote or
written consent of the Limited Partners owning at least two-thirds ( ) of the
outstanding Units of Fastcom is necessary to approve and adopt the Agreement and
Plan of Merger. Datalinc owns approximately 80% of all of the outstanding Units
of Fastcom and ICN, has given Datalinc s written consent to Fastcom for the
approval of the Reorganization Agreement. Datalinc s consent, alone, is
sufficient to give Fastcom's approval to the Reorganization. The board of
directors of FMI approved the Reorganization without dissent on abstention. See
Recommendation of the General Partner.
Thrucomm
The Board of Directors of Thrucomm approved the Reorganization
Agreement without dissent or abstention.
EXPIRATION DATE AND EFFECTIVE TIME
The term "Effective Time" means 5:00 p.m., Eastern Standard Time (EST),
on the date on which the Requisite Consents have been received by ICN. Consents
will become irrevocable at the Effective Time, subject to satisfaction of
certain conditions, (See "Consent Procedures - Conditions of the Solicitation")
and all Investors will be bound by the Reorganization Agreement.
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The term "Expiration Date" means 5:00 p.m., EST, on December 31, 1997,
unless ICN, in its sole discretion as Datalinc's General Partner, extends the
period during which the Solicitation is open, in which event the term
"Expiration Date" means the latest time and date to which the Solicitation is so
extended. Datalinc reserves the right to extend the Solicitation at any time and
from time to time, by giving oral or written notice no later than 5:00 p.m.,
EST, on the next business day after the previously announced Expiration Date.
Such notice may be by written notice to the Datalinc Investors. Such
announcement or notice may state that Datalinc is extending the Solicitation for
a specified period of time, or on a daily basis until 5:00 p.m., EST, on the
date on which the Requisite Consents have been received.
REVOCATION OF CONSENTS
Prior to the Effective Time, any Datalinc Investor may revoke any
Consent. Any Datalinc Investor desiring to revoke a Consent must, prior to the
Expiration Date, deliver to ICN, at the address set forth herein and on the
Consent, a written revocation of such Consent (which may be in the form of a
subsequent Consent marked with a specification, i.e., "For" or "Against," which
is different from that set forth on the earlier Consent), containing the name of
such Investor, the identification of the Units to which such revocation relates,
and the signature of the registered owner.
CONDITIONS OF THE SOLICITATION
Consents will become irrevocable at the Effective Time. The effectiveness
of the Reorganization Agreement is conditioned upon (i) the receipt of the
Requisite Consents; (ii) the Registration Statement, of which this Consent
Statement/Prospectus forms a part, shall have become effective and no stop order
suspending such effectiveness shall have been issued and remain in effect; (iii)
no preliminary or permanent injunction or other order or decree by any federal
or state court or any action by any state or federal governmental agency
preventing the consummation of the Reorganization shall have been issued or
taken and remain in effect; and (iv) all consents, orders and approvals legally
required shall have been obtained and be in effect at the Effective Time.
The Solicitation may be abandoned by Datalinc at any time prior to the
Effective Time, for any reason, in which case all Consents will be voided. In
addition, the Reorganization Agreement may be modified or abandoned for any
reason, either before or after the Effective Time. If the Reorganization
Agreement is modified, and Counsel for Datalinc delivers an opinion certifying
that the modifications are not, in the aggregate, materially adverse to the
Datalinc Investors, as compared to the Solicitation on the Reorganization
Agreement as described in this Consent Statement/Prospectus. Consents given
prior to such modification will remain valid and effective and will constitute
Consents to the Reorganization Agreement, as so modified.
EXPENSES
Datalinc and Fastcom will bear equally all of the expenses in connection
with printing and mailing this Consent Statement/Prospectus. Datalinc and
Fastcom equally will reimburse brokers, fiduciaries, custodians and other
nominees for reasonable out-of-pocket expenses incurred in sending this Consent
Statement/Prospectus and other proxy materials to, and obtaining instructions
relating to such materials from, beneficial owners of Datalinc Units. Written
Consents may be solicited by directors, executive officers or regular employees
of Datalinc, in person, by letter or by telephone, telegram or telefax.
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CERTAIN TAX CONSEQUENCES OF THE REORGANIZATION
The Reorganization will be treated as a transfer of the assets of the
Partnerships to Thrucomm and the assumption of the Partnerships' liabilities by
Thrucomm in exchange for the Preferred Stock. Immediately after such transfer,
the persons who control Datalinc will
control Thrucomm. Accordingly, other than with respect
to Datalinc Limited Partners with a negative basis requiring recognition of gain
in the year in which the Reorganization is effected, no gain or loss will be
recognized by the Datalinc Investors and the Fastcom Investors as a consequence
of the Reorganization. The Investors have received an opinion from Schifino and
Fleischer, P.A., special counsel to Thrucomm, dated as of the date of this
Consent Statement/Prospectus, to the effect that as a consequence of the
Reorganization, other than with respect to Datalinc Limited Partners with a
negative basis above, (i) the Investors will not recognize any gain or loss in
the transfer of the assets and assumption of the liabilities of the Partnership;
and (ii) that the Investors will not recognize any gain or loss in the
subsequent distribution of the Underlying Shares. Such opinion is based on
current law and various other assumptions as set forth in the copy of such
opinion which is filed as an exhibit to the Registration Statement of which this
Consent Statement/Prospectus forms a part, and which may be obtained by
Investors upon request.
COMPARATIVE RIGHTS OF INVESTORS
The following comparative information is an accurate summary of the
material differences associated with rights of a holder of Units in the
Partnerships versus stockholders in Thrucomm. The Investors shall become
stockholders of Thrucomm in the event of a Mandatory Conversion and dissolution
of the Partnerships. The rights and duties of Investors are identical under each
of the Partnerships, except as otherwise noted.
DISTRIBUTIONS AND DIVIDENDS
The Partnerships
Each of the Partnership Agreements provide for cash distributions in
the discretion of the General Partner, provided however, that distributions of
cash flow, if any, shall be made at least quarterly commencing as soon as
possible, and distributions of Sale Proceeds shall be made promptly after the
occurrence of the event giving rise thereto as the General Partner deems
reasonably prudent.
Thrucomm, Inc.
Although holders of Common Stock are entitled to receive any
dividends declared thereon by Thrucomm s Board of Directors out of legally
available funds, no dividends are expected to be paid on the Common Stock for
the foreseeable future. Under Florida law, dividends may be paid out of the
Company s surplus or out of its net profits for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. In addition, the Company
s credit agreements restrict the Company s ability to pay cash dividends.
TAX MATTERS
The Partnerships
None of the Partnerships are subject to federal or state income
taxes. Each Investor or Other Equity Owner is allocated his pro rata share of
the Partnership s taxable income or loss.
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Thrucomm, Inc.
The Company is subject to federal income tax on its consolidated
income after allowable deductions and credits. Stockholders will not be taxed on
the Company s income, but will generally be subject to federal and state income
taxes on dividends received from the Company, if any.
VOTING RIGHTS
The Partnerships
Under Datalinc's Partnership Agreement, the holders of Units in
Datalinc are presently entitled to the following number of votes: Series 100
Units - 2.226 votes per Unit; Series 200 Units - 0.0756 votes per Unit; Series
300 Units - 0.0757 votes per Unit; Series 300E1 Units - 0.757 votes per Unit;
and the Series 300E2 Units - 0.757 votes per Unit, on matters submitted to them
for a vote. Holders of Units in Fastcom are entitled to one vote per Unit on
matters submitted to them for a vote. The approval of a sale of all or
substantially all of the assets of the Partnerships, dissolution of the
Partnerships and removal of the General Partners are matters requiring the vote
or written consent of a majority of the outstanding voting rights of Datalinc's
Investors and or the vote or written consent of the holders of at least
two-thirds of the outstanding Fastcom Units.
Thrucomm, Inc.
Holders of the Company s Common Stock are entitled to one vote per
share on all matters submitted to them for a vote, including the election and
removal of directors, amendments to the Articles of Incorporation, certain
mergers and share exchanges, dissolution and the sale of all or substantially
all of the assets of the Company. These matters require the approval of a
majority of the outstanding Common Stock. Accordingly, holders of Units will not
receive a security with significantly different voting right, other than
eliminating the right to compel dissolution and adding the right to participate
in annual elections of directors. However, former holders of Units will own a
slightly larger or slightly smaller percentage in the Company than they
currently own in the respective Partnerships, resulting in a corresponding
increase or decrease in their voting power.
RESTRICTIONS ON TRANSFERS
The Partnerships
No limited partnership interests in the Partnerships may be
transferred or assigned unless (i) the transferor delivers an unqualified
opinion of counsel satisfactory to counsel designated by the General Partners
that the transfer does not violate any federal or state securities law; (ii) the
transferee executes a statement as to his investment intent, and (iii) the
General Partner consents to the transfer. In addition, no substitution may be
made unless the transferor delivers an instrument of substitution adopting the
terms of the Partnership Agreement, the General Partner consents, a reasonable
transfer fee is paid and an amendment to the Certificate of Limited Partnership
is filed.
Thrucomm, Inc.
The Common Stock to be issued upon Mandatory Conversion will be
acquired pursuant to an exemption from the registration requirements of the
Securities Act, pursuant to Section 3(a)(9) of the Act. The Common Stock will be
freely transferable under the Securities Act, except for shares issued to any
48
<PAGE>
person who may be deemed to be an affiliate, (as such term is defined for
purposes of Rule 145 under the Securities Act, an "Affiliate"), of Thrucomm.
Affiliates may not sell their shares except pursuant to: (i) an effective
registration statement under the Securities Act covering such shares; (ii)
paragraph (d) of Rule 145; or (iii) any other applicable exemption under the
Securities Act. See "Risk Factors."
RIGHT TO CALL MEETINGS
The Partnerships
Meetings of the limited partners of the Partnerships may be called
by the holders of at least 10% of the outstanding Units. Actions requiring a
vote of the holders of Units may be taken without a meeting upon written consent
by the same percentage of limited partners required to approve the action at a
meeting.
Thrucomm, Inc.
Special meetings of the Company s stockholders may be called by the
President, Board of Directors or by holders of no less than 10% of the Common
Stock. Actions requiring a vote may be taken without a meeting upon written
consent by the same percentage of stockholders required to approve the action at
a meeting.
RIGHT TO INVESTOR LIST
The Partnerships
Under Florida law and the Partnership Agreements, a holder of Units
has the right to examine or copy a listing of the names and addresses and record
ownership positions of the holders of Units.
Thrucomm, Inc.
The Company is required to maintain a list of the names and
addresses of all stockholders at its principal office during normal business
hours for any proper purpose and, in certain circumstances to provide a copy of
the list to any stockholder upon request.
ASSESSMENTS AND LIMITED LIABILITY
The Partnerships
Under the terms of the Partnership Agreements, Investors are not
subject to additional assessments. The liability of the limited partners
generally limited to their capital contributions and, in certain circumstances,
the amount of any capital distributed or returned to them.
Thrucomm, Inc.
The Company s stockholders will not be subject to assessments or to
personal liability for obligations of the Company.
49
<PAGE>
ALLOCATIONS AND DILUTION
The Partnerships
Allocation of distributions to Investors and Other Equity Owners in
the Partnerships are governed by the Partnership Agreements and are set forth in
several places in this Consent Statement/Prospectus. See The Datalinc Investors,
The Fastcom Investors. Generally, allocations are made to Investors in
proportion to their respective percentage ownership in the Partnerships, after
certain returns of cash Contributions and receipt of certain Preferred Returns.
The Partnership Agreements permit the sale of additional Units on
such terms and conditions as the General Partner and a Majority Vote of the
limited partners may determine. Any additional Units offered must be offered
initially to all existing partners in the Partnerships on a pro rata basis.
Thrucomm, Inc.
The Company s Articles of Incorporation authorize the issuance of up
to 75,000,000 shares of Common Stock and 25,000,000 shares of Preferred Stock,
including shares that may be divided into one or more additional series with
rights and preferences to be determined by Thrucomm s Board of Directors without
any shareholder action. An Investor s percentage interest in the Company is
subject to dilution upon issuance of additional securities by the Company.
LIQUIDITY
The Partnerships
There is no trading market for the Units.
Thrucomm, Inc.
There is no trading market for the securities of the Company, and no
assurances can be given that one will develop in the future.
REDEMPTION AND CONVERSION
The Partnerships
The Units are not redeemable or convertible into other securities.
Thrucomm, Inc.
The Common Stock of the Company is not redeemable or convertible.
FINANCIAL REPORTING
The Partnerships
No later than ninety (90) days afer the end of each fiscal year, the
limited partners are entitled to receive a report of their respective General
Partner showing distributions and allocations, all necessary tax reporting
50
<PAGE>
information. No later than ninety (90) days after receipt of the aforementioned
report, the Investors shall receive an audited balance sheet and statement of
income or loss.
Thrucomm, Inc.
After the Reorganization, the Company will not be subject to the
reporting requirements of the Exchange Act and will not be required to file
periodic reports or proxy statements with the Commission.
MANAGEMENT AND COMPENSATION
The Partnerships
The General Partners make all decisions regarding the day-to-day
operations of their respective Partnerships. The General Partners devote such
time as each determines shall be reasonably required. The limited partners shall
have no participation in or control over the management of the Partnership.
Subject to certain significant limitations, Investors or Other Equity Owner
holding 66- % of the Units shall have the right to remove the General Partner.
The General Partner may not withdraw or resign as General Partner without the
Majority Vote of the limited partners of the Partnerships.
The General Partners receive management fees from their respective
Partnership. The management fees will terminate upon the Investor s approval of
the Reorganization. See Management Comparative Compensation Information."
Thrucomm, Inc.
The stockholders of Thrucomm elect the Board of Directors. The
directors appoint the Company s officers, to serve at the discretion of the
Board. The directors of Thrucomm receive no compensation, but shall be entitled
to participate in the Company's Stock Option Plans. Officer salaries and
incentive compensation are determined by the Board of Directors.
FIDUCIARY DUTIES
The Partnerships
The managing General Partners' fiduciary duties to the limited
partners include legal responsibilities of loyalty, care and good faith. ICN and
FMI may not profit from any activities in contravention of their fiduciary
obligations to the Partnerships.
Thrucomm, Inc.
The fiduciary duties owed by the directors of Thrucomm to its
stockholders under the Florida Business Corporations Act, and remedies available
for a breach of those responsibilities are similar to those applicable to the
Partnerships and the limited partners. Therefore the Reorganization generally
will not involve any reduction in the standard of care owed to Investors or in
the remedies available for any breach of those duties.
51
<PAGE>
LIMITS ON MANAGEMENT'S LIABILITY
The Partnerships
The Partnership Agreements provide that in any threatened, pending
or completed action, suit or proceeding to which the General Partners were or
are a party or are threatened to be made a party by reason of the fact that they
were or are a General Partner of the Partnerships, involving any alleged cause
of action for damages arising from the performance of the activities of the
Partnerships, the Partnerships will indemnify their respective General Partners
against expenses actually and reasonably incurred by them in connection with
such action, suit or proceeding if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
Partnership, and provided their conduct does not constitute negligence,
misconduct or a breach of their fiduciary obligations to the limited partners.
Thrucomm, Inc.
Thrucomm's Articles of Incorporation and By-laws provide for the
elimination of directors' liability for monetary damages arising from a breach
of certain fiduciary obligations and for the indemnification of directors,
officers and agents to the full extent permitted by the Florida Business
Corporation Act. These provisions generally provide for indemnification in the
absence of gross negligence, willful misconduct and cannot be amended without
the affirmative vote of a majority of the outstanding shares of Common Stock.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the registrant
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.
CONTINUATION OF EXISTENCE
The Partnerships
The Partnership Agreements provide for a term ending on December 31,
2039, or until an earlier dissolution upon specified events, but contemplates
continuing operations in accordance with its objectives.
Thrucomm, Inc.
The Company has a perpetual term, subject to dissolution upon the
occurrence of specified events.
ANTI-TAKEOVER PROVISIONS
The Partnerships
There are no anti-takeover provisions in the Partnership Agreements
or under Florida Partnership law.
52
<PAGE>
Thrucomm, Inc.
Thrucomm is subject to the anti-takeover protections of the Florida
Business Corporations Act, which prohibit business combinations with interested
stockholders under certain circumstances. Florida's Affiliated Transactions
Statute is designed to protect shareholder from a so-called two-tier, front-end
loaded tender offer (e.g., a front-end cash tender offer for 51% of the stock at
a price of $65 a share, to be followed by a take-out merger for the remaining
49% at a price of $45 a share). This statute however does not apply to any
corporation with fewer than 300 shareholders.
LIQUIDATION RIGHTS
The Partnerships
In the event of liquidation, the Investors and Other Equity Owners
are entitled to a distribution in proportion their positive Capital Accounts,
after taxes and creditors (including any partners who are creditors, to the
extent permitted by law) have been paid, and if any General Partner's Capital
Account then has a deficit balance, such General Partner shall contribute to the
capital of the Partnership the amount necessary to restore such deficit balance
to zero.
Thrucomm, Inc.
In the event of liquidation, holders of Common Stock would be
entitled to share ratably in any assets of the Company remaining after
satisfaction of obligations to its creditors and liquidation preferences on any
series of Preferred Stock of the Company then outstanding.
RIGHT TO COMPEL DISSOLUTION
The Partnerships
The Partnerships may be dissolved by unanimous vote or written
consent of all the Partners.
Thrucomm, Inc.
Under Florida law, stockholders of a Company may not vote to compel
dissolution of the Company without prior action by its Board of Directors.
PRO FORMA CONDENSED FINANCIAL INFORMATION (Unaudited)
The following pro forma information and explanatory notes are presented
to reflect the proposed Reorganization on the historical financial statements of
Datalinc, Fastcom and Thrucomm. The Reorganization, reflected in the pro forma
information, has been accounted for as a transaction among related parties.
Accordingly, historical cost basis is used for the parties considered to be
under common control, including all Datalinc limited partners and Datalinc's
interest in Fastcom. The historical basis of the Fastcom Series 100EA Investors
and the MIP Interests have been stepped up to fair market value to reflect the
purchase method on these minority interests in Fastcom. Fastcom's Series 100
Units, its Series 200 Units and CFG's Options are recorded at historical basis
and reflect fair value. The Unaudited Pro Forma Condensed Combined Balance Sheet
at December 31, 1996 reflects the transfer of 100% of the assets and liabilities
53
<PAGE>
of Fastcom in exchange for one (1) share of each series of Thrucomm's Mandatory
Convertible Preferred Stock, Series I - O. All the assets and liabilities of
Datalinc are reflected as being transferred to its 100% owned subsidiary
Thrucomm in exchange for one (1) share of each series of Thrucomm's Mandatory
Convertible Preferred Stock, Series A - H. The Unaudited Pro Forma Condensed
Combined Statements of Operations and Cash Flows for the year ended
December 31, 1996 reflect the pro forma of operations and cash flows, as
adjusted, as if this combination had taken place on January 1, 1996.
The pro forma condensed combined balance sheet assumes that the
Reorganization was consummated on December 31, 1996, and the pro forma condensed
statements of operations and cash flows assume that the Reorganization was
consummated at the beginning of the year presented. The assumptions are
described in the accompanying Pro Forma Adjustments.
The pro forma financial statements do not include earnings or book value
per share amounts as the calculation to determine the preferred shares
conversion to common shares is currently not determinable due to the inability
to ascertain a value of the Company and the number of shares that will be
ultimately issued. As a result, the pro forma capital structure can not be
determined at this time.
The pro forma information should be read in conjunction with the
historical financial statements of Datalinc, Fastcom and Thrucomm and the
related notes thereto included in the Consent Statement/Prospectus. The pro
forma financial information is presented for informational purposes only and is
not necessarily indicative of the results of operations, cash flows or combined
financial position that would have resulted had the Reorganization been
consummated at the dates indicated, nor is it necessarily indicative of the
results of operations or cash flows of future periods or future combined
financial position.
54
<PAGE>
THRUCOMM
Pro Forma Combined Balance Sheet
December 31, 1996
(See)
Historical (* NOTE)
Datalinc Fastcom (Below) Combined
ASSETS
- --------------------------------
Cash and Cash Equivalents $ 24,575 $ 12,166 $ 276,743
Trade Accounts Receivable 574,079 14,212 588,291
Inventories 281,550 0 281,550
Other Receivables 41,512 38,221 79,733
Prepaid and Other Current Assets 20,510 16,022 36,532
----------- ------------ ----------
Total Current Assets 942,226 80,621 1,262,849
Advances to and Investment in
Affiliate (gross) 1,345,931 0 0
Reserve for advances to Affiliate (827,396) 0
Property and Equipment, net 1,498,452 947,388 2,445,840
Organization Costs(net) 0 167 167
Other Long-term Receivables 10,000 0 10,000
Other Assets and Deposits 72,530 0 72,530
Purchased R & D 0
----------- ------------ -----------
Total Assets 3,041,743 1,028,176 3,791,386
=========== ============ ===========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accounts Payable and
Accrued Expenses 920,108 308,057 1,228,165
Debt Due Within One Year 746,152 0 746,152
Lease Obligation Due Within
One Year 297,953 58,715 356,668
----------- ----------- -----------
Total Current Liabilities 1,964,213 366,772 2,330,985
Payable to Affiliate 0 1,345,931 0
Long-term debt 5,208 5,208
Long-term Capital Lease Obligation 725,080 142,869 867,949
----------- ----------- -----------
Total Liabilities 2,694,501 1,855,572 3,204,142
Common Stock 1
Preferred Stock:
Datalinc:
Series A-series 100 1,632,000
Series B-series 200 1,027,952
Series C-series 300 654,433
Series D-series 300E1 1,110,889
Series E-series 300E2 956,791
Series F-MIP 41,000
Series G-CFG 261,068
Series H-ICN 0
Fastcom:
Series I-series 100 414,600
Series J-series 100EA 85,251
Series K-series 200 1,936,500
Series L-Datalinc 74,143
Series M-CFG 317,029
Series N-ICN 0
Serios O-ILC 0
Retained Earnings(Deficit) (7,924,413)
Mandatory redeemable
partnership interest 2,155,000 0
Partners' Equity(Deficit)-Gen. (1,666,735) (3,406,754) 0
CFG Option - Datalinc 261,067 0
Partners' Equity(Deficit)-Ltd. 1,752,910 347,329 0
CFG Option - Fastcom 77,029 0
----------- ----------- -----------
Total Equity 347,242 (827,396) 587,244
----------- ----------- -----------
Total Liabilities &
Equity(Deficit) $ 3,041,743 $ 1,028,176 $ 3,791,386
=========== =========== ===========
* - NOTE - See Page 55-b for Pro-Forma Adjustments Columns
55-a
<PAGE>
THRUCOMM
Pro Forma Combined Balance Sheet
December 31, 1996
Pro Forma Adjustments
-------------------------------------------------------
ASSETS
- -------------------------
Cash and Cash Equivalents $ 240,002 (f)(l)(m)
Trade Accounts Receivable
Inventories
Other Receivables
Prepaid and Other
Current Assets
----------- ------------ ----------- ----------
Total Current Assets $ 0 $ 0 240,002 $ 0
Advances to and Investment
in Affiliate (gross) (1,345,931)(b)
Reserve for advances to
Affiliate 827,396 (a)
Property and Equipment, net
Organization Costs(net)
Other Long-term Receivables
Other Assets and Deposits
Purchased R & D 126,251 (126,251)
(d) (g)
----------- ------------ ----------- ----------
Total Assets $ (518,535) $ 0 $ 366,253 $ (126,251)
=========== ============ ========== ========(g)
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Accounts Payable and
Accrued Expenses
Debt Due Within One Year
Lease Obligation Due Within
One Year
----------- ------------ ----------- ---------
Total Current Liabilities $ 0 $ 0 $ 0 $ 0
Payable to Affiliate (1,345,931)(b)
Long-term debt
Long-term Capital
Lease Obligation
----------- ------------ ----------- ---------
Total Liabilities (1,345,931) 0 0 0
Common Stock 1 (f)
Preferred Stock:
Datalinc:
Series A-series 100 1,632,000 (c)
Series B-series 200 1,027,952 (c)
Series C-series 300 654,433 (c)
Series D-series 300E1 1,110,889 (c)
Series E-series 300E2 956,791 (c)
Series F-MIP 0 41,000 (d)
Series G-CFG 261,067 (c) 1 (m)
Series H-ICN 0
Fastcom:
Series I-series 100 414,600 (c)
Series J-series 100EA 0 85,251 (d)
Series K-series 200 1,936,500 (c)
Series L-Datalinc 74,143 (c)
Series M-CFG 77,029 (c) 240,000 (l)
Series N-ICN 0
Series O-ILC 0
Retained Earnings(Deficit) (7,798,162)(e)
(126,251)
Mandatory redeemable (g)
partnership interest (2,155,000)(c)
Partners' Equity(Deficit)-Gen. 5,073,489(e)
CFG Option - Datalinc (261,067)(c)
Partners' Equity(Deficit)-Ltd. 827,396(a)(5,652,308)(c) 2,724,673(e)
CFG Option - Fastcom (77,029)(c)
----------- ---------- ----------- --------
Total Equity 827,396 0 366,253 (126,251)
Total Liabilities &
Equity(Deficit) $ (518,535) $ 0 $ 366,253 $(126,251)
============ ========== ========== ========
55-b
<PAGE>
Thrucomm
Pro Forma Combined Statement of Operations
Year Ended December 31, 1996
Historical
----------------- Pro Forma
Datalinc Fastcom Adjustments Combined
---------- --------- ----------- ----------
Revenues:
Hub Access Fees $ 2,094,411 $ 69,134 $ 2,163,545
VSAT/PES Sales 3,131,810 3,131,810
Hub Equipment Sales 255,000 255,000
Terminal Equipment Sales 50,805 50,805
Installation Income and
Other Services 300,395 $ (48,340)(h) 252,055
----------- --------- --------- -----------
Total Revenues 5,832,421 69,134 (48,340) 5,853,215
=========== ========= ========= ===========
Operating Expenses:
Cost of Services Provided 1,349,499 1,349,499
Cost of Equipment Sales 3,315,001 3,315,001
Selling, general and
administrative 711,402 1,305,687 (48,340)(h) 1,968,749
Research and Development,
Net of Refund 0 364,977 126,251 (g) 491,228
Depreciation and
Amortization 473,024 106,680 579,704
---------- ---------- --------- -----------
Total Operating
Expenses 5,848,926 1,777,344 77,911 7,704,181
============ ========== ========= ===========
Income (Loss) From
Operations (16,505) (1,708,210) (126,251) (1,850,996)
Income (Loss) From
Affiliate (481,752) 481,752(l) 0
Interest Expense (158,292) (7,830) (166,122)
----------- --------- -------- ---------
Net Income (Loss) $ (656,549)$(1,716,040) $ 355,501 $ (2,017,088)
=========== ========== ========= ===========
56
<PAGE>
Thrucomm
Pro Forma Combined Statement of Cash Flows
Year Ended December 31, 1996
Historical Pro Forma
Datalinc Fastcom Adjustments Combined
---------- ----------- ------------------------- ------------
Cash flows from operating activities:
Net loss $ (656,549) $(1,716,040) $ 481,752(l) $ (126,251)(g) $(2,017,088)
Adjustments to reconcile net loss to net cash used in operating activities:
Research & development
--- --- 126,251(g) --- 126,251
Depreciation and amortization
473,024 106,680 --- --- 579,704
Income (loss) in affiliate
481,752 --- (481,752)(l) --- 0
(Increase) decrease in:
Trade accounts
receivable (267,279) (14,212) --- --- (281,491)
Inventories 433,929 --- --- --- 433,929
Other
receivables (20,879) (38,221) --- --- (59,100)
Prepaid and
other current
assets 25,290 (14,360) --- --- 10,930
Other assets
and deposits (43,106) --- --- --- (43,106)
Increase(decrease)in accounts payable and accrued
expenses 81,867 159,102 --- --- 240,969
--------- ---------- --------- --------- ------------
Net cash provided by (used in) operating
activities 508,049 (1,517,051) 0 0 (1,009,002)
========= ========== ========= ========= ============
Cash flows from investing activities:
Acquisitions of property and equipment
(144,817) (636,975) --- --- (781,792)
Advances made to affiliate
(160,287) --- 160,287(j) --- 0
--------- ---------- --------- --------- ------------
Net cash used in investing
activities (305,104) (636,975) 160,287 0 (781,792)
========= ========== ========= ========= ============
Cash flows from financing activities:
Capital * (f) (l) (m)
contributions --- 2,017,500 --- 240,002 * 2,257,502
Advances from
affiliate --- 160,287 (160,287)(j) --- 0
Additions to
borrowing 638,280 --- --- --- 638,280
Reductions in borrowings and capital lease
obligations (890,190) --- --- --- (890,190)
Debt issue costs (4,289) (11,595) --- --- (15,884)
--------- ---------- --------- --------- ------------
Net cash provided by(used in) financing
activities (256,199) 2,166,192 (160,287) 240,002 1,989,708
========= ========== ========= ========= ============
Net increase(decrease) in cash and cash
equivalents (53,254) 12,166 0 240,002 198,914
Cash and cash equivalents, beginning
of year 77,829 0 --- --- 77,829
--------- ---------- --------- --------- ------------
Cash and cash equivalents, end of
year $ 24,575 $ 12,166 $ 0 $ 240,002 $ 276,743
========= ========== ========= ========= ============
57
<PAGE>
Thrucomm
Pro Forma Adjustments
December 31, 1996
The following pro forma adjustments are necessary:
a. To eliminate $827,396 reserve established in fiscal 1996 related to the
advances to and investment in Fastcom recorded by Datalinc.
b. To eliminate $1,345,931 advances to and investment in affiliate and payable
recorded by Datalinc and Fastcom, as of December 31, 1996, respectively.
c. Reflects the issuance of preferred shares in Thrucomm to each of the
partnerships (Datalinc and Fastcom) in exchange for the underlying assets of
the partnerships.
d. Reflects the step-up in basis of the Series 100EA Fastcom limited partners
interest, CFG and, the employees under the Management Incentive Plan (the
"minority interests"). The step-up in the minority interests are based on the
fair value of the Series 200 Fastcom limited partners interest which were
acquired during May to September 1996. As these interests were recently
acquired, management believes that they represent a reasonable estimate for
fair value.
e. Reflects the conversion of Partners' Equity (Deficit) related to operations
to Retained Earnings (Deficit).
f. Reflects the issuance of no-par common stock of ownership interest of
Datalinc in Thrucomm.
g. Reflects the recording and FAS 121 write-off of purchased in-process
research and development costs.
h. To eliminate $48,340 inter-company rent revenue and expense charged to
Fastcom for leasing of certain hub equipment owned by Datalinc.
i. To eliminate the $481,752 Datalinc's equity loss in Fastcom.
j. To eliminate $160,287 in advances made by Datalinc and received by Fastcom
during 1996.
k. No tax benefits or tax asset relating to operating losses have been
recorded as all losses, have been utilited by the partners and there are no
significant book/tax differences.
l. Reflects the $240,000 received from CFG from exercising the Fastcom Option
under Fastcom's Partnership Agreement.
m. Reflects the $1 received from CFG from exercising the Datalinc Option under
the Datalinc's Partnership Agreement.
58
<PAGE>
Datalinc, Ltd.
Management's Discussion and Analysis of
Financial Conditions and Results of Operations
Results of Operations
The following table presents certain items in the Consolidated Statement of
Operations of Datalinc, Ltd. and as a percentage of revenues for the period
indicated.
Year ended December 31,
Percent Percent Percent
of of of
1994 Revenues 1995 Revenues 1996 Revenues
-------- -------- ------ -------- ------ --------
(Dollar amounts in thousands)
Revenues $4,244 100.0% $2,169 100.0% $5,832 100.0%
Operating
expenses:
Cost services
& sales 3,487 82.2 1,456 67.1 4,664 80.0
Selling, general
& administrative 825 19.4 563 26.0 711 12.2
Research &
development,
net of refund (80) -1.9 0 0.0 0 0.0
Depreciation &
amortization 397 9.4 327 15.1 473 8.1
------- ------ ------- ------ ------- -------
Operating loss (385) -9.1 (177) -8.2 (16) -0.3
(Income)loss from
affiliate 567 13.4 (147) -6.8 482 8.3
Interest expense 8 0.2 97 4.5 159 2.7
-------- ------- -------- ------ ------- ------
Net loss $ (960) -22.6 $ (127) -5.9 $(657) -11.3
======== ======= ======== ====== ======== =======
59
<PAGE>
Year Ended December 31, 1996 Compared with Year Ended December 31, 1995
REVENUES for the year ended December 31, 1996 increased approximately $3.7
million (168.9 percent) from 1995. Hub access fee revenues increased
approximately $393,000 from $1.7 million in 1995 to $2.1 million in 1996 (23
percent) as a result of Datalinc obtaining a significant new customer in 1996.
This customer accounted for approximately 570 new sites, raising the total
number of sites to 1,105 in service at December 31, 1996 as compared with 536
sites at December 31, 1995.
In addition to increasing hub access fee revenues, Datalinc's significant new
customer increased equipment sales and installation fees by approximately $3.2
million from $.5 million in 1995 to $3.7 million in 1996 (640 percent).
COST OF SERVICES AND SALES increased by $3.2 million (220.4 percent) for the
year ended December 31, 1996 over the same period in 1995. Cost of hub access
services increased $179,000 from $1.2 million in 1995 to $1.4 million in 1996
(15.2 percent). Cost of services as a percent of hub access fee revenues
decreased from 68.8 percent in 1995 to 64.4 percent in 1996 as a result of
increasing the amount of customer sites, the overall cost per site decreased.
With the addition of Datalinc's significant new customer in 1996, cost of
equipment sales increased $3.0 million from $.3 million in 1995 to $3.3 million
in 1996 (1,063 percent) resulting in margins of $182,000 in 1995 and $423,000 in
1996. Cost of equipment sales as a percent of equipment sales and installation
fees increased 27.7 percent from 61.0 percent in 1995 to 88.7 percent in 1996.
This increase in cost of sales as a percent of sales is principally a result of
lower margins on installing this equipment as certain discounts were given to
obtain the customer discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased approximately $148,000
(26.0 percent) from $563,000 in 1995 to $711,000 in 1996. This is principally
due to increased marketing efforts including more travel by Datalinc's sales
force in the hub's surrounding area, an increase in personnel and an increase in
professional fees.
DEPRECIATION AND AMORTIZATION increased approximately $146,000 (44.7 percent)
from $327,000 in 1995 to $473,000 in 1996. This increase is principally a result
of depreciation expense on several new capital lease transactions during 1996
which will facilitate the expansion of its hub operations to better serve its
customers.
(INCOME) LOSS FROM AFFILIATE increased $629,000 from $147,000 of income in 1995
to a $482,000 loss in 1996. Datalinc records its investment in Fastcom based on
the book value of net assets available for repayment in a manner similar to
equity accounting. The loss recorded in 1996 reflects a decrease in the net
assets available to Datalinc in the event of liquidation of Fastcom. At December
31, 1995 Datalinc's investment was recorded at $840,000 which reflected cash
repayment by Fastcom to Datalinc which was received subsequent to year end from
equity proceeds raised.
INTEREST EXPENSE increased approximately $62,000 (63.9 percent) from $97,000 in
1995 to $159,000 in 1996. This increase is principally due to interest expense
related to several new capital lease transactions during 1996. Additionally,
Datalinc's wholly-owned subsidiary, Thrucomm, obtained a new $600,000 line of
credit to assist in funding operations.
NET LOSS was $657,000 (11.3 percent of total revenues) in the year ended
December 31, 1996 as compared to $127,000 (5.9 percent of total revenues) in the
same period in 1995 as result of factors described above.
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Year Ended December 31, 1995 Compared with Year Ended December 31, 1994
REVENUES for the year ended December 31, 1995 decreased approximately $2.1
million (48.9 percent) from 1994. Hub access fee revenues increased
approximately $186,000 from $1.5 million in 1994 to $1.7 million in 1995 (12.3
percent) as a result of Datalinc's significant new customer in 1994 being in
service for the entire year. This customer accounted for approximately 200 new
sites. Datalinc had 536 sites in service at December 31, 1995 and 492 sites at
December 31, 1994.
Datalinc s equipment sales and installation fees decreased approximately $2.2
million from $2.7 million in 1994 to $.5 million in 1995 (82.9 percent) as
Datalinc's new customer in 1994 accounted for a significant portion of the
equipment sales and installation fees.
COST OF SERVICES AND SALES for the year ended December 31, 1995 decreased
approximately $2.0 million (58.3 percent) from 1994. Cost of hub access services
increased $70,000 from $1.1 million in 1994 to $1.2 million in 1995 (6.4
percent). Cost of services as a percent of hub access fee revenues decreased
from 72.6 percent in 1994 to 68.8 percent in 1995 as a result of increasing the
amount of customer sites, the overall cost per site decreased.
With the addition of Datalinc's significant new customer in 1994, cost of
equipment sales decreased $2.1 million from $2.4 million in 1994 to $.3 million
in 1995 (88.1 percent) resulting in margins of $342,000 in 1994 and $182,000 in
1995. Cost of equipment sales as a percent of equipment sales and installation
fees decreased 26.5 percent from 87.5 percent in 1994 to 61.0 percent in 1995.
This decrease in cost of sales as a percent of sales is principally a result of
lower margins on installing equipment in 1994 as certain discounts were given to
obtain the customer discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES decreased approximately $262,000
(31.8 percent) from $825,000 in 1994 to $563,000 in 1995. This is principally
due to the sharing of costs with Fastcom. Such costs include marketing efforts,
personnel salaries and partnership management fees. Fastcom had a full year of
development in 1995 compared to 1994.
RESEARCH AND DEVELOPMENT, NET OF REFUND decreased $80,000 for the year ended
December 31, 1994 to no research and development costs in 1995. In 1994,
Datalinc received a $110,000 refund of prior year expenses paid to a vendor
because of the vendor's inability to perform under the terms of the contract.
The research and development costs relate to the Network that Fastcom is
developing. Such costs are now exclusively incurred by Fastcom.
DEPRECIATION AND AMORTIZATION decreased approximately $70,000 (17.6 percent)
from $397,000 in 1994 to $327,000 in 1995. This decrease is principally the
result of certain of Datalinc's property and equipment being fully depreciated.
As Datalinc was formed in 1989, a portion of its original property and equipment
had five-year lives which became fully depreciated in 1995.
(INCOME) LOSS FROM AFFILIATE decreased $714,000 from $567,000 loss in 1994 to
$147,000 of income in 1995. The loss recorded in 1994 represents the equity loss
in Fastcom including a reserve for the net assets available to Datalinc. At
December 31, 1995 Datalinc's investment was recorded at $840,000 which reflected
cash repayment by Fastcom to Datalinc subsequent to year end from equity
proceeds.
INTEREST EXPENSE increased approximately $89,000 (1,112.5 percent), from $8,000
in 1994 to $97,000 in 1995 which was principally due to increased interest
expense as Datalinc obtained new debt to assist in funding operations.
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Net loss was $127,000 (5.9 percent of total revenues) in the year ended December
31, 1995 as compared to $960,000 (22.6 percent of total revenues) in the same
period in 1995 as result of factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The accompanying consolidated financial statements have been prepared in a going
concern basis. Datalinc, since its inception, has experienced recurring losses,
although the operating losses have significantly decreased each year. Datalinc
had a working capital deficiency of approximately $1.0 million at December 31,
1996, as compared to a deficiency of approximately $538,000 at December 31,
1995. The increase in working capital deficiency was primarily due to additional
debt and lease obligations being entered into during the year to assist in
financing Fastcom's development.
To assist in funding Fastcom's development, Datalinc's wholly-owned subsidiary,
Thrucomm, obtained a $600,000 line of credit which was guaranteed by both
Datalinc and Fastcom and is collateralized by all of their assets. This line of
credit was originally due March 31, 1997, however, management is presently
negotiating an extension through September 1997 and the line had an unused
available balance of approximately $80,000 at March 31, 1997.
Datalinc's operating activities generated $508,000 of cash flow for the year
ended December 31, 1996. Datalinc believes that it can currently fund its own
requirements with cash flow from operations. However, Datalinc also has funded
the development of Fastcom which continues to drain Datalinc's cash and cause
Datalinc to obtain additional debt. Management of Fastcom is currently seeking
additional financing through venture capital or other investors, which would be
used as repayment of the non-interest bearing advances made to Fastcom. Datalinc
management, however, is also concurrently attempting to effect the proposed
Reorganization to expand its ability to raise capital through alternative
sources of financing. Future additional debt or equity proceeds would be used to
finance the regional build-out of the Fastcom Network.
No assurances can be made that the proposed Reorganization will be approved. The
proposed Reorganization itself, will not provide any additional financing.
However, management believes the proposed Reorganization will enhance the
Company's ability to obtain future financing, as the reorganized Company will be
more attractive to institutional investors, which will expand the financing
opportunities currently available including the possibility of a future IPO.
INFLATION AND CHANGING PRICES
Inflation has not materially affected the sale of hub access fee services by
Datalinc. VSAT/PES equipment, leasing costs and transmission costs have not
risen significantly, nor has Datalinc substantially increased its charges to
customers. Overhead expenses are, however, subject to inflationary pressure.
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Fastcom, Ltd.
Management's Discussion and Analysis of
Financial Condition and Results of Development
Results of Operations
The following table presents certain items in the Statement of Operations of
Fastcom, Ltd. for the period indicated.
For the nine
months from
inception through
December 31, Year ended December 31,
1994 1995 1996
---------------- ---------- ----------
(Dollar amounts in thousands)
Statement of Operations Data:
Revenues (1) - - $ 69
Expenses:
Operating, general &
administrative $ 253 $ 654 1,306
Research and development 309 278 365
Depreciation and amortization 2 27 107
Interest expense 2 11 7
--------- ---------- ---------
Net loss $ (566) $ (970) $ (1,716)
========= ========== =========
(1) Fastcom is a development stage enterprise and has had no significant
revenues.
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Year Ended December 31, 1996 Compared with Year Ended December 31, 1995
REVENUES for the year ended December 31, 1996 were approximately $69,000 as
Fastcom obtained its first customer. These revenues are not considered
significant and Fastcom remains a development stage enterprise. The addition of
Fastcom's first customer in 1996 accounted for approximately 330 sites. Fastcom
is involved in pilot testing with a number of other potential customers which
could result in significant future revenues.
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES increased approximately $652,000
(99.7 percent) from $654,000 in 1995 to $1,306,000 in 1996. The increase is
principally due to Fastcom obtaining its first customer and installing the
Network equipment at the appropriate customer sites. Additionally, an increase
in personnel and marketing efforts were experienced as Fastcom continues to
develop and build its infrastructure necessary to accommodate the activities
associated with the Network.
RESEARCH AND DEVELOPMENT increased $87,000 (31.3 percent) from $278,000 in 1995
to $365,000 in 1996, principally as Fastcom continues to develop the technology
related to its Network and new radios.
DEPRECIATION AND AMORTIZATION increased approximately $80,000 (296.3 percent)
from $27,000 in 1995 to $107,000 in 1996. This principally is a result of
depreciation expense on several capital lease transactions being entered into
during the year as additional equipment was needed to build Fastcom's Network.
INTEREST EXPENSE remained relatively constant for the year ended December 31,
1996, as compared to the same period in 1995, as interest free incremental
financing was provided by Datalinc.
NET LOSS was $1.7 million in the year ended December 31, 1996 as compared to
$970,000 in the same period in 1995 as result of factors described above.
Year Ended December 31, 1995 Compared with Period Ended December 31, 1994
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES increased approximately $401,000
(158.5 percent) from $253,000 in 1994 to $654,000 in 1995. This is principally
due to Fastcom having its first full year of incurring costs to develop its
Network in 1995. As Fastcom was formed in March 1994 there were only nine months
to develop its Network in 1994.
RESEARCH AND DEVELOPMENT remained relatively constant for the year ended
December 31, 1995, as compared to 1994.
DEPRECIATION AND AMORTIZATION remained relatively constant for the year ended
December 31, 1995, as compared to 1994.
INTEREST EXPENSE remained relatively constant for the year ended December 31,
1995, as compared to 1994.
NET LOSS was $970,000 in the year ended December 31, 1995 as compared to
$566,000 in 1994 as result of factors described above.
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LIQUIDITY AND CAPITAL RESOURCES
Since its inception in March 1994, Fastcom has been a development stage
enterprise primarily engaged in the research and development of its Network.
Fastcom obtained its first customer in 1996, although the $67,000 in net
revenues were not considered significant.
Fastcom has been unprofitable since its inception and expects to incur
additional losses until it has completed its product development and obtained a
sufficient customer base. Fastcom's liabilities exceed its assets by
approximately $827,000 at December 31, 1996, which is primarily due to Fastcom's
cumulative losses of $3.3 million. Fastcom also has a working capital deficiency
of $1.6 million at December 31, 1996. The increase in the working capital
deficiency is due to increased development costs and capital leases being
entered into during the year.
Fastcom requires financing in order to complete a regional build-out of the
Network. Such a regional build-out would involve approximately 450 cells at an
estimated aggregate cost of $8.2 million in equipment expenditures, $2.5 million
in working capital (including product development costs) and $1 million in debt
retirement, or a total of $11.7 million. The construction would take
approximately eighteen months to complete.
Fastcom has historically been highly dependent on obtaining necessary financing
from Datalinc, a related party and owes Datalinc $1.3 million for non-interest
bearing advances. Datalinc does not presently have the financial resources
necessary to continue as a going concern and to fund the development of Fastcom.
While Fastcom continues to search for additional debt or equity investors, it
anticipates transferring its assets and liabilities to Thrucomm in the proposed
Reorganization. See discussion of management's anticipated financing at the
"Liquidity and Capital Resources" for Datalinc.
INFLATION AND CHANGING PRICES
Inflation has not materially affected the sale of access fee services by
Fastcom. Leasing costs and transmission costs have not risen significantly, nor
has Fastcom substantially increased its charges to its customer. Overhead
expenses are, however, subject to inflationary pressure.
BUSINESS
FASTCOM
Fastcom was formed in 1994 to develop, install and operate a proprietary
wireless, digital communications network for automated teller machines and
on-line point of sale verification terminals in the license free, 902 to 928
megahertz (MHZ") frequency band ("Part 15" of the regulations of the Federal
Communications Commission - "FCC"). Significant funding for the development of
Fastcom has been principally provided by Datalinc. Through December 31, 1996,
Datalinc has funded approximately $2.2 million. Under the terms of Datalinc's
non-interest bearing advances, such amounts are required to be repaid before
Fastcom can make any distributions to its Investors or Other Equity Owners.
As of December 31, 1996, Datalinc has been repaid $840,000 from Fastcom
from funds raised by Fastcom's Series 200 Offering. The remaining non-interest
bearing advances from Datalinc as of December 31, 1996 totaled $1,345,931.
Fastcom may repay these non-interest bearing advances out of the proceeds of
future offerings. In the event the Reorganization is approved, the related
party debt will be climinated, which was considered by management in
establishing the relative ownership interests of Fastcom and Datalinc in
Thrucomm.
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Fastcom's Network is designed for customers currently using traditional
telephone lines to transmit data between a central data center and multiple,
geographically dispersed "remote" locations. The Network is a hybrid
transmission data solution which seamlessly integrates high speed, digital
radios with a frame relay backbone. Fastcom's proprietary radio technology and
network structure are designed to displace current traditional telephone line
carriers, primarily telephone companies, by providing better performance, and,
for certain users, a significantly lower cost than alternate traditional
delivery systems.
Fastcom recently signed a contract with Star Bank, a leading regional bank
in Cincinnati, to deploy Fastcom's service to over 403 of its ATM locations.
Fastcom has successfully completed a pilot with one potential customer and is
negotiating with that company for a three year contract for a minimum of 200 ATM
locations. Fastcom is currently undertaking, or about to begin, pilot programs
with several electronics fund transfer providers which control a total of
approximately 28,500 ATM locations and up to approximately 529,000 point of sale
devices.
THE ELECTRONICS FUND TRANSFER ("EFT") INDUSTRY
The EFT industry is comprised of large banks and independent third party
processors which function as clearing houses for ATMs, credit card, debit card
and check authorization requests, lotteries and any other retail transaction
that require searching one or more data bases while the connection with the
requesting party remains established (also referred to as accessing in real
time). Typically, the credit or funds transfer authorization process is
initiated by an ATM or merchant transmitting an authorization request to the
processor, which accesses the pertinent data bases in real time and transmits an
acceptance or rejection back to the ATM or merchant.
Based upon source documents, management believes that the EFT industry
serves approximately 2.9 million locations in the United States. Management also
believes that the potential for growth in both the number of sites that will
benefit from the Network's operation efficiencies and lower cost and a projected
400% increase in on-line data transmission speed requirements for the EFT
industry for 1995 until 1999 to be significant.
In general, the EFT industry is using only two data transmission protocols,
synchronous and asynchronous. A synchronous protocol is used for EFT
applications characterized by heavy traffic volume running over a dedicated,
on-line network which remains in constant use, such as an ATM. An asynchronous
protocol is used for light or infrequent traffic volume, which typically is
transmitted over dial-up networks and only used during the authorization
process, such as a merchant validating use of a credit card. These protocols
determine the manner in which data are transmitted between two devices.
ATMS - SYNCHRONOUS & ASYNCHRONOUS
Full service ATMs accept deposits, statement drops, balance inquiries and
also dispense postage, event tickets and other items in addition to cash. Full
service ATMs typically operate synchronously and are networked in a dedicated or
on-line environment due to the large number of transactions and heavy traffic
volume. Management believes that the average number of monthly transactions for
a full service ATM is approximately 7,000.
Off premise deployment of full service ATMs and the introduction of lower
functionality ATMs, known as "cash dispensers," are two trends driving
significant increases in the installed base of ATMs during the past few years.
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Cash dispensers are much lower cost ATMs that, with the exception of dispensing
cash, have none of the functionality of full service ATMs. Cash dispensers can
be operated profitably at 1,000 transactions per month and generally operate
asynchronously over dial-up networks.
The installed base of synchronous ATMs in August 1996 was 139,134 according
to source documents, a 12.5% increase over the previous year, up from a 12.5%
increase for 1995 over 1994. Most of the new synchronous ATM deployments is
taking place away from bank premises. The number of ATMs deployed at off-premise
locations in the United States has increased from 18,380 in 1991 to 38,039 in
1995, for a compound annual growth rate of 19.9%, as compared to the increase of
ATMs installed at on-premise locations from 65,165 to 84,667 over the same
period, for a compound annual growth rate of 6.8%. Factors contributing to the
increased deployment of ATMs in off-premise locations include consumer demand
for cash at these locations and the competitive advantage an ATM can give a
retailer through increased customer traffic and incremental revenues. Management
expects this trend to continue over the next five years as banks, in an effort
to trim costs from operations and reduce their dependence on traditional branch
offices for the delivery of many banking services, continue to reduce the number
of branches and increase the number and type of services delivered through ATMs.
Cash dispensers present ATM operators the opportunity to deploy ATMs in
locations that historically did not generate the number of transactions needed
to support full service ATMs, such as convenience stores, gas stations, college
campuses and sporting events. With the development of surcharging fees for using
ATMs, the banking industry began to view ATMs as a profit center rather than a
cost center. Although there is still controversy surrounding ATM surcharge fees,
it is anticipated by management that these fees will become standard over the
next three to five years.
POINT OF SALE ("POS") - SYNCHRONOUS & ASYNCHRONOUS
POS applications are supported in a manner similar to those of ATMs. Retail
outlets that generate high volumes of credit and debit card authorizations
utilize synchronous, on-line network systems, and low volume retail outlets
utilize asynchronous dial-up network systems. However, retail outlets have a
higher sensitivity to response times than ATM processors, particularly during
peak retail seasons.
There are 2.7 million discrete locations in the United States that accept
credit card and/or debit cards. Management believes that the ratio of
asynchronous to synchronous POS sites is approximately 10:1.
OVERVIEW OF THE NETWORK
Fastcom's Network provides users end-to-end connectivity between their
central office and remote devices such as ATMs and POS terminals. Fastcom
utilizes (i) a proprietary, digital, wireless license-free technology within
metropolitan areas to by-pass the LEC carriers or enhanced satellite
transmission device ("VSAT") transceivers in rural areas and (ii) leased
high-speed, digital, frame relay circuits from major long distance carriers to
traffic data from metropolitan areas to the customers' central office via
Fastcom's Network communications center ("NCC"). The Network also consists of a
back-up satellite-based transmission path between metropolitan areas in the
event of service interruption. The Network consists of (i) remote transceivers
at customer locations (ATMs and POS), (ii) cell sites dispersed throughout the
metropolitan areas, and (iii) a NCC.
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REMOTE TRANSCEIVERS - DP1000 AND DP100
Remote transceivers are installed at ATM or POS locations. Fastcom provides
a complete solution to its customers by offering either (i) its proprietary
license-free radio frequency transceivers, or (ii) VSAT satellite transceivers.
The proprietary license-free radio frequency transceivers, DP1000 and
DP100, have small directional antennas that are targeted at cell sites within a
five miles radius (about 75 square miles). As currently configured, Fastcom
transceivers operate in the license-free 902 to 928 MHZ band. Fastcom is
developing a field ungradable component which will permit operation in the 2400
to 2483.5 MHZ frequency as well. Fastcom will install DP1000 and DP100
transceivers in urban and suburban areas with sufficient concentration to
economically justify the installation of a supporting network of cell sites. The
DP1000 is a synchronous product which will be used in full service ATM
applications and the DP100 is an asynchronous product which will be used
predominately in POS applications and in cash only ATM locations. Both products
are designed for remote monitoring and upgradability. The NCC will be capable of
deciphering problems at particular site installations, remotely.
Each transceiver provides up to four ports that can transact
simultaneously. Each port, based on the Motorola Vanguard technology, will
independently support various customer devices, protocols and speeds. Port
speeds are capable of up to 38.4Kbps, and transceivers in total will operate at
data rates in excess of 64Kbps. Additional features include network driven
software upgrade capabilities, public key encryption and the ability to measure
the integrity of a signal between a cell site and the remote transceiver in real
time.
For rural installations, Fastcom will deploy VSAT transceivers, which will
broadcast directly (via the Galaxy 7 satellite service of Hughes Communications,
Inc., a unit of Hughes Electronics Corp. ("Hughes")) back to the NCC, thus
obviating the need for a network of cell sites. Fastcom has been working with
Hughes to develop specialized VSAT transceivers. The transceivers will cost
significantly less than other commercially available equipment, and will allow
for integration with the Fastcom's standard Motorola Vanguard based
communications ports found on Fastcom's proprietary DP1000 and DP100s.
CELL SITES
Fastcom installs cell sites on existing towers and rooftops which are
leased by Fastcom. Each cell site has an effective radius of five miles and
additional cell sites can be installed to increase coverage, providing a total
by-pass of the local telephone company. A cell site is equipped with a digital
switch, a frame relay access device, a VSAT, an uninterruptable power supply and
a proprietary DP1000 transceiver. Each transceiver can support up to 200 remote
devices and additional transceivers can be added incrementally, with the
addition of radios and switches, at existing cell sites for additional capacity.
THE NETWORK CONTROL CENTER ("NCC")
The NCC is a fully redundant, digital switching center equipped to control
and monitor the Network at all levels. From the NCC, system operators fault
isolated Network problems, dispatch technicians to cell or transceiver sites on
a nationwide basis and act as a single point of contact for all customer
technical inquiries. The NCC, built by Datalinc, has been fully operational
since November 1991 and serves as the master earth station for Datalinc's VSAT
data communication service. Over the past two years, Datalinc has retrofitted
its NCC to manage the Network for Fastcom.
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Fastcom also maintains a disaster recovery path through a Hughes Network
System ("HNS") facility in Washington, D.C., providing a satellite-based,
alternate access network to "shadow" the frame relay circuits in the event of
cable cuts or other service interruptions beyond the control of Fastcom. HNS is
a division of Hughes. Management believes Fastcom is the only carrier in
operation that maintains two totally independent wide area network paths (frame
relay circuits and satellite).
REGULATION
The DP1000 transceiver operates under FCC regulations that permit
license-free, spread spectrum operation of radio frequency transceivers.
License-free operation is permitted in the 902MHz - 928MHz and 2400MHz -
2483.5MHz bands in which the DP1000 operates.
INTERFERENCE REJECTION - LICENSED COMPARED TO LICENSE FREE
License-free operators must accept interference from all other license-free
operators in the band and have no recourse to the FCC. In the absence of
statutory protection from harmful interference, the DP1000 assumes the existence
of harmful interference and relies upon the combination of a sophisticated
spread spectrum modulation techniques. This spread spectrum modulation
techniques was first developed for the military as a method of transmitting and
receiving secure radio signals immune to jamming and intercept efforts.
COMPETITION
Fastcom competes primarily with traditional land lines rather than wireless
data networks offered by traditional telephone line carriers, all of which are
larger and have more financial resources than Fastcom.
AT&T dominates the data transmission market.
Depending on the volume of transactions and type of application, processors
utilize either on-line circuits or dial up circuits. The more expensive on-line
circuits are either multi-drop networks, integrated services digital networks or
packet networks.
MULTI-DROP NETWORKS
With few exceptions, synchronous communication networks consist of
terrestrial multi-drop networks that are provided by AT&T and, to a lesser
extent, MCI and Sprint. Multi-drop circuits are characterized by an
interexchange carrier ("IXC") provided leased circuit installed between a
processor's data center and a given metropolitan area. The land exchange carrier
("LEC") serving that area installs subsidiary circuits from the IXC circuit to
each remote processor site. The same design is repeated for each metropolitan
area in which the processor maintains a presence. In addition, modems, which are
the sole responsibility of the processor, must be installed at each remote site.
These networks must buy services from multiple vendors, including an IXC, a
LEC and/or modem vendor. Current multi-drop networks carry data speeds ranging
from 2.4 kilobits per second ("Kbps") to 19.6 Kbps. Adding sites to an existing
multi-drop network or upgrading an existing network to support faster data rates
require ordering more expensive telephone circuits, new modems and a
reconfiguration of the front end processor. A front-end processor is a device
that controls the flow of data between the host computer and each remote device.
Upgrading a multi-drop network is expensive and time consuming.
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NETWORK ADVANTAGES COMPARED TO MULTI-DROP NETWORKs
MULTIPLE SERVICE OFFERINGS - A key Network advantage is Fastcom's ability
to respond to multiple displacement costs often found in a typical processor's
network, through a variety of service offerings that include point to
multi-point spread spectrum, frame relay and VSAT.
SINGLE VENDOR SOLUTION - The Network offers a single vendor system (as
opposed to its competitors' multi- vendor synchronous systems) utilizing its
proprietary Network management platform to deliver "end-to-end" pro- active
command and control features.
DISTANCE SENSITIVITY - A major cost factor of telephone land lines is
distance. The greater the distance between a processor's data center and the
remote sites, the higher the cost. Due to Fastcom's wide area network, pricing
for Fastcom's services is distance insensitive. As EFT processors continue to
market their services over a wider geographic area, Fastcom's pricing based on
its wide area network will eliminate distance as a cost consideration.
LEC BY-PASS - Fastcom's wireless, spread spectrum platform, installed as a
metropolitan area network serves to by-pass the LECs. LEC charges comprise
approximately two thirds of multi-drop network costs. The cost of installing
Fastcom's spread spectrum Network is significantly less than the cost of
maintaining and upgrading land lines.
UPGRADE COSTS - Upgrading multi-drop networks is expensive and time
consuming. Faster and more expensive circuits must be ordered. New modems to
support the faster circuits must be installed and in many cases the processor's
FEP, located at the data center, must be upgraded. For large networks, this
process can take months to complete. Fastcom's Network is primarily software
driven, and upgrade commands can be downloaded over the satellite to the cells
and from the cells to the transceivers. Based on source data, circuit speeds for
ATMs and POS are projected to increase from 9.6Kbps to 38.4Kbps by 1999.
However, a doubling of data traffic on the Network will result in only a ten
percent increase in overall cost in most cases.
NETWORK MANAGEMENT - The IXCs and LECs cannot monitor a multi-drop network
in real time. An outage must be reported by the processor before any action can
be taken by the phone companies to restore service. Also, because a multi-drop
network involves multiple service providers, much time is spent determining
which phone company or modem vendor has responsibility for restoring service.
Fastcom has designed into its Network platform the ability to monitor the
Network in real time, spotting potential problems or service interruptions as
they occur and to begin service restoration immediately. Key network operating
parameters, such as band width assignment, port speeds and protocols, can be
downloaded over the Network rather than by site visit as required in multi-drop
networks. Unlike phone companies, Fastcom is able to guarantee contractually
Network availability (or up-time) to customers.
TARIFFS - Multi-drop networks are subject to an array of federal and state
tariffs. EFT processors operating over multiple states experience constant
fluctuations in tariff rates from various states and the federal government.
Tariff fluctuations complicate the budget and planning process for large EFT
processors. Fastcom's service is totally non-tariffed.
INTEGRATED SERVICES DIGITAL PACKET NETWORKS
An integrated packet network requires such service be installed at each ATM
or POS site. An integrated services digital network is in effect a digital dial
up technology which enables a user to transmit voice and data simultaneously
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over the same telephone line. In the case of the EFT industry, users have no use
for the voice portion of the service and order only what is known as the "D
channel" to transmit data. For example, when a card is used at an ATM or POS
site, the integrated digital network service establishes a connection with a
local LEC switch (or node). The node then forwards the data packets to the
processor's host computer, through a dedicated leased circuit. When the
transaction is complete, the connection is terminated. Processors pay a monthly
fee to access the node, a monthly fee for each remote site and a fee for each
one thousand packets transmitted. Additionally, integrated digital network
compatible equipment must be installed at each remote site and at the
processor's data center. If an IXC is required, additional packet (or usage)
fees are charged to the processor.
Integrated services packet networks that originate and terminate within the
same LEC service area can cost as little as $95/month, per site. However, the
cost of integrated services packet networks that do cross LEC service areas, and
therefore require an IXC increase, can surpass the cost of multi-drop networks.
ADVANTAGES OF THE NETWORK COMPARED TO INTEGRATED SERVICES PACKET NETWORKS
Integrated services packet networks have the same disadvantages as
multi-drop networks. However, users of integrated services packet networks also
must bear the added burden of packet charges not found in multi-drop networks.
Management believes there is significant growth in the number of transactions in
the wider geographic areas served by EFT processors, Fastcom believes that for
businesses that want to install or upgrade data transmission networks,
integrated services packet networks are not cost effective in the long run due
to the flat price characteristics of Fastcom's service.
The Network will be marketed to users of asynchronous networks based on
upgrading service and eliminating problems inherent in asynchronous networking.
There are significant disadvantages to dial-up networks. First, they are subject
to slow downs. Because they operate much like the public, switched voice
network, the number of sites dialing in at a given time can vary significantly.
During peak retail seasons, authorization times can triple or quadruple,
contributing to long lines at the check out counters and dissatisfied customers.
Second, there is no network management associated with dial-up networks, and the
usual time to repair problems ranges from "same day" to "next day."
Additionally, most debit card readers only operate over synchronous networks,
preventing dial-up network users from offering debit card authorization, which
is one of the fastest growing segments of retail authorization. None of the
foregoing problems exist with the Network.
DEVELOPMENT OF THE NETWORK
Fastcom intends to establish a national Network through the development of
a series of regional Networks, for the following reasons: (i) Fastcom can locate
Cells based on the greatest amount of coverage area (as opposed to where a
particular customer's sites are located), which should lead to fewer Cells and
lower costs; (ii) Fastcom can focus its efforts on all ATM and POS opportunities
within a region, which will enable Fastcom to place multiple customers on the
same network infrastructure; and (iii) Fastcom can better forecast equipment
requirements, placing larger orders with vendors, resulting in lower equipment
costs.
RESEARCH AND DEVELOPMENT
Fastcom has built a core group of system and software engineers which make
up the Network development team. The development team's mission statement is
simultaneously to improve overall Network performance and decrease Network
operating costs through innovation and technology.
In an effort to enhance the effectiveness of Fastcom's development team,
Fastcom has entered into an agreement with Nova Engineering, an engineering firm
specializing in the field of spread spectrum modulation. This agreement (i)
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provides Fastcom exclusive proprietary rights to all designs and algorithms that
result from the collaborative effort between the engineering firm and Fastcom.;
(ii) pays the engineering firm a royalty for each transceiver placed in service;
and (iii) pays the engineering firm a bonus royalty based on a percentage of
savings for any innovative effort on their part that results in a lower
transceiver cost. In addition, Nova will pay Fastcom a royalty on any radio that
is a derivative of the radio technology developed for Fastcom.
Fastcom believes it has become the leader in the development of spread
spectrum technology for EFT type applications. Fastcom will continue to improve
the cost/performance ratio of the DP1000 through investments in the on-going
development of the DP1000 platform and VSAT service offerings.
Fastcom is currently engaged in two major development projects which
management believes will dramatically expand Fastcom's market. The DP100 is a
less costly version of the DP1000 and is targeted at the large segment of the
POS market made up mostly of independent retailers, restaurants and convenience
stores. This is a market segment that accounts for approximately 90% of existing
POS sites, generates less than 3,000 transactions per month, per site and
currently uses low cost, dial up circuits. Fastcom believes users of dial up
circuits will adopt the Network's superior on-line service if comparably priced
to what they are currently paying for dial-up services. Fastcom is currently
conducting laboratory testing with two potential customers.
The DPX cell development is an effort that would provide a significant
increase in the current throughput of a Network cell and would enable Fastcom to
address higher bandwidth applications currently running on traditional frame
relay and switched packet networks. Monthly per site expenditures for frame
relay and switched packet solutions range between $200 and $400. The DPX
development involves an upgrade of a cell's switching capability and the
implementation of data compression. The DPX cell is anticipated to be
operational in 1998.
When these projects are completed, management believes that the combination
of the DP100, DP1000, DPX cell and VSATs will enable Fastcom to address all
market segments of the EFT industry and to offer displaceable costs ranging from
$75 to $400 per month, per site.
OPERATIONS
Fastcom sub-contracts manufacturing, installation and certain aspects of
field maintenance. Fastcom performs the remainder of the operating tasks itself.
MANUFACTURING
Being primarily a service provider, Fastcom elected to sub-contract the
manufacture of the DP1000 printed circuit boards, cables and enclosure. Fastcom
has a multiple source policy and maintains subcontracting agreements with a
number of manufacturers and production houses. Fastcom gains a number of
advantages through its subcontracting relationships, including the capability to
remain focused on the delivery of communication services, to avail itself of the
latest production techniques and to maintain short manufacturing lead times.
Fastcom elected to retain component sourcing, inventory management, final
assembly and quality assurance on an in-house basis.
CELL SITE LEASING
Because of Fastcom's license-free operation, Fastcom is able to co-locate
with almost any wireless transceiver and is therefor able to lease existing
towers and roof tops. Over the last three years, Fastcom has compiled a data
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base of over 14,000 existing towers and roof tops containing the site location,
height and elevation above ground, with contact name and phone number. Fastcom
will utilize the services of brokers and site acquisition companies to locate
and secure locations not included in Fastcom's data base. Once identified, the
leasing of a tower or roof top is very similar to leasing any commercial space.
General terms and conditions include sixty month terms with options to renew,
twenty-four hour access and monthly rents averaging $500.
SITE LAYOUT
Fastcom has invested in a group of software programs that enables Network
engineers to pinpoint existing towers and roof tops at which to locate DP1000
cells. Using the NPA.-NNX (area code and prefix) of each site provided by the
customer, Fastcom's engineers can then plot all customer sites relative to cell
locations. Additionally, each radio frequency link between a proposed
transceiver and cell can be simulated and evaluated in advance of actual
installation. The software and related methodologies permit Fastcom to forecast
deployment costs with a high degree of accuracy.
INSTALLATION
Fastcom maintains a core installation staff that manages a national network
of installation subcontractors. Fastcom is able to maintain quality and
consistency throughout the installation process and maximum flexibility in
calibrating installers and installation schedules. In keeping with its "end to
end" approach to service, Fastcom acquires landlord approvals on behalf of its
customers in the many instances where the customer does not own the property at
which the transceiver is to be installed.
FIELD MAINTENANCE
Fastcom has entered into an agreement with a prominent, third party
maintenance company with 25 years of experience to provide Fastcom with a
national field maintenance program that includes cells and customer site
transceivers. The agreement provides coverage on a national basis and specifies
an average mean time to respond of four hours. Fastcom provides spares and
on-going training, and the maintenance organization provides skilled technicians
and will inventory Network spares in their depot centers around the United
States.
SALE OF EQUIPMENT
Fastcom will also sell remote site VSAT equipment to a customer or a
leasing company as each customer site is installed on the VSAT portion of the
Network. Certain switching and terminating equipment sold or leased to the
customer may be installed at the Hub.
In order to facilitate the sale of equipment, Fastcom has entered into an
equipment financing agreement with ILC, a Cincinnati-based leasing company
specializing in hi-tech and telecommunications equipment. Under the terms of
this agreement, the customer enters into a 36 to 60 month "firm term" services
contract with Fastcom called an integrated services agreement. Under the terms
of the integrated services agreement, a customer can cancel the agreement if
Fastcom fails to maintain a minimum network availability standard mutually
agreed upon between Fastcom and the customer. ILC owns the equipment for the
term of the agreement, and Fastcom has the option to purchase or refinance the
equipment at the end of the initial term. ILC was acquired by Provident Bancorp,
Inc. in December of 1996.
ILC currently maintains an integrated services agreement portfolio of
approximately $1 million of Fastcom equipment and has committed to significant
ISA financing.
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COMPANY FACILITIES
Fastcom's primary NCC is housed in a nine thousand square foot leased
facility in Cincinnati, Ohio sublevel from Datalinc. The NCC maintains a single
up-link on the HNS - owned and operated Galaxy 7 satellite and operates 24 hours
a day, seven days a week. The Cincinnati facility employs a staff of 26, which
includes engineers, technicians and system operators who act as the central
contact point for all customer network support issues, all shared with Datalinc.
As part of Fastcom's VAR relationship with HNS, Fastcom has access to the
HNS hub in Germantown, Maryland, and maintains alternative disaster recovery
paths to that facility.
DATALINC
Datalinc was formed in 1990 to develop and operate a satellite based data
communications shared hub in Cincinnati, Ohio. The Hub provides a link for data
transmitted by satellite from a remote small satellite antenna dish to the Hub
providing a link between a central computer located in the headquarters of a
business and computers and data processing devices located in remote offices or
stores. This system is used for a variety of data transmission functions, such
as order entry, shipment tracking and inventory control.
Datalinc is a Value Added Reseller for HNS, which has provided significant
assistance in developing Datalinc's shared Hub business.
Datalinc has an informal working arrangement with HNS which provides
for the following:
Exclusivity - HNS will not sell equipment to another shared hub
operator within a 50-mile radius of Datalinc's Hub and will not
provide engineering or marketing support to another shared hub
operator within a 100-mile radius.
Support - HNS pays a commission to its sales force for all
equipment sales made by Datalinc in Datalinc's marketing radius,
which helps assure marketing and engineering support for
Datalinc's sales efforts. It has been Datalinc's experience that
because HNS salesmen receive such commission, they will turn over
all leads for shared Hub customers and support Datalinc's sales
efforts by making sales presentations with Datalinc's salespeople
and by making engineering and legal support personnel available.
Corporate Backup - HNS has provided Datalinc's existing customers
with a letter to the effect that if Datalinc becomes insolvent,
HNS will migrate the customers' networks to an HNS owned and
operated hub and maintain Datalinc's contractual terms.
Disaster Recovery - HNS provides Datalinc a disaster recovery
program assuring total network restoration within 48 hours in the
event of a catastrophic hub failure, such as fire or flood.
Datalinc receives access to such resources of HNS without additional
cost.
Although HNS has furnished such services to Datalinc's customers, they
are under no obligation to furnish such services to any future customers. HNS
has indicated that it will decide whether to furnish any or all of these
services in the future on a case-by-case basis.
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INDUSTRY BACKGROUND
The 1984 AT&T divestiture order negatively impacted leased land phone
line data circuits. Since 1984, the cost of such leased circuits has doubled,
while service has been degraded, due in large part to the fragmentation of the
telecommunications industry brought on by the divestiture order.
Research and development in VSAT technology was underway at HNS before
the divestiture. However, the 1984 decision acted as a catalyst for HNS and
other manufacturers to bring VSAT technology to market.
MARKET
The minimum cost of a hub is approximately $1.5 million and increases
depending on the number of remote VSATs the hub is required to support. To
justify the minimum investment, a large number of remote VSAT sites, typically
more than 300, is required. Consequently, the market has split into two
segments, dedicated or private hubs and shared hubs. WalMart (1,600 sites),
Chrysler (6,000 sites), Chevron (6,000 sites), E.D. Jones (1,000 sites) and
Holiday Inn (1,500 sites) are examples of dedicated hubs. Standard Register (192
sites), Mercantile Stores (10 sites) and Ashland Oil (635 sites) are examples of
Datalinc's shared hub customers. In the past, HNS has found that it takes an
equivalent amount of time and resources to sell a 1,000 site private (dedicated)
network or a 100 site shared network. Thus, HNS has chosen to concentrate its
efforts on sales of large, dedicated hub networks.
To address the shared hub market segment, HNS's strategy is to use a
mix of company-owned shared hubs and independent shared hubs such as Datalinc's.
Datalinc believes that HNS views Datalinc as an extension of HNS's sales and
marketing efforts. Based on the Datalinc General Partner's research, within a
100-mile radius of Datalinc's Hub located in Cincinnati, in Indiana, Kentucky
and Ohio, there are over 100 major corporations that have over 15,000 remote
sites, all of which are candidates for Datalinc's service. To date, Datalinc has
successfully targeted customers with networks of 10 to 635 sites.
The telecommunications industry can be illustrated as a pyramid, with
leased circuit customers occupying the top position. Moving down the pyramid,
the per site cost of communications drops, but the number of customers expands
almost exponentially.
MARKET GROWTH
In 1986 there were 200 high-speed, interactive VSATs installed in the
United States. There are over 100,000 VSAT terminals installed today.
Performance and cost savings are two primary factors which have
contributed to the growth of the VSAT technology over the last ten years. The
all-digital, error-free transmission characteristics of satellite, together with
the software defined network configuration and management capabilities, provide
users with an effective method of data transmission.
Due to major telephone service disruptions, the need for "alternate
access" to telephone line transmitted data has also become a primary factor in
the development of the market.
On-line data service to outlying offices and stores from corporate
computer centers are major users of AT&T telephone circuits. These users are
adversely affected by any outages of over a few minutes' duration.
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SALES
Datalinc commenced operations in January 1990. Since 1987, principals
of the Datalinc General Partner have been active in researching the VSAT
industry, selecting a VSAT manufacturer, selecting the city in which to locate
the Hub and finding a local corporation of sufficient size to be the anchor
customer.
Datalinc commenced operations in January 1990. Datalinc has 13 customer
contracts with 1,105 sites installed, an increase from 536 as of December 31,
1995, ranging from Fortune 500 companies to smaller businesses.
COMPETITION
Datalinc competes with other shared hubs and terrestrial telephone
companies.
GOVERNMENTAL REGULATION
In April 1986, the FCC simplified licensing procedures for VSAT
networks. Prior to such date, a separate FCC license was required for each
remote VSAT terminal. The 1986 ruling created a "blanket license" which requires
licensing of the Hub only. Under the blanket license received by Datalinc in
1991, all remote terminals communicating with a licensed Hub are covered. A
blanket license has a term of 10 years.
PROPERTIES
In 1991 Datalinc executed a lease for a 9,000 square foot facility in
the Fairfield Business Center, Phase II, Fairfield, Ohio. Fairfield is located
approximately 15 miles northeast of Cincinnati. The lease is for a term of 10
years. The current annual rental is $86,332 and increases to $88,564 in years 6
through 10. The lease is a triple-net lease, requiring Datalinc to pay all
taxes, maintenance and insurance expenses on a pro rata basis. The lease
contains other provisions found in typical commercial leases.
THRUCOMM
Thrucomm was recently formed to effect the Reorganization contemplated
by this Consent Statement/Prospectus and has no current business activity.
MANAGEMENT
THRUCOMM'S EXECUTIVE OFFICERS AND DIRECTORS
THE OFFICERS
John F. Kolenda, age 53, has been Chairman of the Board and Director of
Thrucomm, ICN, and of FMI, since their inceptions. As well as being co-founder,
Mr. Kolenda has served as Chief Financial Officer of Datalinc and Fastcom since
their inceptions. From 1982 to present, Mr. Kolenda was President of Home
Cinema, Inc., a provider of turnkey video rental programs for supermarket chains
throughout the southeastern and mid-western United States. From 1975 to 1982, he
was Vice President of Southern Data, Inc. and President of Southern Consulting
Group, Inc., two sister companies involved in financial computer system design,
programming services and data processing services. From 1970 to 1975, Mr.
Kolenda was a manager in the Management Advisory Services Division of Price
Waterhouse. He received a B.S. in Electrical Engineering in 1965 from Bucknell
University and an MBA degree in 1970 from The Wharton School, University of
Pennsylvania.
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Mark J. Gianinni, age 42, has been President and Director of Thrucomm,
ICN, and of FMI, since their inceptions. As well as being co-founder, Mr.
Gianinni has served as Director of Development and Operations of Datalinc and
Fastcom since their inceptions. From 1984 to 1987, he was President of Strand
Communications, Inc., which designed and marketed PC based, media gateways
primarily for the Humana chain of hospitals. From 1982 to 1984, Mr. Gianinni was
Vice President of Home Cinema, Inc. Mr. Gianinni attended University of
California at Los Angeles, and Pennsylvania State University.
THE DIRECTORS
Joseph F. Bert, age 50, has been a Director of Thrucomm since its
inception, Director of ICN since 1993, and Director of FMI since 1994. From 1989
to the present, Mr. Bert has been Chairman of the Board and CFO of Certified
Financial Group, Inc., Orlando, Florida, the holding company for CFG. He is a
Certified Financial Planner and a member of the Institute of Certified Financial
Planners and the International Association for Financial Planning. He is also an
advisor affiliate of Certified Advisory Corp., an SEC registered Investment
Advisor, and an adjunct faculty member for the College for Financial Planning
based in Denver, Colorado. CFG acted as Managing Dealer of prior limited
partnership offerings for Datalinc and Fastcom. Mr. Bert was selected as a
director of ICN and Thrucomm pursuant to CFG Agreements entered into between
CFG, Datalinc and Fastcom, in connection with private placement offerings of
Datalinc and Fastcom's Units. Mr. Bert attended Ohio State University, majoring
in International Business.
R. Brandon Harrison, Jr., age 58, has been a Director of Thrucomm since
its inception, Director of ICN since 1993, and Director of FMI since 1994. From
1975 to the present, Mr. Harrison has served as the President of Petrus
Management of Cincinnati, Ohio, a business involved in a wide range of
activities including venture capital activities, investment in rental
properties, and a sourcing agency for trade with Russia and CIS states. Mr.
Harrison's previous employment includes Procter & Gamble Co., and Laird, Inc., a
New York investment banking company. In addition, Mr. Harrison has served, since
1996, on the Board of Directors of Fine Gold Systems, Inc., a company involved
in the business of mining equipment. Mr. Harrison attended Harvard College and
New York University.
Z. David Patterson, age 60, has been a Director of Thrucomm since its
inception, Director of ICN since 1993 and FMI since 1994. From 1992 to the
present, Mr. Patterson has served as the Executive Vice President,Treasurer and
Secretary of Blue Chip Venture Company, the General Partner of Blue Chip Capital
Fund, a $44 million, Cincinnati based venture capital fund which specializes in
growth equity investment in privately owned companies located in the Mid-west.
Mr. Patterson serves in similar capacities in Blue Chip and its other
affiliates. From 1973-1991, Mr. Patterson served as Vice President and then as
President of New England Capital Corporation, a venture capital firm based in
Boston, with a portfolio value of $50 million. From 1962-1973, Mr. Patterson
held a broad range of corporate lending positions at Bank of New England. From
1994 to the present, Mr. Patterson has served as a director for Lan Vision
Systems, Inc. Mr. Patterson received a B.S. in Finance in 1961 and an MBA in
1967 from Babson College, in Boston, Massachusetts.
Vincent Rinaldi, age 48, has been a Director of Thrucomm since its
inception, and Director of FMI since 1996. Mr. Rinaldi has served as the CEO
of Information Leasing Corporation of Cincinnati, Ohio since 1984. Since
April of 1990, he has been the CEO of Procurement Alternative Corporation,
which currently manages over $300 million of lease transactions and negotiates
the procurement of lease financing for Fortune 100 companies. Mr.Rinaldi was
previously employed by Xerox Corp. from 1973 to 1984, and by Ernest & Ernest
from 1971 to 1973. ILC provides leasing services to the Partnerships.
Pursuant to the leasing and financing agreements, Mr. Rinaldi was selected to
serve as a director to Thrucomm and FMI. Mr. Rinaldi received a B.S. in
Accounting from the University of Cincinnati in 1971.
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KEY EMPLOYEES
The following key employees of Datalinc / Fastcom will continue to be
involved in the Thrucomm service.
Thomas A. Egner, Jr., age 47, joined Datalinc as Director of Sales in
1991. Mr. Egner has increased Datalinc's installed base over five fold. In 1995
Mr. Egner was named Vice President of Sales when the Network was added to his
sales and marketing responsibilities. Recently, he was responsible for signing
Star Bank, the Network's first account and is currently in sales discussions
with the top transaction processors in the United States. Prior to his tenure at
Datalinc, he served in other Senior Sales positions with Hughes Communications,
Geostar and Burlington Northern. He received a B.S. in Business from the
University of Cincinnati in 1974 and an MBA in 1977 from Baldwin-Wallace.
Thomas C. Greggo, age 40, has been Director of Network Operations since
1991. Mr. Greggo oversaw the construction, installation and commissioning of
Datalinc s Hub and currently directs the daily operation of that facility.
Additionally, in 1993, Mr. Greggo was named Director of Network Development
for the Network, which includes design and implementation responsibilities of
the Network architecture and DP1000 radio. Prior to his tenure with Datalinc,
he managed and supported a PC based network for Home Cinema, Inc. in St.
Petersburg, Florida. Mr. Greggo attended Ohio State University, College of
Engineering and graduated from Jefferson Technical Institute in 1976.
Rene Tremblay, age 36, has been Director of Network Engineering for
Datalinc since 1991 and was named to the same post for the Network in 1993. In
those positions he has total responsibility for customer network engineering,
the Network s backbone architecture, performance and capacity planning and
directs customer pilot implementation. Mr. Tremblay also directed the Network /
Datalinc integration and was responsible for designing the Networks backbone
protocol. He came to Datalinc from Telsat Canada, where he worked in the fields
of telephone switching, public data networks and mainframe communications using
both terrestrial and satellite based networks. He graduated Cum Laude from the
University of Ottawa in 1989 with a B.S. in Computer Science.
Michael C. Mothershead, age 38, serves in dual roles as Director of
Installations and Program Manager. As Installation Director, he is responsible
for the coordination and installation of both the Network and Datalinc customer
sites and has both company installers and sub-contractors reporting to him. As
Program Manager, Mr. Mothershead is responsible for reconciling company
resources and equipment to customer contracts and equipment inventories. Prior
to his tenure at Datalinc, Mr. Mothershead was a Production Manager for NCR, and
a Senior Technician for a Hughes Communications installation sub-contractor. Mr.
Mothershead graduated from Tampa College in 1983 with an A.S. degree in Computer
Programming.
J. Thomas Dichiaro, age 29, as Principal Engineer, Mr. Dichiaro
designed both the hardware and software of the DP1000 radio, and is primarily
responsible for the conceptualization and implementation of the DP1000 radio
manufacturing process. Additionally, he plays a key roll in the strategic
planning of future DP1000 radio development. Prior to joining Datalinc, Mr.
Dichiaro developed integrated circuits and designed software for DEC. He has a
B.S. in Electrical Engineering (1990) and a Masters in Electrical and Computer
Engineering (1992) from the University of Cincinnati, and is currently working
on the completion of his Doctorate in Computer Engineering at the University of
Cincinnati.
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James R. Spurlock, age 30, is the Network Control Center (NCC) Manager.
As NCC Manager, Mr. Spurlock has eight system operators reporting to him. His
responsibilities also include the installation, maintenance and repair of the
VSAT Hub, and troubleshooting existing customer networks. Mr. Spurlock played
a key design role in the Network routing architecture and was primarily
responsible for developing the Network's site commissioning procedures. Prior
to joining Datalinc, Mr. Spurlock installed LAN/WAN networks and VSATs
for Hughes Communications. Mr. Spurlock joined Datalinc in 1992.
COMPENSATION OF DIRECTORS
Directors of Thrucomm currently receive no compensation for their
services as directors; however, they will be entitled to receive stock options
under the Stock Option Plan. See "Stock Option Plan."
STOCK OPTION PLANS
Incentive and Non-Statutory Stock Option Plan
Under Thrucomm's Incentive and Non-Statutory Stock Option Plan
(the "Employees' Plan"), 200,000 shares of Common Stock are reserved for
issuance upon exercise of stock options. The Employees' Plan is designed as a
means to retain and motivate key employees. The Board of Directors or a Stock
Option Committee comprised of "Non-Employee Directors" as defined in the
Employees' Plan and appointed by the Board, administers and interprets the
Employees' Plan. Options may be granted to all eligible employees of Thrucomm,
including officers and employee directors and others who perform services for
Thrucomm.
The Employees' Plan provides for the granting of both incentive
stock options (as defined in Section 422 of the Internal Revenue Code) and
non-statutory stock options. Options are granted under the Employees' Plan on
such terms and at such prices as determined by the Board of Directors or the
Stock Option Committee, except that the per share exercise price of the options
cannot be less than the fair market value of the Common Stock on the date of the
grant. Each option is exercisable after the period or periods specified in the
option agreement, but no option may be exercisable after the expiration of ten
years from the date of grant. Options granted under the plan are not
transferable other than by will or by the laws of descent and distribution.
Non-Employee Directors Non-Statutory Stock Option Plan
Under Thrucomm's Non-Employee Directors Non-Statutory Stock Option
Plan (the "Non- Employee Directors' Plan"), 100,000 shares of Common Stock are
reserved for issuance upon exercise of stock options. The Non-Employee
Directors' Plan is designed as an incentive for members of the Board of
Directors. The Stock Option Committee administers and interprets the
Non-Employee Directors' Plan. Options may be granted to all non-employee
directors for Thrucomm.
The Non-Employee Directors' Plan provides for the granting of
non-statutory stock options. The Non-Employee Directors' Plan is considered a
"formula plan." On the dated of appointment to the Board of Directors, a new
director would be granted options for 5,000 shares of Common Stock and on the
date of each annual stockholders meeting, an option for 1,000 shares. Per share
exercise prices of the options cannot be less than the fair market value of the
Common Stock on the date of the grant. Each option is exercisable after the
period or periods specified in the option agreement, but no option may be
exercisable after the expiration of ten years from the date of grant. Options
granted under the Non-Employee Directors' Plan are not transferable other than
by will or by the laws of descent and distribution.
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COMPARATIVE COMPENSATION INFORMATION
Compensation of ICN
ICN currently receives a management fee (the "Hub Management Fee )
in the amount of $14,000 per month. ICN is also reimbursed for certain expenses
incurred on behalf of the Partnership. The Hub Management Fee is entitled to an
increase at a rate of the annual increase in the Consumer Price Index with a cap
of 10% per year. In consideration of the receipt of the Hub Management Fee, the
General Partners will provide management supervisory services in connection with
the operations of the Hub. Persons involved in the day-to-day operations of the
Hub will be employed by and at the expense of the Partnership.
ICN is entitled to receive 44.022% of any Distribution from Cash
Flow, Sale Proceeds and Refinancing Proceeds of Datalinc, after the Datalinc
Investors have received their respective Capital Contributions and Preferred
Returns, and assuming all of the MIP Interests are fully vested. To the extent
that one Series of Datalinc Investors has received a return of all its cash
Capital Contributions, plus Preferred Return, Distributions of Cash Flow, Sale
Proceeds and Refinancing Proceeds to such Series will be reduced by one-half,
and the General Partner shall be entitled to receive 88.044% of the remaining
amount, in order to give effect to the 50/50 distribution ratio that comes into
effect following the return of cash Capital Contributions and the payment of the
Preferred Returns to all Datalinc Investors.
Compensation of FMI
FMI currently receives a management fee (FMI's Management Fee ) in
the amount of $11,000 per month. FMI is also reimbursed for certain expenses
incurred on behalf of the Partnership. The Management Fee may be increased by
$6,000 per month commencing the first month the Partnership has positive cash
flows from operations, which means earnings before interest, taxes,
depreciation, and amortization ( EBITDA ). The Management Fee is entitled to an
increase at a rate of the annual increase in the Consumer Price Index with a cap
of 10% per year. In consideration of the receipt of the Management Fee, the
General Partners will provide management supervisory services in connection with
the operating of the Network persons involved in the day-to-day operations of
the Network will be employed by and at the expense of the Partnership.
FMI is entitled to receive Distributions from Fastcom, but only
after Fastcom has paid its Investors their total cash Contributions and
Preferred Returns, if applicable, made the payment on its Series 100EA Units,
and after Fastcom has paid Datalinc s and CFG s Initial Distributions.
Thereafter, FMI shall be entitled to 100% of any Distributions of Cash Flow,
Sale Proceeds and Refinancing Proceeds of Fastcom, until it has received
$176,235, (FMI s Initial Distribution ). FMI s Initial Distribution is
determined as follows: (i) the aggregate cash Capital Contributions of the
Fastcom Investors, $2,600,000; (ii) divided by 14.753%, which is the sum of the
equity interests of the Fastcom Investors, after the return of their cash
Capital Contributions, plus Preferred Return, if any, and after payment on the
Series 100EA Units; (iii) multiplied by 1%, which is FMI s percent equity
interest in Fastcom. Following payment of all of the Initial Distributions, FMI
shall be entitled to 1.0% of any subsequent Distributions of Cash Flow, Sale
Proceeds and Refinancing Proceeds.
Compensation After the Reorganization
Mr. Kolenda and Mr. Gianinni After approval of the Reorganization
Agreement, the Management Fees to ICN and FMI will terminate. Messrs. Kolenda
and Gianinni will enter into employment agreements with Thrucomm, the terms of
which are subject to negotiation. The Board of Directors of Thrucomm has,
however, approved base annual salaries of $150,000 for both Messrs. Kolenda and
Gianinni.
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ICN After the Reorganization, and upon the occurrence of a
Mandatory Conversion Event, ICN would be entitled to receive the Underlying
Shares or other consideration allocated to the Series H Preferred Stock.
Assuming Conversion Values of Thrucomm at $30 million, $60 million, and $90
million, the value of ICN's Underlying Shares or other consideration would be:
$7,563,001, $19,017,270, and $29,947,356, or 25.2%, 31.7% and 33.3% of the
equity interests of Thrucomm, respectively.
FMI After the Reorganization, and upon the occurrence of a
Mandatory Conversion Event, FMI would be entitled to receive the Underlying
Shares or other consideration allocated to the Series N Preferred Stock.
Assuming Conversion Values of Thrucomm at $30 million, $60 million, and $90
million, the value of FMI's Underlying Shares or other consideration would be:
$210,000, $450,000, and $720,000, or 0.7%, 0.8% and 0.8% of the equity interests
of Thrucomm, respectively. The combined value of the Series H and O Preferred
Stock, after Mandatory Conversion, assuming the same Conversion Values of
Thrucomm, would be: $7,773,001, $19,467,270 and $30,667,356, or 25.9%, 32.5% and
34.1% of the equity interests of Thrucomm, respectively.
Compensation and Distributions Paid by the
Partnerships to ICN and FMI on a Combined Basis for the
Last Three Fiscal Years and Most Recent Interim Period (1)
-----------------------------------------------------------
Year Compensation Expenses Distributions
---- ------------ -------- -------------
1994 $ 246,000 $ 37,055 $ 0
1995 272,040 64,702 0
1996 289,200 71,470 0
1st Q '97 75,000 12,386 0
------- ------------ -------- ----------
Totals: $ 882,240 $185,613 $ 0
Notes:
(1) If Messrs. Kolenda and Gianinni's proposed salaries with Thrucomm had
been in effect during the last three fiscal years and the most recent
interim period, their aggregate compensation, expenses and distribution
would have been: $975,000, $185,613, and $0, respectively, for a total
of $1,160,613.
CERTAIN TRANSACTIONS WITH MANAGEMENT
Other Transactions
The Partnerships have entered into certain transactions with CFG, ILC,
and Blue Chip. Thrucomm will assume the benefits and liabilities under these
agreements. See "The Proposed Reorganization - Interests of Certain Persons in
the Reorganization."
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DATALINC'S MANAGEMENT INCENTIVE PLAN
On June 1, 1996, the General Partner of Datalinc approved the establishment
of the Datalinc, Ltd. Management Incentive Plan and reserved up to 5% of
Datalinc's equity interests for issuance pursuant to the Plan. At present, 430
MIP Interests, representing 4.3% of the equity ownership of Datalinc, have been
granted to key employees of Datalinc. The rights of Participants in the Plan
shall vest: (i) 33 % on the first anniversary date of the grant; (ii) 66 % on
the second anniversary date of the grant; and (iii) 100% on the third
anniversary date. Datalinc has granted MIP Interests to the following
Participants: Thomas A. Egner, Jr. - 100 MIP Interests; Thomas C. Greggo - 100
MIP Interests; Rene Tremblay - 100 MIP Interests; Michael C. Mothershead - 30
MIP Interests; J. Thomas Dichiaro - 75 MIP Interests; and James R. Spurlock - 25
MIP Interests.
Upon Mandatory Conversion, all of the outstanding MIP Interests shall be
converted into Underlying Shares or such other consideration received in the
Mandatory Conversion Event. However, only Participants who hold vested MIP
Interests will be entitled to receive their pro-rata share of the Underlying
Shares or other consideration. Otherwise, Underlying Shares of Series F
Preferred Stock will be held in trust by Thrucomm, if the MIP Interests to which
relate are not fully vested at the time of Mandatory Conversion, and they will
be issued to Participants, only if and when the rights thereto have vested.
PRINCIPAL STOCKHOLDERS OF THRUCOMM
The following table sets forth information as of the date of this Consent
Statement/Prospectus, with respect to the relative percentage of beneficial
ownership of Common Stock anticipated to be outstanding after Mandatory
Conversion and held by: (i) each person known by Thrucomm to be the owner of
more than 5% of the outstanding shares of Common Stock and Preferred Stock of
Thrucomm; (ii) each current director; and (iii) all executive officers and
directors as a group (the number of shares cannot be determined at this time).
The percentages of ownership set forth below are derived from the application of
the Formula. See The Formula" and The Ownership Tables.
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Percentage of Beneficial Ownership Assuming(1):
Name and Address $30 Million $60 Million $90 Million
of Beneficial Owner Value Value Value
Percent Percent Percent
Blue Chip (2) 16.13 14.03 13.15
ICN (2) 12.60 15.85 16.64
CFG (3) 4.34 4.99 5.24
John F. Kolenda (2) 13.36 16.60 17.40
Mark J. Gianinni (2)12.95 16.22 17.04
Joseph F. Bert 4.34 4.99 5.24
R. Brandon Harrison * * *
Z. David Patterson 16.13 14.03 13.15
Vincent Rinaldi * * *
All officers and
directors as a group48.15 53.16 54.16
(6 persons)
Notes:
(1) As used herein, "beneficial ownership" means the sole or shared power to
vote, or to direct the voting of, a security, or the sole or shared power to
dispose, or to direct the disposition of, a security. Except as otherwise
indicated, all persons named herein and therein have (i) sole voting power
and investment power with respect to their shares of Common Stock, except to
the extent that authority is shared by spouses under applicable law; and
(ii) presently have, or will have upon Mandatory Conversion, record and
beneficial ownership with respect to their shares of Common Stock.
(2) Pursuant to the Blue Chip Agreements, Messrs. Kolenda and Gianinni, have
agreed to vote their ICN stock such that they and a designee of Blue Chip
comprise the majority of the ICN Board. Blue Chip is an affiliate of Mr.
Patterson who serves on the Boards of ICN, FMI and Thrucomm pursuant to the
Blue Chip Agreements. Accordingly, these individuals are the beneficial
owners of the one share of issued and outstanding Common Stock of Thrucomm
both before and after the Reorganization.
(3) Assumes CFG exercises its Datalinc and Fastcom Options to acquire a 3.828%
interest in Datalinc and a 2.4% interest in Fastcom.
* Indicates less than 1% beneficial ownership.
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DESCRIPTION OF THRUCOMM'S SECURITIES
COMMON STOCK
Thrucomm is authorized to issue 75,000,000 shares of Common Stock, no par
value per share (the "Common Stock"), of which one share is issued and
outstanding as of the date of this Consent Statement/Prospectus. The holders of
Common Stock shall be entitled to one vote per share. As of the date of this
Consent Statement/Prospectus, there is no established public trading market for
the Common Stock.
PREFERRED STOCK
Description of Preferred Stock
Thrucomm's Articles of Incorporation (Thrucomm's "Articles") authorize the
issuance of 25,000,000 shares of preferred stock with such designation, rights
and preferences as may be determined from time to time by the Board of Directors
of Thrucomm. Accordingly, the Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting power
or other rights of the holders of Preferred of Common Stock. Preferred stock
could be utilized, under certain circumstances, as a method of discouraging or
delaying a change in the control of Thrucomm subsequent to the Effective Time of
the Reorganization. Although Thrucomm does not currently intend to issue any
shares of preferred stock, except in connection with the Reorganization, there
can be no assurance that Thrucomm will not do so after consummation of the
Reorganization.
Under Florida law and under the terms of Thrucomm's Articles, preferred
stock may be issued in series, as established from time to time by the Board of
Directors. In this connection, the Board of Directors has broad discretion to
set the terms of the preferred stock, and, if it decided to, the Board of
Directors may fix for each series, without further shareholder approval (i) the
rate of dividend; (ii) the price at and the terms and conditions on which shares
may be redeemed; (iii) the amount payable upon shares in the event of voluntary
or involuntary liquidation; (iv) sinking fund provisions, if any, for the
redemption or purchase of shares; (v) the terms and conditions on which shares
may be converted, if the shares of any series are issued with the privilege of
conversion; and (vi) voting rights, if any.
THE MANDATORY CONVERTIBLE PREFERRED STOCK
Of the authorized shares of Thrucomm's preferred stock, 1 share has been
designated to each series of Mandatory Convertible Preferred Stock, Series A - O
(collectively, the Preferred Stock ). Prior to the Effective Time of the
Reorganization, there will be no outstanding series of Preferred Stock. The
following description of the Preferred Stock, does not purport to be complete
and is subject to, and qualified in its entirety by reference to, Thrucomm's
Articles and the Certificate of Designation, Preferences and Rights relating to
the Preferred Stock (the "Certificate of Designation") to be filed with the
Secretary of State of Florida, and which are filed as exhibits to the
Registration Statement of which this Consent Statement/Prospectus is a part.
The Conversion Feature
The Preferred Stock is mandatorily convertible into shares of Thrucomm's
Common Stock upon the occurrence of any of the following triggering events,
Mandatory Conversion Events: (i) the completion of an IPO, raising a minimum of
$15,000,000 of gross offering proceeds; (ii) the sale of all or substantially
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<PAGE>
all of the assets of Thrucomm or (iii) the merger of Thrucomm into a
non-affiliated entity in which Thrucomm is not the surviving corporation. The
conversion rate is determined by the application of the Formula. The Formula is
based upon the Conversion Value of Thrucomm in connection with a Mandatory
Conversion Event. In an IPO, the Conversion Value of Thrucomm is based upon the
amount of equity that is sold in the offering, and the gross proceeds received
therefor. However, because the ultimate holders of the Underlying Shares of
Common Stock will have the right to vote for or against a Sale or Merger, in the
event of a proposed Sale or Merger the Preferred Stock shall be mandatorily
convertible into shares of Thrucomm's Common Stock prior to the Sale or Merger.
The Conversion Value of Thrucomm will be based upon the consideration to be
received in the proposed Sale or Merger. In the event that a majority of the
holders of the Common Stock thereafter do not approve the proposed Sale or
Merger, the number of Underlying Shares of Common Stock then outstanding will
remain outstanding based on the aggregate consideration that was proposed to be
received as a result of that proposed Sale or Merger. There shall be no further
right to convert into Underlying Shares of Thrucomm thereafter. In any Mandatory
Conversion Event, the Conversion Value of Thrucomm will be allocated to Datalinc
and Fastcom in the manner prescribed by the Board of Directors of Thrucomm and
by the General Partners of Datalinc and Fastcom. For a detailed description of
the Formula and for illustrations of the Formula at various Conversion Values of
Thrucomm, see The Formula- Determinating the Values of Thrucomm, Datalinc and
Fastcom and Thrucomm Ownership Tables.
Adjusted Ownership Interests
The Underlying Shares of the Series I and K Preferred Stock will be
distributed to the Investors in Fastcom s Series 100 and 200 Units,
respectively. The Series 100 and 200 Investors are entitled to a minimum
guaranteed return on their investment, which is measured as a 30% discount on
the Fastcom Value at the time of an IPO, Sale or Merger. Accordingly, the Series
I and K Preferred Stock shall be subject to an adjustment upon Mandatory
Conversion, if an adjustment is necessary to ensure that Fastcom's Series 100
and 200 Investors receive their guaranteed return, as provided for under Fastcom
s Partnership Agreement. See Equity Ownership of the Partnerships - The Fastcom
Investors."
The Series I Adjustment. The equity interest of the Series I Preferred Stock
is subject to an adjustment, immediately prior to Mandatory Conversion, if
necessary, to ensure that Fastcom's Series 100 Investors will receive the
minimum return guaranteed to the Series 100 Units (the Series I Adjusted
Ownership Interest ). The Series I Adjusted Ownership Interest is measured as a
30% discount to the Fastcom Value. The 30% discounted Fastcom Value (the
Discounted Fastcom Value ) is determined as follows:
Fastcom Value x .70 = 30% Discounted Fastcom Value.
An adjustment to the equity interest of the Series I Preferred Stock need only
be calculated, if the Discounted Fastcom Value is less than $16,326,640 (the
Series I Guaranteed Minimum of Fastcom Value ). The Series I Adjusted Ownership
Interest is calculated as follows:
Series I Guaranteed Minimum Fastcom Value x .02225 x 100 = % Adjusted Ownership
- -----------------------------------------
Interest Discounted Fastcom Value
For example, if the Fastcom Value is $21,000,000, the Discounted Fastcom Value
is $21,000,000 x .70 = $14,700,000. Since the Discounted Fastcom Value is less
than the Series I Preferred Stock's Guaranteed Minimum Fastcom Value, it is
necessary to make an adjustment to the Series I Preferred Stock's equity
interest. The Adjusted Ownership Interest of the Series I Preferred Stock would
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be: ($16,326,640 o $14,700,000) x .02225 x 100 = 2.471%. Any adjustment in the
equity interest of the Series I Preferred Stock, shall result in a corresponding
decrease in the equity interest of the Series L Preferred Stock, which will be
distributed to Datalinc upon Mandatory Conversion. See The Formula - Determining
the Values of Thrucomm, Datalinc and Fastcom for how to calculate the Fastcom
Value.
The Series K Adjustment. The equity interest of the Series K Preferred Stock
is subject to an adjustment, immediately prior to Mandatory Conversion, if
necessary to ensure that Fastcom's Series 200 Investors will receive the minimum
return guaranteed to the Series 200 Units (the Series K Adjusted Ownership
Interest ). The Series K Adjusted Ownership Interest is also measured as a 30%
discount to the Fastcom Value. If the Discounted Fastcom Value is less than
$18,000,000 (the Series K Guaranteed Minimum Fastcom Value ). The Adjusted
Ownership Interest of the Series K Preferred Stock is calculated as follows:
Series K Guaranteed Minimum Fastcom Value x .11972 x 100 = % Adjusted Ownership
Discounted Fastcom Value Interest
For example, if the Fastcom Value is $21,000,000, the Discounted Fastcom Value
is $21,000,000 x .70 = $14,700,000. Since the Discounted Fastcom Value is less
than the Series K's Guaranteed Minimum Fastcom Value, it is necessary to make an
adjustment to the Series K Preferred Stock's equity interest. The Adjusted
Ownership Interest of the Series K Preferred Stock would be: ($18,000,000 o
$14,700,000) x .11972 x 100 = 14.66%. Any adjustment in the equity interest of
the Series K Preferred Stock shall result in a corresponding decrease in the
equity interest of the Series L Preferred Stock, which shall be distributed to
Datalinc upon Mandatory Conversion.
Dividends
Series A-E Preferred Stock
The Datalinc Units are entitled to repayment of their total cash Capital
Contributions, plus aggregate Preferred Returns, before any Distributions of
Cash Flow, Sale Proceeds and Refinancing Proceeds, and upon Liquidation to
Datalinc s Other Equity Owners. To preserve the Datalinc Investors rights and
preferences under the Partnership Agreements, the Series A-E Preferred Stock
(the Dividend Preferred Stock ), shall be entitled to dividends ( Dividends ),
upon Mandatory Conversion, in an amount which shall be equal or nearly equal to
the Datalinc Investors cash Capital Contributions, plus Preferred Return. See
Column D of Thrucomm Ownership Tables. Dividends shall be declared at the time
of Mandatory Conversion, and will be factored into the Formula to calculate the
number of Underlying Shares or other consideration.
The amount of Dividends payable per share per month shall be computed by
dividing the annual rate (10% for the Series A and B; 8% of the Series C-E) by
twelve. The amount of Dividends payable for the initial dividend period or any
period shorter than a full dividend period shall be computed on the basis of a
360-day year of 12, 30-day months.
The Preferred Returns on the Series 300E1 and 300E2 Units accrue from the
dates of the individual Subscription Agreements of each Investor in those Units.
However, the Dividends on the Series D and E Preferred Stock, shall accrue from
June 1, 1993 and September 1, 1993, respectively. The Boards of Directors of
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Thrucomm, ICN and FMI believe that the dates chosen for the Dividends on the
Series D and E Preferred Stock are not significantly different from the
terms of the Series 300E1 and 300E2 Units under Datalinc s Partnership
Agreement.See The Formula - Material Assumptions and Variances.
Series F-O Preferred Stock
The Series 100 Investors are entitled to a 15% per annum Preferred Return on
their cash Capital Contributions. However, the right to receive this Preferred
Return shall terminate if, by March 31, 1999, the Series 100 Investors have
received an amount equal to their capital investment, or Fastcom (or its
successor) has made a successful public offering, a Cut-Off Event. The Formula
assumes that a Mandatory Conversion Event is a Cut-Off Event which terminates
the Preferred Return of Fastcom s Series 100 Units. All of the other Investors,
except as mentioned above, and the Other Equity Owners do not have Preferred
Returns. Accordingly, the Series F-O Preferred Stock do not receive any
Dividends upon Mandatory Conversion, and the Formula does not factor any
Dividends into its calculation of the Underlying Shares or other value to be
distributed upon the Mandatory Conversion of the Series F-O Preferred Stock. See
"Equity Ownership of the Partnerships," and The Formula."
Dividends may not be paid on the Dividend Preferred Stock in any other
manner or at any other time than as set forth above. Accruals of dividends will
not bear interest.
Voting Rights
Except as provided by law, the holders of the Preferred Stock will not be
entitled to vote.
Liquidation Rights
All of the Preferred Stock will rank in equal priority to each other prior
to the Common Stock upon liquidation. In the event of any liquidation,
dissolution or winding-up of Thrucomm, whether voluntary or involuntary, no
payment or distribution of the assets of Thrucomm, or proceeds thereof (whether
capital or surplus), shall be made to or set apart for the holders of any class
or series of stock of Thrucomm ranking junior to the Preferred Stock upon
liquidation. The holders of the Preferred Stock shall be entitled to receive
payments or distributions of assets, payable in the proportion determined by the
Formula. The voluntary sale, conveyance, lease, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
the property or assets of Thrucomm to, or a consolidation or merger of Thrucomm
with, one or more other corporation (whether or not Thrucomm is Thrucomm
surviving such consolidation or merger) will not be deemed to be a liquidation,
dissolution or winding-up, voluntary or involuntary.
Dividend Policy
Thrucomm does not presently intend to pay any cash dividends on the Common
Stock or the Preferred Stock for the foreseeable future as all available
cash will be utilized to further the growth of business subsequent to the
Effective Time of the Reorganization for the proximate future thereafter.
The payment of any subsequent cash dividends will be in the discretion of the
Board of Directors of Thrucomm and will be dependent upon Thrucomm's results of
operations, financial condition, contractual restrictions and other factors
deemed relevant by the Board.
TRANSFER AGENT
The transfer agent for the Preferred Stock and Common Stock is Thrucomm.
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LEGAL MATTERS
The validity of the Preferred Stock and the Underlying Shares of Common Stock
will be passed upon for Thrucomm by Michael T. Williams, Esq., Tampa, Florida.
Mr. Williams owns 1.5 Units of Fastcom's Series 100 Units, 375 Units of
Fastcom's Series 100EA Units, and one Unit of Fastcom's Series 200 Units.
Certain other legal matters in connection with the Reorganization Agreement,
including the tax consequences of the Reorganization, are being passed
upon for Thrucomm by Schifino & Fleischer, P.A., Tampa, Florida.
EXPERTS
The consolidated financial statements of Datalinc, Ltd. as of December 31,
1996 and 1995 and for each of the three years in the period ended December 31,
1996 included in this Prospectus have been so included in reliance on the report
(which contains an explanatory paragraph relating to the Partnership's ability
to continue as a going concern as described in Note 3 to the consolidated
financial statements) of Price Waterhouse LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
The financial statements of Fastcom, Ltd. as of December 31, 1996 and 1995 and
for each of the two years in the period ended December 31, 1996 and the nine
months since inception through December 31, 1994 included in this Prospectus
have been so included in reliance on the report (which contains an explanatory
paragraph relating to the Partnership's ability to continue as a going concern
as described in Note 1 to the financial statements) of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements of Thrucomm, Inc. as of December 31, 1996 and for the
period since inception through December 31, 1996 included in this Prospectus
have been so included in reliance on the report (which contains an explanatory
paragraph relating to the Company's ability to continue as a going concern as
described in Note 1 to the financial statements) of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The opinion included as Appendix B hereto has been provided by Michael Davis &
Company, P.A.,
independent public accountants, as indicated in their report with respect
thereto, and is included herein in reliance upon the authority of said firm as
experts in giving said report.
GLOSSARY
"ATM" (Asynchronous Transfer Mode) - A modern information transfer standard
that allows packetized voice and data to share a transmission circuit. ATM
provides much greater efficiency than typical channelized transmission media.
"FCC" (Federal Communication Commissions) - The US Government organization
charged with the oversight of all public communications media.
"EFT" - Electronic funds transfer comprised of large banks and independent
third party processors which function as clearing houses for ATMs , credit and
debit cards and check authorization requests, lotteries and any other retail
transaction that require searching one or more data bases while the connection
with the requesting party
remains established.
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"IXC" (Interexchange Carrier) - A provider of telecommunications services
that extend between exchanges or cities. Also called long distance carrier.
"LEC" - (Local Exchange Carrier) - Any telephone service provider offering
local exchange services.
"Local Exchange" - An area inside of which telephone calls are generally
completed without any toll, or long distance charges. Local exchange areas are
defined by the state regulator of telephone services.
"NCC" - Fastcom's Network communications center.
"Network" - Fastcom's proprietary wireless, digital communications network.
"POS" - Point of sale locations include retail outlets that generate credit
and debit card authorizations.
"VSAT" (Very Small Aperture Terminal) - A satellite communication system that
comprises small diameter (approximately 1 meter in diameter) antennae and
electronics to establish a communications terminal, used mostly for data. VSAT
networks compete with other, landline
based networks such as private lines and frame relay.
89
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INDEX TO FINANCIAL STATEMENTS
PAGE
NUMBER
DATALINC, LTD.
- ---------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS....................... F-2
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1995 AND 1996.................. F-3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE YEARS ENDED
DECEMBER 31, 1994, 1995 AND 1996...................................... F-4
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY FOR THE
THREE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996.................... F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED
DECEMBER 31, 1994, 1995 AND 1996...................................... F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................... F-7
FASTCOM, LTD.
- ---------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS....................... F-18
BALANCE SHEETS, DECEMBER 31, 1995 AND 1996............................... F-19
STATEMENTS OF OPERATIONS FOR THE TWO YEARS ENDED DECEMBER 31, 1995 AND
1996 AND FOR THE NINE MONTHS FROM INCEPTION THROUGH DECEMBER 31, 1994.. F-20
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT) FOR THE TWO YEARS ENDED
DECEMBER 31, 1995 AND 1996 AND FOR THE NINE MONTHS FROM INCEPTION
THROUGH DECEMBER 31, 1994............................................. F-21
STATEMENTS OF CASH FLOWS FOR THE TWO YEARS ENDED DECEMBER 31, 1995 AND
1996 AND FOR THE NINE MONTHS FROM INCEPTION THROUGH DECEMBER 31, 1994.. F-22
NOTES TO FINANCIAL STATEMENTS............................................. F-23
THRUCOMM, INC.
- ---------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS........................ F-30
BALANCE SHEET, DECEMBER 31, 1996.......................................... F-31
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT FOR THE PERIOD FROM
INCEPTION THROUGH DECEMBER 31, 1996.................................... F-32
STATEMENT OF CASH FLOWS FOR THE PERIOD FROM INCEPTION THROUGH
DECEMBER 31, 1996...................................................... F-33
NOTES TO FINANCIAL STATEMENTS............................................. F-34
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the General and Limited Partners
of Datalinc, Ltd.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in partners' equity and of
cash flows present fairly, in all material respects, the financial position of
Datalinc, Ltd. (the "Partnership") at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
General Partner; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by the General Partner, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
The accompanying consolidated financial statements have been prepared assuming
that the Partnership will continue as a going concern. The Partnership has
suffered recurring losses from operations and, as indicated in Note 6 to the
consolidated financial statements, the Partnership has guaranteed certain debt,
most of which is due within one year. Additionally, the Partnership has provided
significant funding for the development of Fastcom, Ltd., an affiliated
partnership and development stage enterprise. These financial demands made on
the Partnership raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are described in Note 3.
The accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
As discussed in Notes 3 and 7, the Partnership is a member of a group of
affiliated entities and, as disclosed in the consolidated financial statements,
has transactions and relationships with members of the group, including common
principals involved as General Partners and shared management among the various
entities. Because of these relationships, it is possible that the terms of these
transactions are not the same as those that would result from transactions among
wholly unrelated parties.
PRICE WATERHOUSE LLP
Tampa, Florida
February 12, 1997
F-2
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
December 31,
1996 1995
ASSETS
- ----------------------------------------
Cash and cash equivalents $ 24,575 $ 77,829
Trade accounts receivable 574,079 306,800
Inventories 281,550 715,479
Other receivables 41,512 20,633
Prepaid and other current assets 20,510 45,800
------------ ------------
Total current assets 942,226 1,166,541
Advances to and investment in affiliate, net of
reserves of $827,396 and $345,644 518,535 840,000
Property and equipment, net 1,498,452 1,090,163
Organization costs, net of accumulated
amortization of $79,952 and $79,673 --- 279
Other long-term receivables 10,000 10,000
Other assets and deposits 72,530 25,135
------------- ------------
Total assets $ 3,041,743 $ 3,132,118
============= ============
LIABILITIES AND PARTNERS' EQUITY
- ----------------------------------------
Accounts payable and accrued expenses $ 920,108 $ 838,241
Debt due within one year 746,152 720,000
Capital lease obligations due within one year 297,953 146,086
------------- ------------
Total current liabilities 1,964,213 1,704,327
Debt - long term 5,208 120,000
Capital lease obligations - long term 725,080 304,000
------------- ------------
Total liabilities 2,694,501 2,128,327
Commitments and contingencies (Note 9)
Partners' equity 347,242 1,003,791
------------- ------------
Total liabilities and partners' equity $ 3,041,743 $ 3,132,118
============= ============
The accompanying Notes to Financial Statements
are an integral part of these financial
statements.
F-3
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
For the year ended
December 31,
1996 1995 1994
Revenues:
Hub access fees $ 2,094,411 $ 1,701,591 $ 1,515,509
VSAT/PES sales 3,131,810 120,587 2,400,288
Hub equipment sales 255,000 38,000 100,000
Terminal equipment sales 50,805 20,033 1,284
Installation income and other services 300,395 288,526 226,557
----------- ----------- -----------
Total revenues 5,832,421 2,168,737 4,243,638
----------- ----------- -----------
Operating expenses:
Cost of hub access services 1,349,499 1,170,600 1,100,604
Cost of equipment sales 3,315,001 285,054 2,386,108
Selling, general and administrative 711,402 562,640 824,810
Research and development, net of refund --- --- (79,722)
Depreciation and amortization 473,024 326,529 396,879
----------- ----------- -----------
Total operating expenses 5,848,926 2,344,823 4,628,679
----------- ----------- -----------
Loss from operations (16,505) (176,086) (385,041)
(Loss) income from affiliate (481,752) 146,710 (566,497)
Interest expense (158,292) (97,140) (8,173)
----------- ----------- -----------
Net loss $ (656,549) $ (126,516) $ (959,711)
=========== =========== ===========
The accompanying Notes to Financial Statements
are an integral part of these financial
statements.
F-4
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
- -------------------------------------------------------------------------------
Series Series Series
100 200 300
Limited Limited Limited
Partners Partners Partners CFG
General (17 (228 1/2 (593 Option
Partner units) units) units) (Note 1) Total
- -------------------------------------------------------------------------------
Partners' equity (deficit) - December 31, 1993
$ (859,657) $ --- $ 390,261 $ 2,298,347 $ 261,067 $ 2,090,018
NET LOSS --- (444,442) (202,404) (312,865) --- (959,711)
Transfer of net loss in excess of Series 100 limited partner capital
contributions to general partner
(444,442) 444,442 --- --- --- ---
---------- ---------- --------- ----------- --------- -----------
Partners' equity (deficit) - December 31, 1994
(1,304,099) --- 187,857 1,985,482 261,067 1,130,307
NET LOSS --- (58,590) (26,682) (41,244) --- (126,516)
Transfer of net loss in excess of Series 100 limited partner capital
contributions to general partner
(58,590) 58,590 --- --- --- ---
---------- ---------- --------- ----------- --------- -----------
Partners' equity (deficit) - December 31, 1995
(1,362,689) --- 161,175 1,944,238 261,067 1,003,791
NET LOSS --- (304,046) (138,467) (214,036) --- (656,549)
Transfer of net loss in excess of Series 100 limited partner capital
contribution to general partner
(304,046) 304,046 --- --- --- ---
----------- ----------- --------- ----------- --------- ------------
Partners' equity (deficit) - December 31, 1996
$(1,666,735) $ --- $ 22,708 $ 1,730,202 $ 261,067 $ 347,242
=========== ============ ========== =========== ========= ===========
The accompanying Notes to Financial Statements
are an integral part of these financial
statements.
F-5
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
For the year ended
December 31,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net loss $ 656,549) $ (126,516) $ (959,711)
Adjustments to reconcile net loss to
net cash used for operating activities:
Depreciation and amortization 473,024 326,529 396,879
(Income) loss of affiliate 481,752 (146,710) 566,497
(Increase) decrease in:
Trade accounts receivable (267,279) 175,898 (113,075)
Inventories 433,929 (665,961) 268,929
Other receivables (20,879) (5,263) 46,812
Prepaid and other current assets 25,290 (7,194) 14,566
Other assets and deposits (43,106) --- 888
Increase (decrease) in accounts payable and
accrued expenses 81,867 650,484 (232,096)
----------- ----------- -----------
Net cash provided by (used in)
operating activities 508,049 201,267 (10,311)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Proceeds from sale of equipment --- --- 2,789
Acquisitions of property and equipment (144,817) (36,085) (79,898)
Investment made in affiliate --- --- (74,143)
Advances made to affiliate, net (160,287) (622,184) (512,449)
----------- ----------- -----------
Net cash used in investing
activities (305,104) (658,269) (663,701)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Additions to borrowings 638,280 840,000 255,200
Reductions in borrowings and capital
lease obligations (890,190) (316,394) (94,239)
Debt issue costs (4,289) --- ---
----------- ----------- -----------
Net cash (used in) provided by
financing activities (256,199) 523,606 160,961
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents (53,254) 66,604 (513,051)
Cash and cash equivalents, beginning
of year 77,829 11,225 524,276
----------- ----------- -----------
Cash and cash equivalents, end of year $ 24,575 $ 77,829 $ 11,225
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
- -----------------------------------
Capital lease obligations entered into $ 736,217 $ 202,394 $ 267,703
=========== =========== ===========
Interest paid $ 147,426 $ 97,140 $ 8,173
=========== =========== ===========
The accompanying Notes to Financial Statements are an
integral part of these financial statements.
F-6
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. THE PARTNERSHIP:
Datalinc, Ltd., a Florida limited partnership ("Datalinc" or the
"Partnership"), was formed on July 20, 1989. The principal business of the
Partnership, located in Cincinnati, Ohio, is to develop and operate
satellite based data communications. The Partnership has one hub which
provides a link for data transmitted by satellite between a central
computer located in the headquarters of a business and computers, and data
processing devices located in remote offices or stores. The sole general
partner ("General Partner"), Integrated Communication Networks, Inc.
("ICN"), also serves as the managing partner. The Partnership is heavily
concentrated in the telecommunications industry. A significant change in
this industry and/or related technologies could impact the Partnership.
PARTNERSHIP ALLOCATION
SERIES 100
The Partnership was initially capitalized by the Limited Partners'
contributions of $1,632,000 representing the subscription of 17 Series 100
limited partnership units of $96,000 each.
In accordance with the initial partnership agreement, cash flows and any
refinancing proceeds or sale proceeds shall be distributed 99% to the
Series 100 Limited Partners and 1% to the General Partner until the
Limited Partners have received aggregate distributions of any kind from
the Partnership in an amount equal to their initial cash Capital
Contributions (as defined), and thereafter 50% to the Limited Partners and
50% to the General Partner. Profits and losses (as defined) were to be
allocated in the same manner.
SERIES 200
During 1991, the Partnership initiated a Series 200 offering and obtained
228 1/2 subscriptions for Series 200 limited partnership units at $5,000
each or a total of $1,142,500. Expenses in the amount of $114,548 were
incurred in relation to the offering and were excluded from the proceeds.
The offering closed and the partnership certificates were issued on
January 1, 1992.
The partnership agreement was amended upon the completion of the Series
200 offering. Under the agreement, cash flows, any refinancing proceeds or
sale proceeds and profits and losses shall be distributed 68.5% to the
Series 100 Limited Partners and 31.5% to the Series 200 Limited Partners
until the Limited Partners have received aggregate distributions of any
kind from the Partnership in an amount equal to their initial cash Capital
Contributions (as defined), plus the aggregate Preferred Return of 10% to
the Series 100 and 200 Limited Partners. Since the Series 200 offering was
not fully subscribed, the Agreement states that cash flows, any
refinancing proceeds or sale proceeds and profits and losses with respect
to the unissued Series 200 units shall be distributed on a pro rata basis
between the outstanding Series 100 and 200 Limited Partners.
F-7
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
After the Limited Partners have received aggregate distributions of any
kind from the Partnership in an amount equal to their initial cash Capital
Contributions (also defined), cash flow, refinancing proceeds or sales
proceeds and profits and losses were to be distributed 34.25% to the
Series 100 Limited Partners, 15.75% to Series 200 Limited Partners, 50% to
the General Partner.
CFG OPTION
In connection with the Series 200 offering, CFG Securities Corp. ("CFG"),
the Managing Dealer Limited Partner (syndicator), was given the option to
purchase approximately a 4% interest in the Partnership at a cost of $1.
The General Partner will transfer CFG the appropriate interest from its
own share of ownership. The fair value of CFG's option was determined
based on the pricing of the Series 200 units sold in 1991.
SERIES 300
During 1992, the Partnership initiated a Series 300 offering and obtained
143 1/2 subscriptions for Series 300 limited partnership units at $5,000
each or a total of $717,500. Expenses in the amount of $63,067 were
incurred in relation to the offering and were offset against the proceeds.
The partnership certificates were issued on September 15, November 30 and
December 31, 1992. The offering closed on December 31, 1992.
During 1993, the Partnership initiated an extension of the Series 300
offering and obtained 449 1/2 subscriptions for Series 300 limited
partnership units at $5,000 each or a total of $2,247,500. Expenses in the
amount of $179,820 were incurred in relation to this extension and were
offset against the proceeds. Pursuant to a purchase agreement, the Limited
Partner, Blue Chip/Datalinc Corporation ("Blue Chip"), who subscribed most
of this extension, has preferential rights which affect the number of
shares of Thrucomm, Inc. common stock to be issued and the right of first
refusal to purchase equity interests offered by Thrucomm, Inc. (see
Principles of Consolidation at Note 2). The preferential rights also
include the right for Blue Chip to be entitled to receive certain
distributions, otherwise payable to ICN, providing a return equal to 35%
per annum on its capital contribution. ICN has agreed to escrow certain
distributions otherwise payable to ICN as an assurance that Blue Chip will
receive its specified return. In addition, ICN has agreed to certain
restrictions on its right to transfer its interest in Datalinc. The
stockholders of ICN have agreed to elect a nominee to the ICN Board of
Directors, place certain restrictions on their right to transfer stock in
ICN, and to certain employment restrictions. Blue Chip has been granted
registration rights in the event Datalinc or its successor should register
its securities under the Securities Act of 1933.
The Partnership agreement was amended upon the completion of the Series
300 offering in 1992 and 1993. Assuming the sale of all Series 200 and all
Series 300 units, cash flows, any refinancing proceeds or sale proceeds
and profits and losses shall be distributed 45.9% to the Series 100
Limited Partners, 21.1% to the Series 200 Limited Partners and 33% to the
Series 300 Limited Partners until the Limited Partners have received
aggregate distributions of any kind from the Partnership in an amount
equal to their initial cash Capital Contributions (as defined) plus the
aggregate Preferred Return of 10% for Series 100 and 200 Limited Partners
F-8
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
and 8% for Series 300 Limited Partners. After the Limited Partners have
received aggregate distributions of any kind from the Partnership in an
amount equal to their initial cash Capital Contributions (also defined),
cash flow, refinancing proceeds or sales proceeds and profits and losses
shall be distributed 22.95% to the Series 100 Limited Partners, 10.55% to
the Series 200 Limited Partners, 16.5% to the Series 300 Limited Partners,
50% to the General Partner.
As the Series 200 and Series 300 limited partnership units were not fully
subscribed, the agreement states that cash flows, any refinancing proceeds
or sale proceeds and profits and losses with respect to the unissued
Series 200 and 300 units shall be distributed to the Series 100 and/or
Series 200 Limited Partners on a pro rata basis. Profits and losses were
therefore allocated on a monthly basis to Limited Partners admitted to the
Partnership as of or prior to the 15th day of such month.
NEGATIVE CAPITAL
In accordance with generally accepted accounting principles and the
limited liability provisions of the Partnership agreement, all losses in
excess of the Limited Partners' capital contributions are transferred to
the General Partner. Any future profits generated for Limited Partners
with zero basis will be transferred to the General Partner to offset these
losses in accordance with the terms of the agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying consolidated financial statements have been prepared on
the accrual basis of accounting. The significant accounting principles and
practices used in the preparation of the accompanying consolidated
financial statements are summarized below:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Datalinc and its wholly-owned subsidiary Thrucomm, Inc. ("Thrucomm") which
was incorporated in the state of Florida in December 1996. Thrucomm is a
non-operating entity that has obtained debt financing to assist in funding
Datalinc's operations.
USE OF ESTIMATES
The Partnership prepares its financial statements in conformity with
generally accepted accounting principles. These principles require
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclose contingent assets and
liabilities at the date of the financial statements and report amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
F-9
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Partnership considers all
highly liquid debt instruments purchased with an original maturity of
three months or less to be cash equivalents.
INVENTORIES
Inventories are comprised of component parts, equipment and supplies used
in the installation and sale of remote Very Small Aperture Terminals
(VSATs) and Personal Earth Stations (PESs) at customer locations.
Inventories are valued at cost determined on the specific identification
basis.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is provided using a
method not materially different than the double declining balance method
over the estimated useful lives of the assets ranging from five to
thirty-nine years for both financial reporting and tax purposes. Costs of
additions and betterments are capitalized, and repairs and maintenance are
charged to expense as incurred. Upon sale or retirement of property and
equipment, the costs and related accumulated depreciation are eliminated
from the accounts and the resulting gain or loss is reflected in the
statement of operations.
ORGANIZATION COSTS
Organization costs incurred in establishing the Partnership are recorded
as other assets and are amortized on a straight line basis over a period
of sixty months. Amortization began upon the commencement of operations in
February 1991. Amortization costs of $279, $1,053, and $15,991 have been
amortized for the years ended December 31, 1996, 1995 and 1994,
respectively.
OTHER ASSETS
Other assets include deposits and debt issue costs. Debt issue costs are
amortized over the life of the loan using the straight line method, which
is not materially different than the effective interest rate method.
RESEARCH AND DEVELOPMENT COSTS
Expenditures for research, development, and engineering of products are
expensed as incurred. In 1994, the Partnership received a refund of prior
year expenses paid to a vendor because of the vendor's inability to
perform under the terms of a contract. The refund totaled $110,000 and has
been reflected net of 1994 expenses in the statement of operations.
F-10
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
INCOME TAXES
No provision or benefit for federal or state income taxes is included in
the financial statements of the Partnership as any liability or benefit
for such taxes of the Partnership is that of the partners rather than the
Partnership. Thrucomm is subject to federal and state income taxes.
However, through December 31, 1996, Thrucomm had limited activities and an
immaterial operating loss. Accordingly, no income tax provision was
necessary. Certain items may be treated differently in the Partnership
income tax return than in the accompanying consolidated financial
statements. Therefore, net income in the consolidated financial statements
may not be the same as that reported in the Partnership income tax return.
MAJOR CUSTOMERS
The Partnership has two major customers which accounted for approximately
$3,725,000 and $858,000 of sales for the year ended December 31, 1996;
three major customers which accounted for approximately $926,000, $608,000
and $459,000 of sales for the year ended December 31, 1995; and two
customers which accounted for approximately $2,705,000 and $981,000 of
sales for the year ended December 31, 1994.
VALUATION ASSESSMENT OF LONG-LIVED ASSETS
The General Partner continuously reviews the value of the Partnership's
long-lived assets and records necessary adjustments to the asset's
carrying value when the asset becomes impaired. If an asset is determined
to be impaired, a loss is recognized in the statement of operations.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to be consistent with
the current year presentation.
3. ADVANCES TO AFFILIATE:
Datalinc is a limited partner in Fastcom, Ltd. ("Fastcom"), a Florida
limited partnership formed on March 31, 1994. Fastcom was formed to
develop, install and operate a wireless, digital communications network
called THRUCOMM. THRUCOMM addresses a customer base currently utilizing
terrestrial, telephone networks to transmit data between a central data
center and multiple, geographically dispersed "remote" locations. Fastcom
devotes all of its efforts to establishing THRUCOMM. Such efforts include
developing software, radios and related wireless systems in which the
THRUCOMM network will operate. Fastcom is a development stage enterprise.
The Partnership's initial capital contribution to Fastcom included a cash
contribution of $10 and $74,133 in equipment. Fastcom Management, Inc.
F-11
<PAGE>
(owned by the same shareholders as ICN), is Fastcom's general partner;
however, Fastcom Management, Inc. did not contribute to the initial
capital of Fastcom. Datalinc has made advances to Fastcom of $160,287,
$622,184 and $563,460 during 1996, 1995 and 1994, respectively. These
advances are non-interest bearing and had average outstanding balances of
approximately $1,266,000, $946,000 and $418,000 during 1996, 1995 and
1994, respectively. These advances remain outstanding at December 31,
1996. The advances were used to fund the initial business activities and
losses of Fastcom (marketing, research and development, and general and
administrative activities).
Although Datalinc has funded all Fastcom's losses from its own operations,
Datalinc is a limited partner in Fastcom. The initial limited partnership
interest is valued at zero in 1996 and 1995. At December 31, 1996 and
1995, Datalinc's receivables of $1,345,931 and $1,185,644, respectively,
reflected advances to this affiliate. Datalinc has recorded a reserve
against these advances of $827,396 and $345,644, respectively. At December
31, 1996, Datalinc has recorded its investment in Fastcom based on the
book value of net assets available for repayment in a manner similar to
equity accounting. At December 31, 1995, this investment was recorded at
$840,000 which reflected cash repayment by Fastcom to Datalinc subsequent
to year end from equity proceeds.
It is intended that Datalinc and Fastcom will combine their assets and
liabilities into Thrucomm, thus enhancing their ability to obtain
additional financing to fund future operations. Datalinc is currently
attempting to effect this reorganization which will expand its ability to
raise capital through alternative sources of financing. Additionally,
Fastcom is seeking additional financing through venture capital or other
investors, which would be used as repayment of the non-interest bearing
advances made to Fastcom. However, until this reorganization is completed
and additional financing is obtained, the financial demands on Datalinc
raise substantial doubt about its ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Summarized financial information for Fastcom at December 31, 1996 and
1995, and for each of the periods ended December 31, 1996, 1995 and 1994,
is as follows:
FOR THE FOR THE NINE
YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995 1994
Results of Operations:
Revenues $ 69,134 $ --- $ ---
Expenses (1,785,174) (970,102) (566,497)
----------- ------------- -------------
Net loss $(1,716,040) $ (970,102) (566,497)
=========== ============= =============
F-12
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31,
1996 1995
Financial position:
Current assets $ 80,621 $ 1,662
Noncurrent assets 947,555 204,081
------------- -------------
Total assets $ 1,028,176 $ 205,743
------------- -------------
Payable to affiliate $ 1,345,931 $ 1,185,644
Other liabilities 509,641 148,955
------------- -------------
Total liabilities 1,855,572 1,334,599
Partners' deficit (827,396) (1,128,856)
------------- -------------
Total liabilities and partners' deficit
$ 1,028,176 $ 205,743
============= ============
4. INVENTORIES:
DECEMBER 31,
1996 1995
Satellite equipment $ 130,332 $ 527,098
Transmission equipment 142,054 184,763
Materials and supplies 9,164 3,618
------------ -------------
$ 281,550 $ 715,479
============ =============
5. PROPERTY AND EQUIPMENT:
DECEMBER 31,
1996 1995
Hub and network equipment installed
$ 3,166,309 $ 2,304,832
Software 63,767 62,076
Leasehold improvements 137,274 137,274
Furnishings and equipment 209,049 191,183
------------ -------------
3,576,399 2,695,365
Less accumulated depreciation and amortization
(2,077,947) (1,605,202)
------------ -------------
$ 1,498,452 $ 1,090,163
============ =============
Hub and network equipment of approximately $1,252,000 and $516,000 at
December 31, 1996 and 1995, respectively, includes equipment under leases
which have been capitalized.
Accumulated amortization for such equipment approximated $340,000 and
$265,000 at December 31, 1996 and 1995, respectively.
F-13
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
6. DEBT:
DECEMBER 31,
1996 1995
Revolving line of credit; interest rate at
9.87%; interest payments due monthly;
collateralized by equipment, inventory
and accounts receivable; due on demand. $ 293,000 $ -
Bank line of credit; interest rate at
prime plus .75% (9.87% at December
31, 1996); due March 24, 1997; interest
payments due monthly; guaranteed by
Fastcom; collateralized by inventory
receivables, equipment and life
insurance policies of related parties
of Datalinc and Fastcom. 321,289 -
Bank term loan; interest rate at prime
plus .75% (9.87% at December 31, 1996);
due December 15, 1997; $10,000 principal
and interest payments due monthly;
guaranteed by a related party;
collateralized by equipment, inventory
and accounts receivable of Datalinc and
life insurance policies of the
shareholders of ICN. 120,000 240,000
Blue Chip term loan; interest rate at 10%;
interest due at maturity; guaranteed by
shareholders of ICN; $7,500 consulting fee
due quarterly; paid in full during 1996. - 600,000
Equipment loan; interest rate at 9.8%;
interest payments due monthly; guaranteed
by equipment purchased; due May 3, 1998;
$990 principal payments due monthly. 17,071 -
------------- -------------
Total debt 751,360 840,000
Less current portion of total debt (746,152) (720,000)
------------- -------------
Debt - long term $ 5,208 $ 120,000
============= =============
Capital lease obligations, at varying
rates of imputed interest from 8% to 13% $ 1,023,033 $ 450,086
Less current portion of capital lease
obligations (297,953) (146,086)
------------- -------------
Capital lease obligations - long term $ 725,080 $ 304,000
============= =============
F-14
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The Partnership had available borrowings of approximately $286,000 at
December 31, 1996. Approximately $279,000 of these available borrowings
represent an unused line of credit which is due March 24, 1997. Subsequent
to December 31, 1996, the Partnership drew an additional $179,000 on the
line of credit to assist in financing operations.
The Blue Chip term loan was a financing arrangement with a venture capital
firm. As part of Blue Chip's financing agreement with Datalinc, Blue Chip
was granted certain warrant rights with regards to Fastcom in the event
Fastcom did not raise certain minimum equity commitments as part of their
Series 200 offering. Fastcom raised enough capital to exceed the minimum
equity commitments required by the warrants and the contingent warrants
were extinguished. During 1996, the Blue Chip term loan was paid in full.
Included in Datalinc's capital lease obligations at December 31, 1996 and
1995, respectively, is $863,000 and $324,000 of equipment subleased to a
customer under an operating lease and integrated services agreement.
Scheduled principal repayments on debt and minimum future capital lease
payments for the next five years and thereafter are as follows:
OBLIGATIONS
YEAR ENDING UNDER CAPITAL
DECEMBER 31, DEBT LEASES
1997 $ 746,152 $ 382,348
1998 5,208 374,005
1999 --- 326,694
2000 --- 103,779
---------- ------------
Total $ 751,360 1,186,826
===========
Less amount representing interest on
obligations under capital leases (163,793)
------------
Total $ 1,023,033
============
7. RELATED PARTY TRANSACTIONS:
The Partnership is charged, as provided by the partnership agreement, by
the General Partner for management fees. These charges aggregated $157,000
in 1996, $140,000 in 1995 and $246,000 in 1994, and are included in
selling, general and administrative expenses. The Partnership had
non-interest bearing advances to the General Partner and its affiliates of
approximately $200, $18,000 and $17,999 at December 31, 1995 and
1994, respectively, which are included in other receivables.
F-15
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Additionally, the Partnership has advances to an affiliate as discussed in
Note 3.
Datalinc allocates a portion of its selling, general and administrative
expenses on a pro rata basis to Fastcom. Datalinc believes that the
expenses are reasonable and advances Fastcom funds to pay its portion of
the expenses due. In addition to Fastcom, Datalinc allocates a portion of
its general and administrative expenses to another related party. The
allocation of these expenses are based on estimates of the actual expenses
incurred, in a manner similar to Fastcom. The Partnership allocated
approximately $9,600, $14,400 and $12,600 of office services expense in
1996, 1995 and 1994, respectively, to this related party. Included in
other receivables are amounts due from the affiliated company of $29,029
and $9,150 at December 31, 1996 and 1995, respectively.
The Partnership allocated $62,240, $57,003, and $8,650 of rental expense
in 1996, 1995 and 1994, respectively, to Fastcom as both companies share
the hub operations. Life insurance policy premiums on the lives of certain
employees of the General Partner, to which the Partnership is owner and
beneficiary, are paid and expensed by the Partnership. The policies carry
$3,000,000 in life insurance benefits and have no cash surrender value at
December 31, 1996 and 1995.
Datalinc leases $587,500 of equipment to Fastcom under an operating lease
agreement. Datalinc recorded $48,340 in rental income related to this
leasing arrangement which is included in installation income and other
services. Future rental receipts under this leasing transaction are
approximately $193,000 in 1997, 1998 and 1999 and $49,000 in 2000.
In addition, the Partnership recorded charges aggregating approximately
$68,000, $80,000, and $31,000 for the year ended December 31, 1996, 1995
and 1994, respectively, incurred by officers of the General Partner for
various marketing and administrative activities performed by these
individuals on behalf of the Partnership.
8. MANAGEMENT INCENTIVE PLAN:
In May 1996, the Partnership created the Management Incentive Plan (the
"Plan") whose purpose is to provide ownership in Datalinc to certain key
employees. The Plan is a phantom stock plan which allows up to a 5%
ownership interest in Datalinc (500 units) with a 4.05% interest being
granted in 1996. The Plan was valued based on the total fair value of the
Partnership at the date of grant. The Plan provides that participants vest
in their units on their anniversary date of grant as follows:
CUMULATIVE PERCENTAGE
OF VESTED UNITS
ANNIVERSARY DATE OF GRANT
First 33 1/3%
Second 66 2/3%
Third 100%
F-16
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Notwithstanding the above vesting schedule, the participant becomes 100%
vested if certain provisions are met such as 1) the participant's
termination is the result of death, disability or retirement; 2) the
Partnership is sold to another company; or 3) the Partnership completes an
initial public offering. For the year ended December 31, 1996, $41,000 of
compensation expense related to the Plan was recorded and is included in
selling, general and administrative expenses in the statement of
operations. On February 13, 1997, an additional .25% ownership interest
was granted.
9. COMMITMENTS AND CONTINGENCIES:
The Partnership maintains hub operations primarily in leased facilities.
Datalinc's rental expense for these facilities was $63,088, $58,540, and
$102,804 for the year ended December 31, 1996, 1995, and 1994,
respectively, and is included in selling, general and administrative
expenses in the statement of operations. As indicated in Note 7, $62,240,
$57,003 and $8,650 of rent expense was allocated to Fastcom in 1996, 1995
and 1994, respectively. The minimum future noncancelable operating lease
payments for these facilities are $88,564 in 1997, 1998, 1999, 2000 and
2001.
Fastcom had a Series 200 offering during 1996. Under Fastcom's offering,
$2,155,000 of gross proceeds raised represent a Mandatory Redeemable
Partnership Interest, the Series 200 Limited Partners have the option to
require Fastcom or Datalinc to repurchase their Series 200 Units on
December 31, 2000, at an amount equal to their total cash capital
contributions less any distributions received.
Included in one of Fastcom's lease agreements is a provision that the
lessor will receive an ownership interest in Fastcom or its successors,
ranging from 1% up to 5%, dependent on the dollar amount of equipment
financed by Datalinc or Fastcom for Fastcom's network. A 1% ownership
interest will be granted after $1 million of equipment is financed and an
additional .5% ownership interest (up to the maximum of 5%) will be
granted for each additional $3 million financed. No equity ownership will
be granted if less than $1 million is leased. As of December 31, 1996,
approximately $750,000 of equipment had been leased.
F-17
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the General and Limited Partners
of Fastcom, Ltd.
In our opinion, the accompanying balance sheets and the related statements of
operations, of changes in partners' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of Fastcom, Ltd. (the
"Partnership"), a development stage enterprise, at December 31, 1996 and 1995,
and the results of its operations and its cash flows for the two years ended
December 31, 1996 and 1995, and for the nine months from inception through
December 31, 1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the General Partner; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by the
General Partner, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 1 to the
financial statements, the Partnership is a development stage enterprise which
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 1. The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
As discussed in Notes 1 and 5, the Partnership is a member of a group of
affiliated entities and, as disclosed in the financial statements, has
transactions and relationships with members of the group, including common
principals involved as General Partners and shared management among the various
entities. Because of these relationships, it is possible that the terms of these
transactions are not the same as those that would result from transactions among
wholly unrelated parties.
PRICE WATERHOUSE LLP
Tampa, Florida
February 12, 1997
F-18
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited Partnership)
BALANCE SHEETS
- -------------------------------------------------------------------------------
December 31,
1996 1995
ASSETS
- ----------------------------------------
$ 12,166 $ ---
Trade accounts receivable 14,212 ---
Other receivables 38,221 ---
Prepaid and other current assets 16,022 1,662
----------- ------------
Total current assets 80,621 1,662
Property and equipment, net 947,388 203,856
Organization costs, net of accumulated
amortization of $116 and $58 167 225
----------- ------------
$ 1,028,176 $ 205,743
============ ============
LIABILITIES AND PARTNERS' DEFICIT
- ----------------------------------------
Accounts payable and accrued expenses $ 308,057 $ 148,955
Capital lease obligations due within one year 58,715 ---
Payable to affiliate 1,345,931 1,185,644
------------ ------------
Total current liabilities 1,712,703 1,334,599
Capital lease obligations - long term portion 142,869 ---
------------ ------------
Commitments and contingencies (Note 6)
Total liabilities 1,855,572 1,334,599
Mandatory redeemable partnership interest (Note 1) 2,155,000 ---
Non-redeemable partners' interest and deficit
accumulated during the development stage (2,982,396) (1,128,856)
------------- ------------
$ 1,028,176 $ 205,743
============ ============
The accompanying Notes to Financial Statements are an integral
part of these financial statements.
F-19
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited Partnership)
STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
For the
nine months Cumulative
from inception operations from
For the year ended through inception to
December 31, December 31, December 31,
1996 1995 1994 1996
Revenues:
Service fees $ 69,134 $ --- $ --- $ 69,134
Expenses:
Operating, general and administrative
1,305,687 653,768 253,241 2,212,696
Research and development
364,977 278,426 308,659 952,062
Depreciation and amortization
106,680 26,667 2,392 135,739
Interest expense
7,830 11,241 2,205 21,276
------------- ---------- ------------ ------------
Net loss $ (1,716,040) $ (970,102) $ (566,497) $ (3,252,639)
============= ========== ============ ============
The accompanying Notes to Financial Statements are
an integral part of these financial
statements.
F-20
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
- --------------------------------------------------------------------------------
Datalinc, Series Series
Ltd. 100 200
Limited Partners Partners CFG
General Partner (55 5/8 (215 1/2 Option
Partner Interest units) units) (Note 1) Total
- -------------------------------------------------------------------------------
Partners' equity - March 31, 1994
$ --- $ 74,143 $ --- $ --- $ --- $ 74,143
NET LOSS --- (566,497) --- --- --- (566,497)
Transfer of net loss in excess of Datalinc's limited partner capital
contributions to general partner
(492,354) 492,354 --- --- --- ---
=========== ========== ========= ========= ========= =========
Partners' deficit - December 31, 1994
(492,354) --- --- --- --- (492,354)
Capital contributions
--- --- 333,600 --- --- 333,600
NET LOSS (9,701) (938,575) (21,826) --- --- (970,102)
Transfer of net loss in excess of Datalinc's limited partner capital
contributions to general partner
(938,575) 938,575 --- --- --- ---
========= ========== ========= ========= ========= ==========
Partners' equity (deficit) - December 31, 1995
(1,440,630) --- 311,774 --- --- (1,128,856)
Capital contributions
--- --- 81,000 1,936,500 --- 2,017,500
Options issued in connection with Series 200 offering (Note 1)
--- (77,029) --- --- --- 77,029
NET LOSS (17,160) (1,561,118) (45,445) (92,317) --- (1,716,040)
Transfer of net loss in excess of Datalinc's limited partner capital
contributions to general partner
(1,638,147) 1,638,147 --- --- --- ---
----------- ---------- --------- ---------- ---------- ----------
Partners' equity (deficit) - December 31, 1996
(3,095,937) --- 347,329 1,844,183 77,029 (827,396)
Transfer of net losses in excess of redeemable partnership interest
(310,817) --- --- 310,817 --- ---
Mandatory redeemable partnership interest (Note 1) - December 31, 1996
--- --- --- (2,155,000) --- (2,155,000)
--------- ---------- --------- ---------- ---------- -----------
Non-redeemable partners'interest and deficit accumulated
during the development stage - December 31, 1996
$(3,406,754) $ --- $ 347,329 $ --- $ 77,029 $(2,982,396)
=========== ========== ========= ========== ========== ===========
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
F-21
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
FOR THE
NINE MONTHS CUMULATIVE CASH
FROM INCEPTION FLOWS FROM
FOR THE YEAR ENDED THROUGH INCEPTION TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $(1,716,040) $ (970,102) $ (566,497) $ (3,252,639)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
106,680 26,667 2,392 135,739
(Increase) decrease in:
Trade accounts receivable
(14,212) --- --- (14,212)
Other receivables
(38,221) 51,011 (51,011) (38,221)
Prepaid and other current assets
(14,360) (1,662) --- (16,022)
Increase in accounts payable and accrued expenses
159,102 95,002 53,953 308,057
----------- ----------- ----------- -----------
Net cash used in operating activities
(1,517,051) (799,084) (561,163) (2,877,298)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment
(636,975) (158,071) (653) (795,699)
Organization costs --- --- (283) (283)
----------- ----------- ----------- -----------
Net cash used in investing activities
(636,975) (158,071) (936) (795,982)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions
2,017,500 333,600 10 2,351,110
Advances received from affiliate, net
160,287 622,184 563,460 1,345,931
Repayments of capital lease obligations
(11,595) --- --- (11,595)
----------- ----------- ----------- -----------
Net cash provided by financing activities
2,166,192 955,784 563,470 3,685,446
----------- ----------- ----------- -----------
Net (decrease) increase in cash
12,166 (1,371) 1,371 12,166
Cash, beginning of year --- 1,371 --- ---
----------- ----------- ----------- -----------
Cash, end of year $ 12,166 $ --- $ 1,371 $ 12,166
=========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Capital contribution of property and equipment
$ --- $ --- $ 74,133 $ 74,133
=========== =========== =========== ===========
Capital lease obligations entered into
$ 213,179 $ --- $ --- $ 213,179
=========== =========== =========== ===========
CFG option (Note 1)$ 77,029 $ --- $ --- $ 77,029
=========== =========== =========== ===========
Interest paid $ 4,755 $ 11,241 $ 2,205 $ 18,201
=========== =========== =========== ===========
The accompanying Notes to Financial Statements are an
integral part of these financial statements.
F-22
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited
Partnership)
Notes to Financial Statements
- -------------------------------------------------------------------------------
1. THE PARTNERSHIP:
Fastcom, Ltd. ("Fastcom" or the "Partnership"), a Florida limited
partnership, was formed on March 31, 1994, with the concept to develop,
install and operate a wireless, digital communications network called
THRUCOMM. THRUCOMM addresses a customer base currently utilizing
terrestrial, telephone networks to transmit data between a central data
center and multiple, geographically dispersed "remote" locations. The
Partnership's operations, located in Cincinnati, Ohio, are heavily involved
in the telecommunications industry. A significant change in this industry
and/or related technologies could impact the Partnership.
Fastcom is a development stage enterprise as it is devoting substantially
all of its efforts to establishing THRUCOMM. Such efforts include
developing software, radios and related wireless systems in which the
THRUCOMM network will operate. Although Fastcom has one customer as of
December 31, 1996, it has not completed its principal planned operations
and remains a development stage enterprise.
Fastcom Management, Inc. (owned by the same shareholders as Integrated
Communication Networks, Inc. ["ICN"], the general partner of Datalinc, Ltd.
("Datalinc") is the general partner ("General Partner") of Fastcom. No
equity contribution was made by the General Partner. The Partnership was
initially capitalized by a limited partnership investment to Fastcom from
Datalinc, a Florida partnership and a related party, which included a cash
contribution of $10 and $74,133 in equipment. Additionally, Datalinc made
advances to Fastcom of $160,287, $622,184 and $563,460 during 1996, 1995
and 1994, respectively. These advances were non-interest bearing and remain
outstanding at December 31, 1996. The advances were used to fund the
start-up of Fastcom (marketing, research and development, and general and
administrative activities).
It is intended that Datalinc and Fastcom will combine their assets and
liabilities intoThrucomm, Inc., a wholly-owned subsidiary of Datalinc, thus
enhancing their ability to obtain additional financing to fund future
operations. Datalinc's management is currently attempting to effect this
reorganization which will expand its ability to raise capital though
alternative sources of financing. Additionally, Fastcom is seeking
additional financing through venture capital or other investors, which
would be used as repayment of the non-interest bearing advances made to
Fastcom. However, until this reorganization is completed and additional
financing is obtained, the financial demands on Fastcom raise substantial
doubt its ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
PARTNERSHIP ALLOCATION
SERIES 100
During 1995 and 1996, the Partnership executed a Series 100 offering and
sold 44 1/2 subscriptions for Series 100 limited partnership units of
$10,000 each or a total of $445,000. Expenses in the amount of $30,400 were
The accompanying Notes to Financial Statements are an
integral part of these financial statements.
F-23
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited
Partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
incurred in relation to the offering which were netted against the
proceeds. As an incentive to entice early investors, Fastcom offered Early
Investor Units ("EA Units") which was an additional .25% share in Fastcom
for no additional consideration. The Partnership issued 11 and 1/8 EA Units
under this incentive plan. The offering closed and the partnership
certificates were issued on March 31, 1996.
In accordance with the initial partnership agreement, cash flows and any
refinancing proceeds or sale proceeds shall be distributed 100% to the
Series 100 Limited Partners until the Limited Partners have received
aggregate distributions of any kind from the Partnership in an amount equal
to their initial cash Capital Contributions (as defined), and thereafter
2.23% to the Series 100 Limited Partners, .55% to EA Units (as defined),
96.22% to Datalinc and 1% to the General Partner. Profits and losses (as
defined) are to be allocated in the same manner.
SERIES 200
During 1996, Fastcom began offering Series 200 limited partnership units at
$10,000 each. The offering closed on September 30, 1996, and Fastcom sold
215 1/2 limited partnership units with contributions approximating
$2,155,000. Expenses in the amount of $218,500 were incurred in relation to
the offering and were offset against the proceeds.
The partnership agreement was amended upon completion of the Series 200
offering. Under the agreement, cash flows, sales proceeds, refinancing
proceeds and profits and losses shall be distributed in the following
manner to the Limited Partners: first to the Series 100 Limited Partners
until the Limited Partners have received Distributions (as defined) equal
to their total Capital Contributions (as defined), plus their aggregate 15%
Preferred Return (as defined), if and when such Preferred Return is
payable; second to the Series 200 Limited Partners until the Series 200
Limited Partners have received Distributions equal to their total Capital
Contributions; any remaining amounts would be distributed to Datalinc and
the Managing Dealer Limited Partners and the General Partner, as determined
by their respective ownership percentages multiplied by the ratio of their
respective total Capital Contributions to their total aggregate ownership
interests.
After the Limited Partners have received aggregate Distributions of any
kind from the Partnership, cash flow, refinancing proceeds, sales proceeds
and profits and losses are to be distributed 2.23% to Series 100 Limited
Partners, .55% to EA Limited Partners, 11.97% to Series 200 Limited
Partners, 84.25% to Datalinc, and 1% to the General Partner.
The Series 200 Limited Partners have the option to require Fastcom or
Datalinc to repurchase their Series 200 Units on December 31, 2000, at an
amount equal to their total cash Capital Contribution less any
distributions received (a "Mandatorily Redeemable Partnership").
Accordingly, the total cash contributions obtained during the Series 200
offering of $2,155,000 at December 31, 1996, has been Redeemable
Partnership Interest.
The accompanying Notes to Financial Statements are an
integral part of these financial statements.
F-24
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited
Partnership)
Notes to Financial Statements
- -------------------------------------------------------------------------------
CFG OPTION
In connection with the Series 200 offering, CFG Securities Corp. ("CFG"),
the Managing Dealer Limited Partner (syndicator), was given an option to
purchase a 2.4% interest in the Partnership at a cost of $240,000. Datalinc
will transfer CFG the approriate interest from its own share of ownership.
The fair value of CFG's option of $77,029 was determined based on the
pricing of the Series 200 units sold in 1996.
NEGATIVE CAPITAL
In accordance with generally accepted accounting principles and the limited
liability provisions of the partnership agreement, all losses in excess of
a limited partner's capital contributions are transferred to the General
Partner. Any future profits generated for Limited Partners with a zero
basis will be transferred to the General Partner to offset these losses in
accordance with the terms of the agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accompanying financial statements have been prepared on the accrual
basis of accounting. The significant accounting principles and practices
used in the preparation of the accompanying financial statements are
summarized below:
USE OF ESTIMATES
Fastcom prepares its financial statements in conformity with generally
accepted accounting principles. These principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclose contingent assets and liabilities at the date of the
financial statements and report amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
CASH MANAGEMENT SYSTEM
The partnership's policy is to reclassify book overdrafts. Book overdrafts
representing outstanding checks in excess of funds on deposit, are
classified as liabilities (accounts payable and accrued expenses) and cash
is reinstated at period end. Accordingly, $45,088 at December 31, 1995 was
reclassified from cash to accounts payable and accrued expenses in the
accompanying financial statements. There were no overdrafts at December 31,
1996.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and includes the direct cost of
installation. Depreciation is provided using a method not materially
different than the double declining balance method over the estimated
useful lives of the assets ranging from five to thirty-nine years for both
financial reporting and tax purposes. Costs of additions and betterments
are capitalized, and repairs and maintenance are charged to expense as
incurred. Upon sale or retirement of property and equipment, the costs and
The accompanying Notes to Financial Statements are an
integral part of these financial statements.
F-25
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited
Partnership)
Notes to Financial Statements
- -------------------------------------------------------------------------------
related accumulated depreciation are eliminated from the accounts and the
resulting gain or loss is reflected in the statement of operations.
ORGANIZATION COSTS
Organization costs incurred in establishing the Partnership are amortized
on a straight line basis over a period of sixty months. Amortization costs
of $58 in 1996 and 1995 have been recorded in the statement of operations.
RESEARCH AND DEVELOPMENT COSTS
Expenditures for research, development, and engineering of products are
expensed as incurred.
INCOME TAXES
No provision or benefit for federal or state income taxes is included in
the financial statements of the Partnership as any liability or benefit for
such taxes is that of the partners rather than the Partnership. Certain
items may be treated differently in the Partnership income tax return than
in the accompanying financial statements. Therefore, net income in the
financial statements may not be the same as that reported in the
Partnership income tax return.
SALE-LEASEBACKS
The Partnership entered into sale and leaseback operating lease
transactions in 1995 and 1994 with one leasing company. Approximately
$12,000 of gross profit was deferred in 1995 and will be recognized over
the life of the lease. The Partnership recognized $5,617 and $333 of the
deferred profit in 1996 and 1995, respectively, which is netted against
operating, general and administrative expenses. Accounts payable and
accrued expenses include $6,050 and $11,667 of deferred profit at December
31, 1996 and 1995, respectively.
VALUATION ASSESSMENT OF LONG-LIVED ASSETS
The General Partner continuously reviews the value of the Partnership's
long-lived assets and records necessary adjustments to the asset's carrying
value when the asset becomesimpaired. If an asset is determined to be
impaired, a loss is recognized in the statement of operations.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to be consistent with
the current year presentation.
The accompanying Notes to Financial Statements are an
integral part of these financial statements.
F-26
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited
Partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. PROPERTY AND EQUIPMENT:
DECEMBER 31,
1996 1995
Hub and network equipment installed $ 355,745 $ 51,011
Software 37,749 17,351
Office furniture and equipment 209,794 32,027
Construction in progress 479,723 132,468
------------ ------------
1,083,011 232,857
Less accumulated depreciation
and amortization (135,623) (29,001)
------------ -------------
$ 947,388 $ 203,856
------------ ------------
Hub and network equipment of $320,196 and $51,011 at December 31, 1996
and 1995, respectively, is equipment under capital lease. Accumulated
amortization for such equipment approximated $71,000 and $32,000 at
December 31, 1996 and 1995, respectively.
4. CAPITAL LEASE OBLIGATIONS:
December 31,
1996
Capital lease obligation, at varying rates
of imputed interest of 8 to 16% $ 201,584
Less current portion of capital lease
obligations (58,715)
-------------
Capital lease obligations $ 142,869
============
The accompanying Notes to Financial Statements are an
integral part of these financial statements.
F-27
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited
Partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
Included in payable to affiliate at December 31, 1995 is $38,749 of lease
obligations related to certain equipment contributed by Datalinc to Fastcom
which was under a capital lease agreement.
Scheduled principal repayments on debt and minimum future capital lease
payments for the next five years and thereafter are as follows:
OBLIGATIONS
YEAR ENDING UNDER CAPITAL
DECEMBER 31 LEASES
1997 $ 73,801
1998 75,945
1999 63,890
2000 15,972
-------------
Total 229,608
Less amount representing interest on
obligations under capital leases (28,024)
-------------
Total $ 201,584
-------------
5. RELATED PARTY TRANSACTIONS:
The Partnership is charged, as provided by the partnership agreement, by
the General Partner for management fees. These charges aggregated $157,200,
$132,000 and $0 in 1996, 1995 and 1994, respectively, and are included in
operating, general and administrative expenses. Datalinc provided
non-interest bearing advances to the Partnership of
$1,345,931
and $1,185,644 at December 31, 1996 and 1995, respectively. These advances
had average outstanding balances of approximately $1,266,000, $946,000 and
$418,000 during 1996, 1995 and 1994, respectively.
All of Fastcom's operating, general and administrative expenses are
allocated from Datalinc on a pro rata basis. Datalinc advances Fastcom
funds to pay its portion of the expenses
due.
Fastcom was allocated $62,240, $57,003 and $8,650 of rental expense in
1996, 1995 and 1994, respectively, from Datalinc as its share of hub
operations.
Fastcom leases $587,500 of equipment from Datalinc under an operating lease
agreement. Fastcom recorded $48,340 of rent expense related to this leasing
arrangement which is included in operating, general and administrative
expenses. The future operating lease
The accompanying Notes to Financial Statements are an
integral part of these financial statements.
F-28
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited
Partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
payments for the leased equipment are approximately $193,000 in 1997, 1998
and 1999 and $49,000 in 2000.
Fastcom is a guarantor of approximately $321,000 of debt in the name of
Datalinc, which is payable by Datalinc at various dates in 1997 and 1998.
In the event of default by
Datalinc,
Fastcom would be obligated to remit the amount due.
A member of Fastcom Management, Inc.'s Board of Directors is the president
of the company that engages in certain leasing transactions with Fastcom
and Datalinc. This company has leased approximately $1,200,000 of equipment
over the last several years to Datalinc and Fastcom.
6. COMMITMENTS AND CONTINGENCIES:
The Partnership leases certain operating equipment under an operating lease
from third parties. Rental expense for this equipment in the amount of
$15,456, $1,288 and $0 for the year ended December 31, 1996, 1995, and
1994, respectively, is included in operating, general and administrative
expenses in the statement of operations. The minimum future noncancelable
operating lease payments for these facilities are $15,456 in 1997 and
$14,168 in 1998. See Note 5 for related party operating leases.
Included in one of Fastcom's lease agreements is a provision that the
lessor will receive an ownership interest in the Partnership or its
successors, ranging from 1% up to 5%, dependent on the dollar amount of
equipment financed by Datalinc or Fastcom for Fastcom's network. A 1%
ownership interest will be granted after $1 million of equipment is
financed and an additional .5% ownership interest (up to the maximum of 5%)
will be granted for each additional $3 million financed. No equity
ownership will be granted if less than $1 million is leased. As of December
31, 1996, approximately $750,000 of equipment had been leased.
The Partnership has entered into a contract, subject to completion of a
successful pilot program, to purchase up to $3,300,000 in equipment from a
vendor. The vendor is to provide, for a trial period, a pilot network
system. The Partnership made a $15,000 non-refundable payment for the pilot
equipment which is included in property and equipment. The equipment must
be returned and the deposit forfeited if the Partnership does not accept
the equipment and cancels the contract.
The accompanying Notes to Financial Statements are an
integral part of these financial statements.
F-29
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholder of Thrucomm, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations and accumulated deficit and of cash flows present fairly, in all
material respects, the financial position of Thrucomm, Inc. (a wholly-owned
subsidiary of Datalinc, Ltd.) at December 31, 1996, and the results of its
operations and its cash flows for the period from inception (December 16, 1996)
through December 31, 1996, in conformity with generally accepted accounting
principles. 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 audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We
believe that our audit provides a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is a subsidiary of
Datalinc, Ltd. ("Datalinc"), a Florida limited partnership which has provided
significant funding for the operations of Fastcom, Ltd., an affiliated
partnership and development stage enterprise. These financial demands made on
Datalinc raise substantial doubt about the Company's ability to continue as
going concern. Management's plans in regard to these matters are described in
Note 1. The accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
As discussed in Notes 1 and 4, the Company is a member of a group of affiliated
entities and, as disclosed in the financial statements, has transactions and
relationships with members of the group, including common principals involved as
Board of Directors and shared management among the various entities. Because of
these relationships, it is possible that the terms of these transactions are not
the same as those that would result from transactions among wholly unrelated
parties.
PRICE WATERHOUSE LLP
Tampa, Florida
February 12, 1997
F-30
<PAGE>
Thrucomm, Inc.
(A wholly-owned subsidiary of Datalinc, Ltd.)
BALANCE SHEET
- -------------------------------------------------------------------------------
December 31,
1996
ASSETS
- ------------------------------------------
Cash $ 3,001
Debt issue costs 4,289
Receivable from affiliate 314,000
------------
$ 321,290
============
LIABILITIES AND SHAREHOLDER'S EQUITY
- -------------------------------------------
Accrued expenses $ 722
Line of credit 321,289
-----------
Total liabilities 322,011
Commitments and contingencies (Note 7)
Shareholder's equity:
Preferred stock, no par value (Note 5) ---
Common stock, no par value, 75,000,000 shares
authorized, 1 share issued and outstanding 1
Accumulated deficit (722)
-----------
$ 321,290
===========
The accompanying Notes to Financial Statements are an integral
part of these financial statements.
F-31
<PAGE>
Thrucomm, Inc.
(A wholly-owned subsidiary of Datalinc, Ltd.)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
- --------------------------------------------------------------------------------
For the period from
inception through
December 31, 1996
Interest expense $ 722
----------
Net loss and accumulated deficit $ (722)
----------
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
F-32
<PAGE>
Thrucomm, Inc.
(A wholly-owned subsidiary of Datalinc, Ltd.)
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
For the period from
inception through
December 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (722)
Interest accrued 722
---------------
Net cash used in operating activities 0
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Line of credit borrowings 321,289
Advances to affiliates (314,000)
Debt issue costs (4,289)
Proceeds from issuance of common stock 1
---------------
Net cash provided by financing activities 3,001
---------------
Cash, end of period $ 3,001
===============
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
F-33
<PAGE>
Thrucomm, Inc.
(A wholly-owned subsidiary of Datalinc, Ltd.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. THE CORPORATION:
Thrucomm, Inc. (the "Company") is a wholly-owned subsidiary of Datalinc,
Ltd. ("Datalinc"), a Florida limited partnership, offering satellite based
data communications. The Company was incorporated in the state of Florida
in December 1996, with the intent of serving as a corporate entity to
combine the assets and operations of Datalinc and Fastcom, Ltd.
("Fastcom"), a development stage Florida limited partnership with the same
general partner as Datalinc, into Thrucomm, thus enhancing their ability to
obtain additional financing to fund future operations. Datalinc's
management is currently attempting the effect this reorganization which
will expand its ability to raise capital through alternative sources of
financing. Additionally, Fastcom is seeking additional financing through
venture capital or other investors which would be used as repayment of the
non-interest bearing advances made to Fastcom. However, until this
reorganization is completed and additional financing is obtained, there is
substantial doubt about Thrucomm's ability to continue as a going concern.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The significant accounting principles and practices used in the preparation
of the accompanying financial statements are summarized below:
USE OF ESTIMATES
The Company prepares its financial statements in conformity with generally
accepted accounting principles. These principles require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclose contingent assets and liabilities at the date of the
financial statements and report amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
DEBT ISSUE COSTS
Debt issue costs are recorded at cost and are amortized over the life of
the loan using the straight line method, which is not materially different
than the effective interest rate method.
F-34
<PAGE>
Thrucomm, Inc.
(A wholly-owned subsidiary of Datalinc, Ltd.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INCOME TAXES
The Company is subject to federal and state income taxes. However,
through December 31, 1996, the Company had limited activities and an
immaterial operating loss. Accordingly, no income tax provision was
necessary. 3. DEBT: December 31, 1996
Bank line of credit, interest rate at prime plus .75%
(9.87% at December 31, 1996), due March 24, 1997,
interest payments due monthly, guaranteed by
related parties, collateralized by inventory,
receivables, equipment and life insurance policies of
Datalinc and Fastcom. $ 321,289
------------
There was $278,711 of unused line of credit outstanding at December 31,
1996. The proceeds drawn on the line were advanced to Datalinc (Note 4).
Datalinc and Fastcom have guaranteed Thrucomm's line of credit.
Subsequent to December 31, 1996, Thrucomm drew an additional $179,000 on
the line of credit, all of which was provided to Datalinc to assist in the
financing of Datalinc's operations.
4. RELATED PARTY TRANSACTIONS:
The Company is a member of a group of affiliated entities and, has
transactions and relationships with members of the group, including common
principles involved as board of directors and shared management among the
various entities.
The Company had non-interest bearing advances to Datalinc of approximately
$314,000 at December 31, 1996, which were provided to assist in the
financing of Datalinc's operations.
5. PREFERRED STOCK:
Thrucomm is authorized to issue 25,000,000 shares of preferred stock with
such designation, rights and preferences as may be determined by Thrucomm's
Board of Directors. No shares are issued or outstanding at December 31,
1996. Additionally, Thrucomm's board of directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the
common stockholder's voting power or other rights.
F-35
<PAGE>
Thrucomm, Inc.
(A wholly-owned subsidiary of Datalinc, Ltd.)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. EMPLOYEE STOCK COMPENSATION PLANS:
The Company's stock option plans authorize the granting of incentive stock
options for a total of 200,000 shares of Common Stock to all eligible
employees, including officers and employee directors and others who perform
services for the Company and, with respect to 100,000 shares to
non-employee directors. Under the plans, all options cannot be granted at
prices not less than market value on the date of grant. Options generally
vest over a three-year period from the date of grant, with 25% of the
options becoming exercisable on the date of the grant and 25% becoming
exercisable on each of the next three anniversaries of the date of grant.
No options have been granted as of December 31, 1996.
7. COMMITMENTS AND CONTINGENCIES:
Pursuant to a purchase agreement between Datalinc and one of Datalinc's
limited partners, Blue Chip/Datalinc Corporation ("Blue Chip"), Blue Chip
has preferential rights which affect the number of shares of Thrucomm
common stock to be issued and the right of first refusal to purchase equity
interests offered by Thrucomm. The preferential rights also include the
right for Blue Chip to be entitled to receive certain distributions,
otherwise payable to ICN, providing a return equal to 35% per annum on its
capital contribution. ICN has agreed to escrow certain distributions
otherwise payable to ICN as an assurance that Blue Chip will receive its
specified return.In addition, ICN has agreed to certain restrictions on its
right to transfer its interest in Datalinc. The stockholders of ICN have
agreed to elect a nominee to the ICN Board of Directors, place certain
restrictions on their right to transfer stock in ICN, and to certain
employment restrictions. Blue Chip has been granted registration rights in
the event Datalinc or its successor should register its securities under
the Securities Act of 1993.
F-36
<PAGE>
THIS AGREEMENT AND PLAN OF REORGANIZATION dated as of the day of the day,
1997 (the "Agreement") by and among Datalinc, Ltd., a Florida
limited partnership ("Datalinc"), Fastcom, Ltd., a Florida limited partnership
("Fastcom") (Datalinc and Fastcom collectively referred to as the
"Partnerships"), and Thrucomm, Inc., a Florida corporation ("Thrucomm").
WITNESSETH:
WHEREAS, the Partnerships and Thrucomm desire for the reorganization (the
"Reorganization") of the businesses of the Partnerships, combining them into
Thrucomm by, among other things:
A. The transfer of all of the assets and liabilities of the
Partnerships to Thrucomm (the "Transfer"), upon the terms and conditions
described in this Agreement; and
B. In exchange for the Transfer, Datalinc will receive shares of Thrucomm's
Mandatory Convertible Reorganization Stock, Series A-H and Fastcom will receive
shares of Thrucomm's Mandatory Convertible Reorganization Stock, Series 1-0 (the
Mandatory Convertible Preferred Stock, Series A-H and 1-0, collectively referred
to as the "Reorganization
Stock').
NOW, THEREFORE, in consideration of the terms, conditions, agreements and
covenants contained herein, and in reliance upon the representations and
warranties contained in this Agreement, the parties hereto agree as follows:
I. RECITALS; TRUE AND CORRECT.
The above stated recitals are true and correct and are incorporated into
this Agreement.
II. MERGER.
REORGANIZATION. The Partnerships and Thrucomm shall effect the
Transfer upon the terms and conditions described in this Agreement, and in
exchange for the Transfer, the Partnerships will receive the Reorganization
Stock. The Reorganization Stock will be held by the Partnerships until mandatory
conversion (the "Mandatory Conversion"), at which time the Reorganization Stock
will be converted into shares of Thrucomm's Common Stock, no par value (the
"Underlying Shares"). Upon Mandatory Conversion, Integrated Communication
Networks, Inc., a Florida corporation which is the General Partner of Datalinc
(the "Datalinc General Partner"), and Fastcom Management, Inc., a Florida
corporation which is the General Partner of Fastcom (the "Fastcom General
Partner"), will distribute the Underlying Shares to the Partners and employees
in the Management Incentive Plan in Datalinc (collectively, the "Datalinc
Distributees") and the Partners in Fastcom (collectively, the "Fastcom"
Distibutees), and the Partnerships will dissolve.
A-1
<PAGE>
2.2 EFFECTIVE DATE. If all of the conditions precedent
to the obligations of each of the parties hereto as hereinafter set forth shall
have been satisfied or shall have been waived, the Reorganization shall become
effective on the date (the "Effective Date") of the Transfer.
2.3 SECURITIES OF THRUCOMM.
The authorized capital stock of Thrucomm is comprised of the following: (i)
100,000,000 shares of Common Stock, no par value (the "Common Stock"), one share
of which is issued and outstanding; and (ii) 25,000,000 shares of Preferred
Stock, no par value (the "Preferred Stock"), with such designation, rights and
preferences as may be determined from time to time by the Board of Directors of
Thrucomm, of which no shares are issued and outstanding.
2.4 REORGANIZATION STOCK. The manner and basis of issuing the
Reorganization Stock are as follows:
(a) STOCK CONSIDERATION. At the Effective Date, the
Partnerships shall receive the following number of shares of Reorganization
Stock:
TO DATALINC:
1 Preferred Share, Series A; the Underlying Shares to be distributed to
the holders of Series 100 Limited Partnership Units upon Mandatory
Conversion;
1 Preferred Share, Series B; the Underlying Shares to be distributed to
the holders of Series 200 Limited Partnership Units upon Mandatory
Conversion;
1 Preferred Share, Series C; the Underlying Shares to be distributed to
the holders of Series 300 Limited Partnership Units upon Mandatory
Conversion;
1 Preferred Share, Series D; the Underlying Shares to be distributed to
the holders of Series 300E1 Limited Partnership Units upon Mandatory
Conversion;
1 Preferred Share, Series E; the Underlying Shares to be distributed to
the holders of Series 3OOE2 Limited Partnership Units upon Mandatory
Conversion;
1 Preferred Share, Series F; the Underlying Shares to be distributed
to the Datalinc Management Incentive Plan upon Mandatory
Conversion;
1 Preferred Share, Series G; the Underlying Shares to be distributed to
the holder of the Managing Dealer Units upon Mandatory Conversion; and
1 Preferred Share, Series H; the Underlying Shares to be distributed
to the Datalinc General Partner upon Mandatory Conversion.
A-2
<PAGE>
TO FASTCOM:
1 Preferred Share, Series I; the Underlying Shares to be distributed to
the holders of Series 100 Limited Partnership Units upon Mandatory
Conversion;
1 Preferred Share, Series J; the Underlying Shares to be distributed to
the holders of Series 100EA Limited Partnership Units upon Mandatory
Conversion;
1 Preferred Share, Series K; the Underlying Shares to be distributed to
the holders of Series 200 Limited Partnership Units upon Mandatory
Conversion;
1 Preferred Share, Series L; the Underlying Shares to be distributed to
Datalinc, as the holder of the Datalinc Limited Partnership Units,
upon Mandatory Conversion;
1 Preferred Share, Series N; the Underlying Shares to be distributed to
the Fastcom General Partner upon Mandatory Conversion;
1 Preferred Share, Series O; the Underlying Shares to be distributed
to Renaldi, Renaldi & Nart upon Mandatory Conversion;
Dividends
Series A-E Preferred Stock
The Datalinc Units are entitled to repayment of their total cash Capital
Contributions, plus aggregate Preferred Returns, before any Distributions of
Cash Flow, Sale Proceeds and Refinancing Proceeds, and upon Liquidation to
Datalinc's Other Equity Owners. To preserve the Datalinc Investors' rights and
preferences under the Partnership Agreements, the Series A-E Preferred Stock
(the "Dividend Preferred Stock"), shall be entitled to dividends ("Dividends"),
upon Mandatory Conversion, in an amount which shall be equal or nearly equal
to the Datalinc Investors' cash Capital Contributions, plus Preferred Return.
See Column D of "Thrucomm Ownership Tables". Dividends shall be declared at
the time of Mandatory Conversion, and will be factored into the Formula to
calculate the number of Underlying or other consideration.
The amount of Dividends payable per share shall be computed by dividing the
annual rate (10% for the Series A and B; 8% of the Series C-E) by twelve. The
amount of Dividends payable for the initial dividend period or any period
shorter than a full dividend period shall be computed on the basis of a
360-day year of 12, 30-day months.
The Preferred Returns on the Series 300E1 and 3OOE2 Units accrue from the
dates of the individual Subscription Agreements of each Investor in those Units.
However, the Dividends on the Series D and E Preferred Stock, shall accrue from
June 1, 1993 and September 1, 1993, respectively. The Boards of Directors of
Thrucomm, ICN and FM believe that the dates chosen for the Dividends on the
Series D and E Preferred Stock are not significantly different from the terms
of the Series 3OOE1 and 3OOE2 Units under Datalinc's Partnership Agreement. See
"The Formula - Material Assumptions and Variances."
A-3
<PAGE>
SERIES F-O PREFERRED STOCK
The Series 100 Investors are entitled to a 15 % per annum Preferred Return
on their cash Capital Contributions. However, the right to receive this
Preferred Return shall terminate if, by March 31, 1999, the Series 100
Investors have received an amount equal to their capital investment, or Fastcom
(or its successor) has made a successful public offering, a Cut-Off Event. The
Formula assumes that a Mandatory Conversion Event is a Cut-Off Event which
terminates the Preferred Return of Fastcom's Series 100 Units. All of the other
Investors, except as mentioned above, and the Other Equity Owners do not have
Preferred Returns. Accordingly, the Series F-0 Preferred Stock do not receive
any Dividends upon Mandatory Conversion, and the Formula does not factor any
Dividends into its calculation of the Underlying Shares or other value to be
distributed upon the Mandatory Conversion of the Series F-0 Preferred Stock. See
"Equity Ownership of the Partnerships," and "The Formula."
Dividends may not be paid on the Dividend Preferred Stock in any other
manner or at any other time than as set forth above. Accruals of dividends will
not bear interest.
VOTING RIGHTS
Except as provided by law, the holders of the Preferred Stock will not be
entitled to vote.
LIQUIDATION RIGHTS
All of the Preferred Stock will rank in equal priority to each other, but
prior to the Common Stock, upon liquidation. In the event of any liquidation,
dissolution or winding-up of Thrucomm, whether voluntary or involuntary, no
payment or distribution of the assets of Thrucomm, or proceeds thereof (whether
capital or surplus), shall be made to or set apart for the holders of any class
or series of stock of Thrucomm ranking junior to the Preferred Stock upon
liquidation. The holders of the Preferred Stock shall be entitled to receive
payments or distributions of assets, payable in the proportion determined by the
Formula. The voluntary sale, conveyance, lease, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
the property or assets of Thrucomm to, or a consolidation or merger of Thrucomm
with, one or more other corporation (whether or not Thrucomm is Thrucomm
surviving such consolidation or merger) will not be deemed to be a liquidation,
dissolution or winding-up, voluntary or involuntary.
DIVIDEND POLICY
Thrucomm does not presently intend to pay any cash dividends on the Common
Stock or the Preferred Stock for the foreseeable future as all available cash
will be utilized to further the growth of business subsequent to the Effective
Time of the Reorganization for the proximate future thereafter. The payment of
any subsequent cash dividends will be in the discretion of the Board of
Directors of Thrucomm and will be dependent upon Thrucomm's results of
operations, financial condition, contractual restrictions and other factors
deemed relevant by the Board..
A-4
<PAGE>
(c) CONVERSION. THE CONVERSION FEATURE
The Preferred Stock is mandatorily convertible into shares of Thrucomm's
Common Stock upon the occurrence of any of the following triggering events,
Mandatory Conversion Events: (i) the completion of an IPO, raising a minimum of
$15,000,000 of gross offering proceeds; (ii) the sale of all or substantially
all of the assets of Thrucomm or (iii) the merger of Thrucomm into a
nonaffiliated entity in which Thrucomm is not the surviving corporation. The
conversion rate is determined by the application of the Formula. The Formula is
based upon the Conversion Value of Thrucomm in connection with a Mandatory
Conversion Event. In an IEPO, the Conversion Value of Thrucomm is based upon the
amount of equity that is sold in the offering, and the gross proceeds received
therefor. In the event of a Sale or a Merger, the Conversion Value of Thrucomm
is based upon the consideration received in the Sale or Merger. In any Mandatory
Conversion Event, the Conversion Value of Thrucomm will be allocated to Datalinc
and Fastcom in the manner prescribed by the Board of Directors of Thrucomm and
by the General Partners of Datalinc and Fastcom. For a detailed description of
the Formula and for illustrations of the Formula at various Conversion Values of
Thrucomm, see "The Formula-Determinating the Values of Thrucomm, Datalinc and
Fastcom" and "Thrucomm Ownership Tables.'
In the event of a Sale or Merger, the Preferred Stock will not be converted
into Underlying Shares. The Preferred Stock shall be convertible directly into
the kind and amount of securities, cash or other consideration offered in the
Sale or Merger, which it would have been entitled to receive as if the Preferred
Stock had first been converted into the Underlying Shares immediately prior to
such Merger or Sale, and there shall be no further right to convert into
Underlying Shares of Thrucomm's Common Stock.
ADJUSTED OWNERSHIP INTERESTS
The Underlying Shares of the Series I and K Preferred Stock win be
distributed to the Investors in Fastcom's Series 100 and 200 Units,
respectively. The Series 100 and 200 Investors are entitled to a minimum
guaranteed return on their investment, which is measured as a 30% discount on
the Fastcom Value at the time of an IPO, Sale or Merger. Accordingly, the Series
I and K Preferred Stock shall be subject to an adjustment upon Mandatory
Conversion, if an adjustment is necessary to ensure that Fastcom's Series 100
and 200 Investors receive their guaranteed return, as provided for under
Fastcom's Partnership Agreement. See "Equity Ownership of the Partnerships - The
Fastcom Investors."
THE SERIES I ADJUSTMENT. The equity interest of the Series I Preferred
Stock is subject to an adjustment, immediately prior to Mandatory Conversion, if
necessary, to ensure that Fastcom's Series 100 Investors will receive the
minimum return guaranteed to the Series 100 Units (the Series I "Adjusted
Ownership Interest"). The Series I Adjusted Ownership Interest is measured as a
30% discount to the Fastcom Value. The 30% discounted Fastcom Value (the
"Discounted Fastcom Value") is determined as follows:
FASTCOM VALUE X .70 = 30% Discounted Fastcom Value.
An adjustment to the equity interest of the Series I Preferred Stock need only
be calculated, if the Discounted Fastcom Value is less than $16,326,640 (the
Series I "Guaranteed Minimum of Fastcom Value"). The Series I Adjusted Ownership
Interest is calculated as follows:
SERIES I GUARANTEED MINIMUM FASTCOM VALUE X .02225 X 100 = % ADJUSTED
------------------------------------------- OWNERSHIP INTEREST
DISCOUNTED FASTCOM VALUE
For example, if the Fastcom Value is $21,000,000, the Discounted Fastcom Value
is $21,000,000 X .70 = $14,700,000. Since the Discounted Fastcom Value is less
than the Series I Preferred Stock's Guaranteed Minimum Fastcom Value, it is
necessary to make an adjustment to the Series I Preferred Stock's equity
interest. The Adjusted Ownership Interest of the Series I Preferred Stock would
be: ($16,326,640 -. $14,700,000) X .02225 X 100 = 2.471 %. Any adjustment in the
equity interest of the Series I Preferred Stock, shall result in a corresponding
decrease in the equity interest of the Series L Preferred Stock, which will be
distributed to Datalinc upon Mandatory Conversion. See "The Formula -
Determining the Values of Thrucomm, Datalinc and Fastcom" for how to calculate
the Fastcom Value.
A-5
<PAGE>
THE SERIES K ADJUSTMENT. The equity interest of the Series K Preferred
Stock is subject to an adjustment, immediately prior to Mandatory Conversion, if
necessary to ensure that Fastcom's Series 200 Investors will receive the minimum
return guaranteed to the Series 200 Units (the Series K "Adjusted Ownership
Interest"). The Series K Adjusted Ownership Interest is also measured as a 30 %
discount to the Fastcom Value. If the Discounted Fastcom Value is less than
$18,000,000 (the Series K "Guaranteed Minimum Fastcom Value"). The Adjusted
Ownership Interest of the Series K Preferred Stock is calculated as follows:
SERIES K GUARANTEED MINIMUM FASTCOM VALUE X .11972 X 100 = % ADJUSTED
-------------------------------------------- OWNERSHIP INTEREST
DISCOUNTED FASTCOM VALUE
For example, if the Fastcom Value is $21,000,000, the Discounted Fastcom Value
is $21,000,000 X .70 = $14,700,000. Since the Discounted Fastcom Value is less
than the Series K's Guaranteed Minimum Fastcom Value, it is necessary to make an
adjustment to the Series K Preferred Stock's equity interest. The Adjusted
Ownership Interest of the Series K Preferred Stock would be: ($18,000,000 @
$14,700,000) X .1 1972 X 100 = 14.66 %. Any adjustment in the equity interest of
the Series K Preferred Stock shall result in a corresponding decrease in the
equity interest of the Series L Preferred Stock, which shall be distributed to
Datalinc upon Mandatory Conversion.
No fractional shares will be issued upon conversion.
The conversion rate will not be adjusted for the issuance of additional
Common Stock or Preferred Stock. Except as discussed above, no adjustment upon
conversion will be made for dividends on either the Preferred Stock insert
revise .
(d) VOTING RIGHTS.
Except as provided by law, the holders of the Preferred Stock will not be
entitled to vote.
(e) LIQUIDATION RIGHTS. All of the Preferred Stock will rank in equal
priority to each other, but prior to the Common Stock, upon liquidation. In the
event of any liquidation, dissolution or winding-up of Thrucomm, whether
voluntary or involuntary, no payment or distribution of the assets of Thrucomm,
or proceeds thereof (whether capital or surplus), shall be made to or set apart
for the holders of any class or series of stock of Thrucomm ranking junior to
the Preferred Stock upon liquidation. The holders of the Preferred Stock shall
be entitled to receive payments or distributions of assets, payable in the
proportion determined by the Formula. The voluntary sale, conveyance, lease,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of Thrucomm
to, or a consolidation or merger of Thrucomm with, one or more other corporation
(whether or not Thrucomm is Thrucomm surviving such consolidation or merger)
will not be deemed to be a liquidation, dissolution or winding-up, voluntary or
involuntary.
2.5 EFFECT OF THE REORGANIZATION. As of the Effective Date, all of the
following shall occur:
(a) The corporate identity, existence, purposes, powers,
franchises, rights and immunities of Thrucomm shall continue unaffected and
unimpaired by the Reorganization,
6
<PAGE>
(b) Thrucomm shall be liable for all of the obligations and
liabilities of the Partnerships.
(c) The rights, privileges, good will, inchoate rights, franchises and
property, real, personal and mixed, and debts due on whatever account and all
other things in action belonging to the Partnerships shall be, and they hereby
are, bargained, conveyed, granted, confirmed, transferred, assigned and set over
to and vested in Thrucomm, without further act or deed.
(d) No claim pending at the Effective Date by or against the
Partnerships or Thrucomm or any partner, stockholder, officer or director
thereof, shall abate or be discontinued by the Reorganization, but may be
enforced, prosecuted, settled or compromised as if the Reorganization had not
occurred.
(e) All rights of employees and creditors and all liens upon the
property of the Partnerships or Thrucomm shall be preserved unimpaired, limited
hen to the property affected by such hens at the Effective Date, and all the
debts, liabilities and duties of the Partnerships shall attach to Thrucomm and
shall be enforceable against Thrucomm to the same extent as if all such debts,
liabilities and duties had been incurred or contracted by Thrucomm.
(f) The Articles of Incorporation of Thrucomm, as in effect on the
Effective Date, shall continue to be the Articles of Incorporation of Thrucomm
without change or amendment until such time, if ever, as it is amended
thereafter in accordance with the provisions thereof and applicable laws.
(g) The Bylaws of Thrucomm as in effect on the Effective Date, shall
continue to be the Bylaws of Thrucomm without change or amendment until such
time, if ever, as it is amended thereafter in accordance with the provisions
thereof and applicable laws.
2.6 DISCLOSURE SCHEDULES. The Consent Statement and Prospectus dated
insert (the "Disclosure Schedule") sets forth the matters required to be set
forth in the Disclosure Schedules as described elsewhere in this Agreement.
The Disclosure Schedule shall be deemed to be a part of this Agreement.
III. REPRESENTATIONS AND WARRANTIES OF DATALIN.
Datalinc represents and warrants to Thrucomm as follows, with the knowledge
and understanding that Thrucomm is relying materially upon such representations
and warranties:
3.1 ORGANIZATION AND STANDING. Datalinc is a limited partnership duly
organized, validly existing and in good standing under the laws of the State
of Florida. Datalinc has all requisite power to carry on its business as it is
now being conducted and
7
<PAGE>
is duly qualified to do business as a foreign limited partnership and is in good
standing in each jurisdiction where such qualification is necessary under
applicable law, except where the failure to qualify (individually or in the
aggregate) does not have any material adverse effect on the assets, business or
financial condition of Datalinc, and all states in which Datalinc is qualified
to do business as of the date hereof, are listed in the Disclosure Schedule. A
copy of the Certificate of Limited Partnership of Datalinc (certified by the
Secretary of State of Florida), and the Agreement of Limited Partnership, as
amended to date, delivered to Fastcom and Thrucomm, are true and complete copies
of these documents as now in effect. Except as otherwise set forth in the
Disclosure Schedule, Datalinc does not own any interest in any other
corporation, business trust or similar entity. The minute books of Datalinc
contains accurate records of all meetings of its Partners since its formation.
3.2 CAPITALIZATION. The number of Partnership Units
which are issued and outstanding are as set forth in the Disclosure Schedule.
All of such Units are duly authorized, validly issued and outstanding, fully
paid and nonassessable, and owned of record and beneficially by the Datalinc
Distributees, in such amounts as are set forth opposite their respective names
thereon, and were not issued in violation of the preemptive rights of any
person. There are no subscriptions, options, warrants, rights or calls or other
commitments or agreements to which the Datalinc Distributees, or, to the
Datalinc Distributees' knowledge, are a party or by which any of them is bound,
calling for any issuance, transfer, sale or other disposition of any class of
securities of Datalinc. There are no outstanding securities convertible or
exchangeable, actually or contingently, into Partnership Units or any other
securities of Datalinc. Datalinc has no subsidiaries except Thrucomm.
3.3 AUTHORITY. This Agreement constitutes, and all other
agreements contemplated hereby will constitute, when executed and delivered by
Datalinc in accordance therewith (and assuming due execution and delivery by the
other parties hereto), the valid and binding obligation of Datalinc, enforceable
in accordance with their respective terms, subject to general principles of
equity and bankruptcy or other laws relating to or affecting the rights of
creditors generally.
3.4 PROPERTIES. Except as set forth in the Disclosure Schedule, Datalinc
has good title to all of the assets and properties which it purports to own as
reflected on the balance sheet included in the Financial Statements
(as hereinafter defined), or thereafter acquired. Datalinc has a valid
leasehold interest in all material property of which it is the lessee and
each such lease is valid, binding and enforceable against Datalinc and, to the
knowledge of Datalinc, the other parties thereto in accordance with its terms.
Neither Datalinc nor the other parties thereto are in material default in the
performance of any material provisions thereunder. Neither the whole nor any
material portion of the assets of Datalinc is subject to any governmental decree
or order to be sold or is being condemned, expropriated or otherwise taken by
any public authority with or without payment of compensation therefor, nor, to
the knowledge of Datalinc, has any such condemnation, expropriation or taking
been proposed. None of the assets of Datalinc is subject to any restriction
which would prevent continuation of the use currently made thereof or materially
adversely affect the value thereof.
8
<PAGE>
3.5 CONTRACTS LISTED; NO DEFAULT. All contracts, agreements, licenses,
leases, easements, permits, rights of way, commitments, and understandings,
written or oral, connected with or relating in any respect to present or
proposed future operations of Datalinc (except employment or other agreements
terminable at will and other agreements which, in the aggregate, are not
material to the business, properties or prospects of Datalinc and except
governmental licenses, permits, authorizations, approvals and other matters
referred to in Section 3.16), which would be required to be listed as exhibits
to an Annual Report on Form 10-K if Datalinc were subject to the reporting
requirements of the Exchange Act (individually, the "Datalinc Contract" and
collectively, the "Datalinc Contracts"), are listed and described
in the Disclosure Schedule. Datalinc is the holder of, or party to, all of the
Datalinc Contracts. To the kmowledge of Datalinc, the Datalinc Contracts are
valid, binding and enforceable by the signatory thereto against the other
parties thereto in accordance with their terms. Neither Datalinc nor any
signatory thereto is in default or breach of any material provision of the
Datalinc Contracts. Datalinc's operation of its business has been, is, and will,
between the date hereof and the Closing Date (as hereinafter defined), continue
to be, consistent with the material terms and conditions of the Datalinc
Contracts. Subsequent to the consummation of the Reorganization, Datalinc shall
use its best efforts to cause the transfer and otherwise assign for the benefit
of Thrucomm, the Datalinc Contracts.
3.6 LITIGATION. Except as disclosed in the Disclosure Schedule, there
is no claim, action, proceeding or investigation pending or threatened against
or affecting Datalinc before or by any court, arbitrator or
governmental agency or authority which, in the reasonable judgment of Datalinc,
could have any materially adverse effect on Datalinc. There are no decrees,
injunctions or orders of any court, governmental department, agency or
arbitration outstanding against Datalinc.
3.7 TAXES. For purposes of this Agreement, (A) "Tax" (and, with
correlative meaning, "Taxes") shall mean any federal, state, local or foreign
income, alternative or add-on minimum business, employment franchise, occupancy,
payroll, property, sales, transfer, use, value added, withholding or other tax,
levy, impost, fee, imposition, assessment or similar charge, together with any
related addition to tax, interest, penalty or fine thereon; and (B) "Returns"
shall mean all returns (including, without limitation, information returns and
other material information), reports and forms relating to Taxes or to any
benefit plans.
Datalinc has duly filed all Returns required by any law or regulation
to be filed by it, except for extensions duly obtained. All such Returns were,
when filed, and to the knowledge of Datalinc are, accurate and complete in all
material respects and were prepared in conformity with applicable laws and
regulations in all material respects. Datalinc has paid or will pay in full or
has adequately reserved against all Taxes otherwise assessed against it through
the Closing Date (as hereinafter defined), and the assessment of any material
amount of additional Taxes in excess of those paid and reported is not
reasonably expected.
Datalinc is not a party to any pending action or proceeding by
any governmental authority for the assessment of any Tax, and no claim for
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assessment or collection of any Tax has been asserted against Datalinc that has
not been paid. There are no Tax liens upon the assets (other than the lien of
personal property taxes not yet due and payable) of Datalinc. There is no valid
basis, to the knowledge of Datalinc, except as set forth in the Disclosure
Schedule, for any assessment, deficiency, notice, 30-day letter or similar
intention to assess any Tax to be issued to Datalinc by any governmental
authority.
3.8 COMPLIANCE WITH LAWS AND REGULATIONS. To its knowledge, Datalinc is
in compliance, in all material respects, with all laws, rules, regulations,
orders and requirements (federal, state and local) applicable to it in all
jurisdictions where the business of Datalinc is currently conducted or to
which Datalinc is currently subject which have a material impact on Datalinc,
including, without limitation, all applicable civil rights and equal
opportunity employment laws and regulations, and all state and federal
antitrust, antimonopolies and fair trade practice laws and the Federal
Occupational Health and Safety Act. Datalinc does not know of any assertion
by any party that it is in violation of any such laws, rules, regulations,
orders, restrictions or requirements with respect to its current operations,
and no notice in that regard has been received by Datalinc. To the knowledge
of Datalinc, there is not presently pending any proceeding, hearing or
investigation with respect to the adoption of amendments or modifications to
existing laws, rules, regulations, orders, restrictions or requirements which,
if adopted, would materially adversely affect the current operations of
Datalinc.
3.9 INSURANCE. Datalinc is covered by insurance policies as
identified and described in the Disclosure Schedule or Schedule 3.9, adequate,
in the reasonable opinion of Datalinc, to cover Datalinc against loss, damage
and liability and will maintain such insurance up to and including the Closing
Date (as hereinafter defined). Datalinc has not received notice from any insurer
or agent of such insurer that improvements or expenditures will have to be made
in order to continue such insurance and, so far as known to Datalinc, no such
improvements or expenditures are required (other than premium payments). There
is no liability under any insurance policy in nature of a retroactive rate
adjustment or loss sharing or similar arrangement except as set forth in the
Disclosure Schedule.
3.10 CONDITION OF ASSETS. The equipment fixtures and other personal
property of Datalinc, taken as a whole, is in good operating condition and
repair (ordinary wear and tear excepted) for the conduct of the business of
Datalinc as presently being conducted.
3.11 NO BREACHES. To its knowledge, the making and performance of this
Agreement and the other agreements contemplated hereby by each of Datalinc
will not (i) conflict with or violate the Certificate of Limited Partnership
or Agreement of Limited Partnership of Datalinc; (ii) violate any material
laws, ordinances, rules or regulations, or any order, writ, injunction or
decree to which Datalinc is a party or by which Datalinc or any of its assets,
business, or operations may be bound or affected; or (iii) result in
any breach or termination of, or constitute a default under, or constitute an
event which, with notice or lapse of time, or both, would become a default
under,
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or result in the creation of any encumbrance upon any asset of Datalinc under,
or create any rights of termination, cancellation or acceleration in any person
under, any Datalinc Contract.
3.12 DISCLOSURE SCHEDULE COMPLETE. Datalinc shall promptly supplement the
Disclosure Schedule if events occur prior to the Closing Date that would have
been required to be disclosed had they existed at the time of executing this
Agreement. The Disclosure Schedule, as supplemented prior to the Closing Date,
will contain a true, correct and complete list and description of all items
required to be set forth therein. The Disclosure Schedule, as supplemented
prior to the Closing Date, is expressly incorporated herein by reference.
Notwithstanding the foregoing, any such supplement to the Disclosure Schedule
following the date hereof shall not in any way affect Thrucomm's right not to
consummate the transactions contemplated hereby as set forth in Section 7.1
hereof
3.13 EMPLOYEES. Except as set forth in the Disclosure Schedule, none of
the employees of Datalinc is represented by any labor union or collective
bargaining unit and, to the knowledge of Datalinc, no discussions are
taking place with respect to such representation.
3.14 FINANCIAL STATEMENTS. Insert revise To its knowledge, the Disclosure
Schedule contains audited balance sheets as of December 3 1, insert and
related statements of operations, statements of cash flows and statements
of partner' equity of Datalinc for the one-year periods ended December 3 1,
insert, and December 3 1, insert and compiled balance sheets as of
March 31, 1997, and related statements of operations, statements of cash
flows and statement of partners' equity for the three-month period ended June
30, 1997 (collectively, the "Financial Statements"). The Financial Statements
present fairly, in all respects, the financial position and results of
operations of Datalinc as of the dates and periods indicated, prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP"1). Without limiting the generality of the foregoing, (i) there is no
basis for any assertion against Datalinc as of the date of the Financial
Statements of any material debt, liability or obligation of any nature not fully
reflected or reserved against in the Financial Statements; and (ii) there are no
assets of Datalinc as of the date of the Financial Statements, the value of
which is overstated in the Financial Statements. Except as disclosed in the
Financial Statements, Datalinc does not have any known contingent liabilities
(including liabilities for Taxes), forward or long-term commitments or
unrealized or anticipated losses from unfavorable commitments other than in the
ordinary course of business. Datalinc is not a party to any contract or
agreement for the forward purchase or sale of any foreign currency that is
material to Datalinc taken as a whole.
3.15 ABSENCE OF CERTAIN CHANGES OR EVENTS CHANGES OR EVENTS. Except as
set forth in the Disclosure Schedule, since December 31, 1996, there
has not been:
(a) any material adverse change in the financial condition,
properties, assets, liabilities or business or a decrease in net worth of
Datalinc;
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(b) any material damage, destruction or loss of any material
properties of Datalinc, whether or not covered by insurance;
(c) any material change in the manner in which the business of
Datalinc has been conducted, including, without limitation, collection of
accounts receivable and payment of accounts receivable;
(d) any change in the accounting principles, methods or practices
or any change in the depreciation or amortization policies or rates
utilized by Datalinc,
(e) any voluntary or involuntary sale, assignment, abandonment,
surrender, termination, transfer, license or other disposition, of any kind or
nature, of any property or fight (including without limitation any equipment,
office equipment, accounts receivable, intangible assets, business records or
Datalinc Contracts, excepting only transfers in accordance with past practices
or collection of accounts receivable in the ordinary course of business;
(f) any material change in the treatment and protection of trade
secrets or other confidential information of Datalinc;
(g) any material change in the business or contractual relationship of
Datalinc with any customer or supplier which might reasonably be expected to
materially and adversely affect the business or prospects of Datalinc;
(h) any strike, material grievance proceeding or other labor dispute,
any union organizational activity or other occurrence, event or condition of
any similar character which might reasonably be expected to adversely affect
the business of Datalinc;
(i) any loan or advance by Datalinc to any party other than credit
extended to clients in the ordinary course of business as previously
conducted;
(j) any incurrence by Datalinc of debts, liabilities or obligations
of any nature whether accrued, absolute, contingent, direct, indirect or
inchoate, or otherwise, and whether due or to become due, except:
(i) current liabilities incurred for services rendered in
the ordinary course of Datalinc's business and entered into at arms'
length;
(ii) obligations incurred in the ordinary course of
Datalinc's business entered into at arms' length;
(iii) liabilities on account of taxes and governmental
charges, but not penalties, interest or fines in respect thereof,
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(iv) obligations or liabilities incurred by virtue of the
execution of this Agreement; or
(v) liabilities pursuant to the litigation listed in the
Disclosure Schedule; or
(k) any agreement by Datalinc, whether written or oral, to do
any of the foregoing; and
(l) any occurrence not included in paragraphs (a) through (k) of
this Section 3.15 which has resulted, or which Datalinc have reason to
believe, in their reasonable judgment, might be expected to result, in a
material adverse change in the business or prospects of Datalinc.
3.16 GOVERNMENTAL LICENSES, PERMITS, ETC. To its knowledge, Datalinc has
all governmental licenses, permits, authorizations and approvals necessary
for the conduct of its business as currently conducted ("Licenses and Permits").
The Disclosure Schedule includes a list of all Licenses and Permits. All
Licenses and Permits are in full force and effect, and no proceedings for the
suspension or cancellation of any thereof is pending or threatened.
3.17 EMPLOYEE AGREEMENTS.
(a) For purposes of this Agreement, the following
definitions apply:
(1) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and any regulations promulgated thereunder.
(2) "Multi-employer Plan" means a plan, as defined in ERISA
Section 3(37), to which either Datalinc contributes or is required to
contribute.
(3) "Employee Plan" means any pension, retirement, profit
sharing, deferred compensation, vacation, bonus, incentive, medical, vision,
dental, disability, life insurance or any other employee benefit plan as defined
in Section 3(3) of ERISA other than a Multi-employer Plan to which either
Datalinc contributes, sponsors, maintains or otherwise is bound to with regard
to any benefits on behalf of the employees of Datalinc.
(4) "Employee Pension Plan" means any Employee Plan for the
provision of retirement income to employees or which results in the deferral of
income by employees extending to the termination of covered employment or beyond
as defined in Section 3(2) of ERISA.
(5) "Employee Welfare Plan" means any Employee Plan other
than an Employee Pension Plan.
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(6) "Compensation Arrangement" means any plan or compensation
arrangement other than an Employee Plan, whether written or unwritten, which
provides to employees of Datalinc, former employees, officers, directors or
stockholders of Datalinc any compensation or other benefits, whether deferred or
not, in excess of base salary or wages, including, but not limited to, any bonus
or incentive plan, stock rights plan, deferred compensation arrangement, life
insurance, stock purchase plan, severance pay plan and any other employee fringe
benefit plan.
(b) The Disclosure Schedule hereto lists, all (1) employment
agreements and collective bargaining agreements to which Datalinc is a party;(2)
Compensation Arrangements of Datalinc; (3) Employee Welfare Plans; (4) Employee
Pension Plans; and (5) consulting agreements under which Datalinc has or may
have any monetary obligations to employees or consultants, of Datalinc or its
beneficiaries or legal representatives or under which any such persons may have
any rights. Datalinc has previously made available to Thrucomm true and complete
copies of all of the foregoing employment contracts, collective bargaining
agreements, Employee Plans and Compensation Arrangements, including descriptions
of any unwritten contracts, agreements, Compensation Arrangements or Employee
Plans, as amended to date. In addition, with respect to any Employee Plan which
continues after the Closing Date, Datalinc has previously delivered or made
available to Thrucomm (1) any related trust agreements, master trust agreements,
annuity contracts or insurance contracts; (2) certified copies of all Partners'
consents adopting such plans and trust documents and amendments thereto; (3)
current investment management agreements; (4) custodial agreements; (5)
fiduciary liability insurance policies; (6) indemnification agreements; (7) the
most recent determination letter (and underlying application thereof and
correspondence and supplemental material related thereto) issued by the Internal
Revenue Service with respect to the qualification of each Employee Plan under
the provisions of Section 401 (a) of the Code; (8) copies of all "advisory
opinion letters," "private letter rulings," "no action letters," and any similar
correspondence (and the underlying applications therefor and correspondence and
supplemental material related thereto) that was issued by any governmental or
quasi-governmental agency with respect to the last plan year, (9) Annual Reports
(Form 5500 Series) and Schedules A and B thereto for the last plan year; (10)
all actuarial reports prepared for the last plan year; (I 1) all certified
Financial Statements for the last plan year; and (12) all current Summary Plan
Descriptions, Summaries of Material Modifications and Summary Annual Reports.
All documents delivered by Datalinc to Thrucomm as photocopies faithfully
reproduce the originals thereof, such originals are authentic and were, to the
extent execution was required, duly executed.
(c) Except as otherwise disclosed in the Disclosure Schedule:
(1) Each Employee Plan and Compensation Arrangement, to the
knowledge of Datalinc, currently substantially complies and has substantially
complied in the past, both as to form and operation, with their terms and with
the provisions of ERISA, the Code, the Age Discrimination in Employment Act
and all other applicable federal or state laws, rules and regulations. Each
Employee Plan and Compensation Arrangement has been administered to date in
substantial compliance with the requirements of ERISA and the Code, and all
reporting and disclosure requirements by any governmental agency have been
timely filed and substantially complied with.
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(2) With respect to any Multi-employer Plan (within the meaning
of Section 3(37) of the ERISA) Datalinc (under the terms of Section 414(b) or
(c) of the Code) are not required to make any contribution thereto.
(3) To the knowledge of Datalinc, the Employee Pension Plans, to
the extent they are intended to be tax-qualified, satisfy all coverage and
minimum participation requirements, if any, imposed on such Employee Plans by
the applicable terms of the Code and ERISA.
(4) Datalinc is not aware of any failures to provide
continuation coverage, as defined in Section 498OB(l) of the Code, to any
such qualified beneficiaries.
(5) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of Datalinc, which could
reasonably be expected to be asserted against any Employee Plan or Compensation
Arrangement or the assets of any such Plan. None of the Employee Plans or
Compensation Arrangements, to the knowledge of Datalinc, currently is the
subject of any audit, investigation or examination by any governmental or
quasi-governmental agency, nor is Datalinc aware of the existence of any facts
that would lead it to believe that any such audit, investigation or examination
is pending or threatened.
(6) Except as described in the Disclosure Schedule, Datalinc does
not sponsor, maintain or contribute to any Employee Plan or Compensation
Arrangement that provides retiree medical or retiree life insurance coverage to
former employees of Datalinc.
(7) With respect to each Employee Plan, except as set forth in
the Disclosure Schedule:
(i) each Employee Pension Plan and each amendment
thereto is qualified under the Code and has received favorable determination
letters with regard thereto or is based on a prototype plan which has received a
favorable determination letter;
(ii) the Financial Statements reflect all of the
employee benefit liabilities of Datalinc in a manner satisfying the
requirements of SFAS 87 and 88;
(iii) to the knowledge of Datalinc, Datalinc has not,
with respect to any Employee Plan, engaged in a prohibited transaction, as such
term is defined in Code Section 4975 or ERISA Section 406, which would subject
Datalinc or Thrucomm to any taxes, penalties or other liabilities resulting from
prohibited transactions under Code Section 4975 or under ERISA Section 409 or
502(i);
(iv) to the knowledge of Datalinc, no event has
occurred and no condition exists that would subject Datalinc or Thrucomm to any
tax under Code Section 4971, 4972, 4976, 4977 or 4979 or a fine under ERISA
Section 502(c);
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(v) to the knowledge of Datalinc, Datalinc have
complied in all material respects with the reporting and disclosure
requirements of ERISA;
(vi) all insurance premiums, including PBGC premiums,
required pursuant to the Employee Plans as of the Closing Date have been or
will be paid;
(vii) Datalinc has or will have, as of the Closing
Date, made all contributions or payments (including funding for any past service
liabilities) to or under such Employee Plans required by law or by the terms of
such Plans or any contracts or agreements. To the knowledge of Datalinc, the
aggregate current value of all vested accrued benefits under all Employee Plans
does not exceed the aggregate current value of all assets of such plans
allocable to such accrued benefits; and
(viii) to the knowledge of Datalinc, Datalinc have performed
substantially all obligations required to be performed by it under each plan or
arrangement under each Employee Plan and Compensation Arrangement and it is not
in default or in violation of, and has no knowledge of any such default or
violation by any other party to any substantial provision of, any and all such
plans or arrangements.
(8) Notwithstanding anything contained herein to the contrary, all
obligations of Datalinc with respect to any Employee Plans of Datalinc shall be
terminated as of the date of the Closing. Further, Datalinc shall indemnify and
hold harmless Thrucomm of and from any losses or liabilities accruing to
Thrucomm arising out of or in any way related to Datalinc's Employee Plans.
3.18 KEY MAN LIFE INSURANCE. The parties acknowledge that the insured
persons reflected on those certain key man life insurance policies reflected on
Schedule 3.18 of this Agreement shall have the fight to have such policies
assigned to them at their own discretion, cost and expense.
3.19 BROKERS. Datalinc shall indemnify and hold Thrucomm harmless from
any claim by any broker or other person for commissions or other compensation
for bringing about the transactions contemplated hereby, where such claim is
based on the purported employment or authorization of such broker or other
person by Datalinc.
3.20 BUSINESS LOCATIONS. Datalinc does not own or lease any real or
personal property in any state except as set forth in the Disclosure Schedule.
Datalinc have no places of business (including, without limitation Datalinc's
executive offices or places where Datalinc's books and records are kept) except
as otherwise set forth in the Disclosure Schedule.
3.21 INTELLECTUAL PROPERTY. The Disclosure Schedule lists all of the
Intellectual Property (as hereinafter defined) used by Datalinc which
constitutes a material patent, trade name, trademark, service mark or
application for any of the foregoing. "Intellectual"
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Property" means all of Datalinc's right, title and interest in and to all
patents, trade names, assumed names, trademarks, service marks, and proprietary
names, copyrights (including any registration and pending applications for any
such registration for any of them), together with all the goodwill relating
thereto and all other intellectual property of Datalinc. Other than as disclosed
in the Disclosure Schedule, Datalinc does not have any licenses granted by or to
it or other agreements to which it is a party, relating in whole or in part to
any Intellectual Property, whether owned by Datalinc or otherwise. All of the
patents, trademark registrations and copyrights listed in the Disclosure
Schedule that are owned by Datalinc are valid and in full force and effect. To
the knowledge of Datalinc, it is not infringing upon, or otherwise violating,
the rights of any third party with respect to any Intellectual Property. No
proceedings have been instituted against or claims received by Datalinc, nor to
its knowledge are any proceedings threatened alleging any such vacation, nor
does Datalinc know of any valid basis for any such proceeding or claim. To the
knowledge of Datalinc, there is no infringement or other adverse claim against
any of the Intellectual Property owned or used by Datalinc. To the knowledge of
Datalinc, the use of software by Datalinc does not violate or otherwise infringe
upon the fights of any third party.
3.22 WARRANTIES. The Disclosure Schedule sets forth a true and complete
list of the forms of all express warranties and guaranties made by Datalinc to
third parties with respect to any services rendered by Datalinc.
3.23 CLIENTS AND SUPPLIERS. Except as set forth in the Disclosure Schedule
Datalinc does not know and has no reason to believe that, either as a result of
the transactions contemplated hereby or for any other reason (exclusive of
expiration of a contract upon the passage of time), any present material client
or supplier of Datalinc will not continue to conduct business with Datalinc
after the Closing Date in substantially the same manner as it has conducted
business prior thereto.
3.24 ACCOUNTS RECEIVABLE. The accounts receivable reflected on the balance
sheets included in the Financial Statements, or thereafter acquired by Datalinc,
consist, in the aggregate in all material respects and 90% of such items which
are collectible in the ordinary and usual course of business.
3.25 GOVERNMENTAL APPROVALS. To its knowledge, other than as set forth
herein, no authorization, license, permit, franchise, approval, order or
consent of, and no registration, declaration or filing by Datalinc with,
any governmental authority, federal, state or local, is required in connection
with Datalinc's execution, delivery and performance of this Agreement.
3.26 NO OMISSIONS OR UNTRUE STATEMENTS. To its knowledge, no representation
or warranty made by Datalinc to Thrucomm in this Agreement or in any
certificate of the Datalinc General Partner required to be delivered to
Thrucomm pursuant to the terms of this Agreement contains or will contain any
untrue statement of a material fact, or omits or will out to state a material
fact necessary
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to make the statements contained herein or therein not misleading as of the date
hereof and as of the Closing Date.
IV. REPRESENTATIONS AND WARRANTIES OF FASTCOM
Fastcom represents and warrants to Thrucomm as follows, with the knowledge and
understanding that Thrucomm is relying materially upon such representations and
warranties
4.1 ORGANIZATION AND STANDING. Fastcom is a limited partnership duly
organized, validly existing and in good standing under the laws of the State
of Florida. Fastcom has all requisite power to carry on its business as it
is now being conducted and is duly qualified to do business as a foreign
limited partnership and is in good standing in each jurisdiction
where such qualification is necessary under applicable law, except where the
failure to qualify (individually or in the aggregate) does not have any material
adverse effect on the assets, business or financial condition of Fastcom, and
all states in which Fastcom is qualified to do business as of the date hereof,
are listed in the Disclosure Schedule. A copy of the Certificate of Limited
Partnership of Fastcom (certified by the Secretary of State of Florida), and the
Agreement of Limited Partnership, as amended to date, delivered to Datalinc and
Thrucomm, are true and complete copies of these documents as now in effect.
Except as otherwise set forth in the Disclosure Schedule, Fastcom does not own
any interest in any other corporation, business trust or similar entity. The
minute books of Fastcom contains accurate records of all meetings of its
Partners since its formation.
4.2 CAPITALIZATION. The number of Partnership Units which are issued and
outstanding are as set forth in the Disclosure Schedule. All of such Units are
duly authorized, validly issued and outstanding, fully paid and nonassessable,
and owned of record and beneficially by the Fastcom Distributees, in such
amounts as are set forth opposite their respective names thereon, and were not
issued in violation of the preemptive rights of any person. There are no
subscriptions, options, warrants, rights or calls or other commitments
or agreements to which the Fastcom Distributees, or, to the Fastcom
Distributees' knowledge, are a party or by which any of them is bound, calling
for any issuance, transfer, sale or other disposition of any class of securities
of Fastcom. There are no outstanding securities convertible or exchangeable,
actually or contingently, into Partnership Units or any other securities of
Fastcom. Fastcom has no subsidiaries except Thrucomm.
4.3 AUTHORITY. This Agreement constitutes, and all other
agreements contemplated hereby will constitute, when executed and delivered by
Fastcom in accordance therewith (and assuming due execution and delivery by the
other parties hereto), the valid and binding obligation of Fastcom, enforceable
in accordance with their respective terms, subject to general principles of
equity and bankruptcy or other laws relating to or affecting the rights of
creditors generally.
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4.4 PROPERTIES. Except as set forth in the Disclosure Schedule,
Fastcom has good title to all of the assets and properties which it
purports to own as reflected on the balance sheet included in the Financial
Statements (as hereinafter defined), or thereafter acquired. Fastcom has a valid
leasehold interest in all material property of which it is the lessee and each
such lease is valid, binding and enforceable against Fastcom and, to the
knowledge of Fastcom, the other parties thereto in accordance with its terms.
Neither Fastcom nor the other parties thereto are in material default in the
performance of any material provisions thereunder. Neither the whole nor any
material portion of the assets of Fastcom is subject to any governmental decree
or order to be sold or is being condemned, expropriated or otherwise taken by
any public authority with or without payment of compensation therefor, nor, to
the knowledge of Fastcom, has any such condemnation, ex-propriation or taking
been proposed. None of the assets of Fastcom is subject to any restriction which
would prevent continuation of the use currently made thereof or materially
adversely affect the value thereof
4.5 CONTRACTS LISTED; NO DEFAULT. All contracts, agreements, licenses,
leases, easements, permits, rights of way, commitments, and understandings,
written or oral, connected with or relating in any respect to present
or proposed future operations of Fastcom (except employment or other
agreements terminable at will and other agreements which, in the aggregate,
are not material to the business, properties or prospects of Fastcom and
except governmental licenses, permits, authorizations, approvals and
other matters referred to in Section 4.16), which would be required to be listed
as exhibits to an Annual Report on Form 10-K if Fastcom were subject to the
reporting requirements of the Exchange Act (individually, the "Fastcom Contract"
and collectively, the "Fastcom Contracts"), are listed and described in the
Disclosure Schedule. Fastcom is the holder of, or party to, all of the Fastcom
Contracts. To the knowledge of Fastcom, the Fastcom Contracts are valid, binding
and enforceable by the signatory thereto against the other parties thereto in
accordance with their terms. Neither Fastcom nor any signatory thereto is in
default or breach of any material provision of the Fastcom Contracts. Fastcom's
operation of its business has been, is, and will, between the date hereof and
the Closing Date (as hereinafter defined), continue to be, consistent with the
material terms and conditions of the Fastcom Contracts. Subsequent to the
consummation of the Reorganization, Fastcom shall use its best efforts to cause
the transfer and otherwise assign for the benefit of Thrucomm, the Fastcom
Contracts.
4.6 LITIGATION. Except as disclosed in the Disclosure Schedule,
there is no claim, action, proceeding or investigation pending or
threatened against or affecting Fastcom before or by any court, arbitrator or
governmental agency or authority which, in the reasonable judgment of Fastcom,
could have any materially adverse effect on Fastcom. There are no decrees,
injunctions or orders of any court, governmental department, agency or
arbitration outstanding against Fastcom.
4.7 TAXES. For purposes of this Agreement, (A) "Tax" (and, with
correlative meaning, "Taxes") shall mean any federal, state, local or foreign
income, alternative or add-on minimum, business, employment, franchise,
occupancy, payroll, property, sales, transfer, use,
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value added, withholding or other tax, levy, impost, fee, imposition, assessment
or similar charge, together with any related addition to tax, interest, penalty
or fine thereon'. and (B) "Returns" shall mean all returns (including, without
limitation, information returns and other material information), reports and
forms relating to Taxes or to any benefit plans.
Fastcom has duly filed all Returns required by any law or regulation to be filed
by it, except for extensions duly obtained. All such Returns were, when filed,
and to the knowledge of Fastcom are, accurate and complete in all material
respects and were prepared in confomity with applicable laws and regulations in
all material respects. Fastcom has paid or will pay in full or has adequately
reserved against all Taxes otherwise assessed against it through the Closing
Date (as hereinafter defined), and the assessment of any material amount of
additional Taxes in excess of those paid and reported is not reasonably
expected.
Fastcom is not a party to any pending action or proceeding by any governmental
authority for the assessment of any Tax, and no claim for assessment or
collection of any Tax has been asserted against Fastcom that has not been paid.
There are no Tax liens upon the assets (other than the lien of property taxes
not yet due and payable) of Fastcom. There is no valid basis, to the knowledge
of Fastcom except as set forth in the Disclosure Schedule, for any assessment,
deficiency, notice, 30-day letter or similar intention to assess any Tax to be
issued to Fastcom by any governmental authority.
4.8 COMPLIANCE WITH LAWS AND REGULATIONS. To its knowledge, Fastcom
is in compliance, in all material respects, with all laws, rules, regulations,
orders and requirements (federal, state and local) applicable to it in all
jurisdictions where the business of Fastcom is currently conducted or to which
Fastcom is currently subject which have a material impact on Fastcom,
including, without limitation, all applicable civil rights and equal
opportunity employment laws and regulations, and all state and federal
antitrust, antimonopolies and fair trade practice laws and the Federal
Occupational Health and Safety Act. Fastcom does not know of any
assertion by any party that it is in violation of any such laws, rules,
regulations, orders, restrictions or requirements with respect to its current
operations, and no notice in that regard has been received by Fastcom. To the
knowledge of Fastcom there is not presently pending any proceeding, hearing or
investigation with respect to the adoption of amendments or modifications to
existing laws, rules, regulations, orders, restrictions or requirements which,
if adopted, would materially adversely affect the current operations of Fastcom.
4.9 INSURANCE. Fastcom is covered by insurance policies as
identified and described in the Disclosure Schedule or Schedule 4.9, adequate,
in the reasonable opinion of the Fastcom, to cover Fastcom against loss, damage
and liability and will maintain such insurance up to and including the Closing
Date (as hereinafter defined). Fastcom has not received notice from any insurer
or agent of such insurer that improvements or expenditures will have to be made
in order to continue such insurance and, so far as known to Fastcom, no such
improvements or expenditures are required (other than premium payments). There
is no liability under any insurance policy in nature of a retroactive rate
adjustment or loss sharing or similar arrangement except as set
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forth in the Disclosure Schedule.
4.10 CONDITION OF ASSETS. The equipment, fixtures and other personal
property of Fastcom, taken as a whole, is in good operating condition and
Repair (ordinary wear and tear excepted) for the conduct of the business of
Fastcom as presently being conducted.
4.11 NO BREACHES. To its knowledge, the making and performance of this
Agreement and the other agreements contemplated hereby by Fastcom will not (i)
conflict with or violate the Certificate of Limited Partnership or Agreement of
Limited Partnership of Fastcom; (ii) violate any material laws, ordinances,
rules or regulations, or any order, writ, injunction or decree to which Fastcom
is a party or by which Fastcom or any of its assets, business, or operations may
be bound or affected; or (iii) result in any breach or termination of, or
constitute a default under, or constitute an event which, with notice or lapse
of time, or both, would become a default under, or result in the creation of any
encumbrance upon any asset of Fastcom under, or create any rights of
termination, cancellation or acceleration in any person under, any Fastcom
Contract.
4.12 DISCLOSURE SCHEDULE COMPLETE. Fastcom shall promptly supplement the
Disclosure Schedule if events occur prior to the Closing Date that would have
been required to be disclosed had they existed at the time of executing
this Agreement. The Disclosure Schedule, as supplemented prior to the
Closing Date, will contain a true, correct and complete list and
description of all items required to be set forth therein. The Disclosure
Schedule, as supplemented prior to the Closing Date, is expressly incorporated
herein by reference. Notwithstanding the foregoing, any such supplement to
the Disclosure Schedule following the date hereof shall not in any way
affect Thrucomm's right not to consummate the transactions
contemplated hereby as set forth in Article VII hereof
4.13 EMPLOYEES. Except as set forth in the Disclosure Schedule, none of
the employees of Fastcom is represented by any labor union or collective
bargaining unit and, to the knowledge of Fastcom, no discussions are taking
place with respect to such representation.
4.14 FINANCIAL STATEMENTS. Insert revise To its knowledge, the Disclosure
Schedule contains audited balance sheets as of December 3 1, insert and related
statements of operations, statements of cash flows and statements of partner'
equity of Fastcom for the one-year periods ended December 3 1, insert, and
December 3 1, insert and compiled balance sheets as of March 31, 1997, and
related statements of operations, statements of cash flows and statement of
partners' equity for the three-month period ended June 30, 1997 (collectively,
the "Financial Statements"). The Financial Statements present fairly, in all
respects, the financial position and results of operations of Fastcom as of the
dates and periods indicated, prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP" 1). Without limiting the
generality of the foregoing, (i) there is no basis for any assertion against
Fastcom as of the date of the Financial Statements of any material debt,
liability or obligation of any nature not fully reflected or reserved against in
the Financial Statements; and (ii) there are no assets of Fastcom as of the date
of
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the Financial Statements, the value of which is overstated in the Financial
Statements. Except as disclosed in the Financial Statements, Fastcom does not
have any known contingent liabilities (including liabilities for Taxes), forward
or long-term commitments or unrealized or anticipated losses from unfavorable
commitments other than in the ordinary course of business. Fastcom is not a
party to any contract or agreement for the forward purchase or sale of any
foreign currency that is material to Fastcom taken as a whole.
4.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
disclosure Schedule, since December 31,1996, there has not been:
(a) any material adverse change in the financial condition,
properties, assets, liabilities or business or a decrease in net worth of
Fastcom;
(b) any material damage, destruction or loss of any material
properties of Fastcom, whether or not covered by insurance;
(c) any material change in the manner in which the business of
Fastcom has been conducted, including, without limitation, collection
of accounts receivable and payment of accounts receivable;
(d) any change in the accounting principles, methods or practices or
any change in the depreciation or amortization policies or rates utilized by
Fastcom;
(e) any voluntary or involuntary sale, assignment, abandonment,
surrender, termination, transfer, license or other disposition, of any kind
or nature, of any property or right (including, without limitation, any
equipment office equipment, accounts receivable, intangible assets, business
records or Fastcom Contracts, excepting only transfers in accordance
with past practices or collection of accounts receivable in the ordinary
course of business;
(f) any material change in the treatment and protection of trade
secrets or other confidential information of Fastcom;
(g) any material change in the business or contractual relationship of
Fastcom with any customer or supplier which might reasonably be expected to
materially and adversely affect the business or prospects of Fastcom;
(h) any strike, material grievance proceeding or other labor dispute,
any union organizational activity or other occurrence, event or condition of any
similar character which might reasonably be expected to adversely affect the
business of Fastcom;
(i) any loan or advance by Fastcom to any party other than credit
extended to clients in the ordinary course of business as previously conducted;
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(j) any incurrence by Fastcom of debts, liabilities or obligations of
any nature whether accrued, absolute, contingent, direct, indirect or inchoate,
or otherwise, and whether due or to become due, except:
(i) current liabilities incurred for services rendered in the
ordinary course of Fastcom's business and entered into at arms' length;
(ii) obligations incurred in the ordinary course of Fastcom's
business entered into at arms' length;
(iii) liabilities on account of taxes and governmental charges, but
not penalties, interest or fines in respect thereof,
(iv) obligations or liabilities incurred by virtue of the
execution of this Agreement; or
(v) liabilities pursuant to the litigation listed in the
Disclosure Schedule; or
(k) any agreement by Fastcom, whether written or oral, to do any of
the foregoing; and
(l) any occurrence not included in paragraphs (a) through (k) of this
Section 4.15 which has resulted, or which Fastcom have reason to believe, in
their reasonable judgment, might be expected to result, in a material adverse
change in the business or prospects of Fastcom.
4.16 GOVERNMENTAL LICENSES, PERMITS, ETC. To its knowledge, Fastcom has
all governmental licenses, permits, authorizations and approvals necessary
for the conduct of its business as currently conducted ("Licenses and
Permits"). The Disclosure Schedule includes a list of all Licenses and Permits.
All Licenses and Permits are in full force and effect, and no proceedings for
the suspension or cancellation of any thereof is pending or threatened.
4.17 EMPLOYEE AGREEMENTS.
(a) For purposes of this Agreement, the following definitions apply:
(1) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and any regulations promulgated thereunder.
(2) "Multi-employer Plan" means a plan, as defined in ERISA
Section 3(37), to which either Fastcom contributes or is required to contribute.
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(3) "Employee Plan" means any pension, retirement, profit
sharing, deferred compensation, vacation, bonus, incentive, medical, vision,
dental, disability, life insurance or any other employee benefit plan as defined
in Section 3(3) of ERISA other than a Multi-employer Plan to which either
Fastcom contributes, sponsors, maintains or otherwise is bound to with regard to
any benefits on behalf of the employees of Fastcom.
(4) "Employee Pension Plan" means any Employee Plan for the
provision of retirement income to employees or which results in the deferral of
income by employees extending to the termination of covered employment or beyond
as defined in Section 3(2) of ERISA.
(5) "Employee Welfare Plan" means any Employee Plan other than
an Employee Pension Plan.
(6) "Compensation Arrangement" means any plan or compensation
arrangement other than an Employee Plan, whether written or unwritten, which
provides to employees of Fastcom, former employees, officers, directors or
stockholders of Fastcom any compensation or other benefits, whether deferred or
not in excess of base salary or wages, including, but not limited to, any bonus
or incentive plan stock rights plan, deferred compensation arrangement, life
insurance, stock purchase plan, severance pay plan and any other employee fringe
benefit plan.
(b) The Disclosure Schedule hereto lists, all (1) employment agreements and
collective bargaining agreements to which Fastcom is a party; (2) Compensation
Arrangements of Fastcom; (3) Employee Welfare Plans; (4) Employee Pension Plans;
and (5) consulting agreements under which Fastcom has or may have any monetary
obligations to employees or consultants of Fastcom or its beneficiaries or legal
representatives or under which any such persons may have any rights. Fastcom has
previously made available to Thrucomm true and complete copies of all of the
foregoing employment contracts, collective bargaining agreements, Employee Plans
and Compensation Arrangements, including descriptions of any unwritten
contracts, agreements, Compensation Arrangements or Employee Plans, as amended
to date. In addition, with respect to any Employee Plan which continues after
the Closing Date, Fastcom has previously delivered or made available to Thrucomm
(1) any related trust agreements, master trust agreements, annuity contracts or
insurance contracts; (2) certified copies of all Partners' consents adopting
such plans and trust documents and amendments thereto; (3) current investment
management agreements; (4) custodial agreements; (5) fiduciary liability
insurance policies; (6) indemnification agreements; (7) the most recent
determination letter (and underlying application thereof and correspondence and
supplemental material related thereto) issued by the Internal Revenue Service
with respect to the qualification of each Employee Plan under the provisions of
Section 401 (a) of the Code; (8) copies of all "advisory opinion letters,"
"private letter rulings," "no action letters," and any similar correspondence
(and the underlying applications therefor and correspondence and supplemental
material related thereto) that was issued by any governmental or
quasi-govemmental agency with respect to the last plan year; (9) Annual Reports
(Form 5500 Series) and Schedules A and B thereto for the last plan year; (10)
all actuarial reports prepared for the last plan year; (11) all certified
Financial Statements for the last plan year; and (12) all current Summary Plan
Descriptions, Summaries of Material Modifications and Summary Annual Reports.
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All documents delivered by Fastcom to Thrucomm as photocopies faithfully
reproduce the originals thereof such originals are authentic and were, to the
extent execution was required, duly executed.
(c) Except as otherwise disclosed in the Disclosure Schedule:
(1) Each Employee Plan and Compensation Arrangement, to the
knowledge of Fastcom, currently substantially complies and has substantially
complied in the past, both as to form and operation, with their terms and with
the provisions of ERISA, the Code, the Age Discrimination in Employment Act and
all other applicable federal or state laws, rules and regulations. Each Employee
Plan and Compensation Arrangement has been administered to date in substantial
compliance with the requirements of ERISA and the Code, and all reporting and
disclosure requirements by any governmental agency have been timely filed and
substantially complied with.
(2) With respect to any Multi-employer Plan (within the
meaning of Section 3(37) of the ERISA) Fastcom (under the terms of Section
414(b) or (c) of the Code) are not required to make any contribution thereto.
(3) To the knowledge of Fastcom, the Employee Pension Plans,
to the extent they are intended to be tax-qualified, satisfy all coverage and
minimum participation requirements, if any, imposed on such Employee Plans by
the applicable terms of the Code and ERISA.
(4) Fastcom is not aware of any failures to provide
continuation coverage, as defined in Section 498OB(l) of the Code, to any such
qualified beneficiaries.
(5) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of Fastcom, which could
reasonably be expected to be asserted against any Employee Plan or Compensation
Arrangement or the assets of any such Plan. None of the Employee Plans or
Compensation Arrangements, to the knowledge of Fastcom, currently is the subject
of any audit, investigation or examination by any governmental or
quasi-governmental agency, nor is Fastcom aware of the existence of any facts
that would lead them to believe that any such audit, investigation or
examination is pending or threatened.
(6) Except as described in the Disclosure Schedule, Fastcom
does not sponsor, maintain or contribute to any Employee Plan or Compensation
Arrangement that provides retiree medical or retiree life insurance coverage to
former employees of Fastcom.
(7) With respect to each Employee Plan, except as set forth in
the Disclosure Schedule:
(i) each Employee Pension Plan and each amendment thereto
is qualified under the Code and has received favorable determination letters
with regard thereto or is
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based on a prototype plan which has received a favorable determination letter;
(ii) the Financial Statements reflect all of the employee
benefit liabilities of Fastcom in a manner satisfying the requirements of SFAS
87 and 88;
(iii) to the knowledge of Fastcom, Fastcom has not, with
respect to any Employee Plan, engaged in a prohibited transaction, as such term
is defined in Code Section 4975 or ERISA Section 406, which would subject
Fastcom or Thrucomm to any taxes, penalties or other liabilities resulting from
prohibited transactions under Code Section 4975 or under ERISA Section 409 or
502(i);
(iv) to the knowledge of Fastcom, no event has occurred and
no condition exists that would subject Fastcom or Thrucomm to any tax under Code
Section 4971, 4972, 4976, 4977 or 4979 or a fine under ERISA Section 502(c)-,
(v) to the knowledge of Fastcom, Fastcom have complied in
all material respects with the reporting and disclosure requirements of ERISA;
(vi) all insurance premiums, including PBGC premiums,
required pursuant to the Employee Plans as of the Closing Date have been or will
be paid;
(vii) Fastcom has or will have, as of the Closing Date, made
all contributions or payments (including funding for any past service
liabilities) to or under such Employee Plans required by law or by the terms of
such Plans or any contracts or agreements. To the knowledge of Fastcom, the
aggregate current value of all vested accrued benefits under all Employee Plans
does not exceed the aggregate current value of all assets of such plans
allocable to such accrued benefits; and
(viii) to the knowledge of Fastcom, Fastcom have performed
substantially all obligations required to be performed by it under each plan or
arrangement under each Employee Plan and Compensation Arrangement and it is not
in default or in violation of, and has no knowledge of any such default or
violation by any other party to any substantial provision of, any and all such
plans or arrangements.
(8) Notwithstanding anything contained herein to the contrary,
all obligations of Fastcom with respect to any Employee Plans of Fastcom shall
be terminated as of the date of the Closing. Further, Fastcom shall indemnify
and hold harmless Thrucomm of and from any losses or liabilities accruing to
Thrucomm arising out of or in any way related to Fastcom's Employee Plans.
4.18 KEY MAN LIFE INSURANCE. The parties acknowledge that the insured
persons reflected on those certain key man life insurance policies reflected on
Schedule 4.18 of this Agreement shall have the fight to have such policies
assigned to them, at their own discretion, cost and expense
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4.19 BROKERS. Fastcom shall indemnify and hold Thrucomm harmless from
any claim by any broker or other person for commissions or other compensation
for bringing about the transactions contemplated hereby, where such claim is
based on the purported employment or authorization of such broker or other
person by Fastcom.
4.20 BUSINESS LOCATIONS. Fastcom does not own or lease any real or
personal property in any state except as set forth in the Disclosure Schedule.
Fastcom have no places of business (including, without limitation Fastcom's
executive offices or places where Fastcom's books and records are kept) except
as otherwise set forth in the Disclosure Schedule.
4.21 INTELLECTUAL PROPERTY. The Disclosure Schedule fists all of the
Intellectual Property (as hereinafter defined) used by Fastcom which constitutes
a material patent, trade name, trademark, service mark or application for any of
the foregoing. "Intellectual Property" means all of Fastcom's right, title and
interest in and to all patents, trade names, assumed names, trademarks, service
marks, and proprietary names, copyrights (including any registration and pending
applications for any such registration for any of them), together with all the
goodwill relating thereto and all other intellectual property of Fastcom. Other
than as disclosed in the Disclosure Schedule, Fastcom does not have any licenses
granted by or to it or other agreements to which it is a party, relating in
whole or in part to any Intellectual Property, whether owned by Fastcom or
otherwise. All of the patents, trademark registrations and copyrights listed in
the Disclosure Schedule that are owned by Fastcom are valid and in full force
and effect. To the knowledge of Fastcom, it is not infringing upon, or otherwise
violating, the rights of any third party with respect to any Intellectual
Property. No proceedings have been instituted against or claims received by
Fastcom, nor to its knowledge are any proceedings threatened alleging any such
violation, nor does Fastcom know of any valid basis for any such proceeding or
claim. To the knowledge of Fastcom, there is no infringement or other adverse
claim against any of the Intellectual Property owned or used by Fastcom. To the
knowledge of Fastcom, the use of software by Fastcom does not violate or
otherwise infringe upon the rights of any third party.
4.22 WARRANTIES. The Disclosure Schedule sets forth a true and complete
estimate of the forms of all express warranties and guaranties made
by Fastcom to third parties with respect to any services rendered by Fastcom.
4.23 CLIENTS AND SUPPLIERS. Except as set forth in the Disclosure
Schedule, Fastcom does not know and has no reason to believe that, either
as a result of the transactions contemplated hereby or for any other reason
(exclusive of expiration of a contract upon the passage of time), any present
material client or supplier of Fastcom will not continue to conduct business
with Fastcom after the Closing Date in substantially the same manner as it has
conducted business prior thereto.
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4.24 ACCOUNTS RECEIVABLE. The accounts receivable reflected on the
balance sheets included in the Financial Statements, or thereafter acquired
by Fastcom, consist, in the aggregate in all material respects and 90% of such
items which are collectible in the ordinary and usual course of business.
4.25 GOVERNMENTAL APPROVALS. To its knowledge, other than as set forth
herein, no authorization, license, permit, franchise, approval, order or
consent of, and no registration, declaration or filing by Fastcom with, any
governmental authority, federal, state or local, is required in connection with
Fastcom's execution, delivery and performance of this Agreement.
4.26 NO OMISSIONS OR UNTRUE STATEMENTS. To its knowledge, no representation
or warranty made by Fastcom to Thrucomm in this Agreement or in any
certificate of the Fastcom General Partner required to be delivered to Thrucomm
pursuant to the terms of this Agreement contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading as
of the date hereof and as of the Closing Date.
V. REPRESENTATIONS AND WARRANTIES OF THRUCOMM
Thrucomm represents and warrants to the Partnerships as follows, with
the knowledge and understanding that the Partnerships are each relying
materially on such representations and warranties:
5.1 ORGANIZATION AND STANDING OF THRUCOMM. Thrucomm is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida, and has the corporate power to carry on its business as now
conducted and to own its assets and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
failure to qualify (individually or in the aggregate) does not have any material
adverse effect on the assets, business or financial condition of Thrucomm. The
copies of the articles of incorporation and bylaws of Thrucomm (certified by the
Secretary of Thrucomm), delivered to the Partnerships, are true and complete
copies of those documents as now in effect. Except as set forth in the
Disclosure Schedule, Thrucomm does not own any capital stock in any other
corporation, business trust or similar entity, and is not engaged in a
partnership, joint venture or similar arrangement with any person or entity. The
minute book of Thrucomm contains accurate records of all meetings of its
incorporator, stockholders and Board of Directors since its date of
incorporation.
5.2 AUTHORITY. Thrucomm's Board of Directors has approved and adopted this
Agreement and the Reorganization. This Agreement constitutes, and all other
agreements contemplated hereby will constitute, when executed and delivered by
Thrucomm in accordance herewith (and assuming due execution and delivery by the
other parties hereto), the valid and binding obligations of Thrucomm,
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enforceable in accordance with their respective terms, subject to general
principles of equity and bankruptcy or other laws relating to or affecting the
fights of creditors generally.
5.3 NO BREACHES. To its knowledge, the making and performance of this
Agreement (including, without limitation, the issuance of the Thrucomm
Reorganization Stock) by Thrucomm will not (i) conflict with the articles of
incorporation or the bylaws of Thrucomm; (ii) violate any order, writ,
injunction, or decree applicable to Thrucomm; or (iii) result in any breach or
termination of, or constitute a default under, or constitute an event which,
with notice or lapse of time, or both, would become a default under, or result
in the creation of any encumbrance, upon any asset of Thrucomm under, or create
any rights of termination, cancellation or acceleration in any person under, any
agreement, arrangement or commitment, or violate any provisions of any laws,
ordinances, rules or regulations or any order, writ, injunction or decree to
which Thrucomm is a party or by which Thrucomm or any of its assets may be
bound.
5.4 CAPITALIZATION. The authorized capital stock of Thrucomm is comprised
of the following: (i) 100,000,000 shares of Common Stock, no par value (the
"Common Stock"), one share of which is issued and outstanding; and (ii)
25,000,000 shares of Preferred Stock, no par value (the "Preferred Stock'),
with such designation, fights and preferences as may be determined from time to
time by the Board of Directors of Thrucomm, of which no shares are issued and
outstanding.
All of the outstanding shares of Thrucomm Common Stock is duly
authorized, validly issued, fully paid and nonassessable, and was not issued in
violation of the preemptive rights of any person. The Reorganization Stock, to
be issued upon effectiveness of the Reorganization, when issued in accordance
with the terms of this Agreement, shall be duly authorized, validly issued,
fully paid and nonassessable. Other than as stated in this Section 5.4, there
are no outstanding subscriptions, options, warrants, calls or fights of any kind
issued or granted by, or binding upon, Thrucomm, to purchase or otherwise
acquire any shares of capital stock of Thrucomm, or other equity securities or
equity interests of Thrucomm or any debt securities of Thrucomm.
5.5 GOVERNMENTAL APPROVAL; CONSENTS. Insert verify To its knowledge,
except for the reports required to be filed in the future by Thrucomm as a
reporting company under the Exchange Act, no authorization, license, permit,
franchise, approval, order or consent of, and no registration, declaration or
filing by Thrucomm with, any governmental authority, federal state or local, is
required in connection with Thrucomm's execution, delivery and performance of
this Agreement. No consents of any other parties are required to be received by
or on the part of Thrucomm to enable Thrucomm to enter into and carry out this
Agreement.
5.6 FINANCIAL STATEMENTS. To its knowledge, the Disclosure schedule
contains audited balance sheets as of December 31, 1996 and related
statements of operations, statements of cash flows and statements of
stockholders' equity of
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Thrucomm for the one-year period ended December 31, 1996 and compiled balance
sheets as of March 31, 1997, and related statements of operations, statements of
cash flows and statement of stockholder' equity for the three-month period ended
June 30, 1997 (collectively, the "Financial Statements"). The Financial
Statements present fairly, in all respects, the financial position and results
of operations of Thrucomm as of the dates and periods indicated, prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP"). Without limiting the generality of the foregoing, (i) there is no
basis for any assertion against Thrucomm as of the date of the Financial
Statements of any material debt, liability or obligation of any nature not fully
reflected or reserved against in the Financial Statements; and (ii) there are no
assets of Thrucomm as of the date of the Financial Statements, the value of
which is overstated in the Financial Statements. Except as disclosed in the
Financial Statements, Thrucomm does have any known contingent liabilities
(including liabilities for Taxes), forward or long-term commitments or
unrealized or anticipated losses from unfavorable commitments other than in the
ordinary course of business. Thrucomm is not a party to any contract or
agreement for the forward purchase or sale of any foreign currency.
5.7 ADVERSE DEVELOPMENTS. Except as expressly provided or set forth in,
or required by, this Agreement or as set forth in the Thrucomm Financial
Statements, since insert, there have been no materially adverse changes in the
assets, liabilities, properties, operations or financial condition of Thrucomm,
and no event has occurred other than in the ordinary and usual course of
business or as set forth in the Thrucomm Financial Statements which could be
reasonably expected to have a materially adverse effect upon Thrucomm, and
Thrucomm does not know of any development or threatened development of a nature
that will, or which could be reasonably expected to, have a materially adverse
effect upon Thrucomm's operations or future prospects.
5.8 CONTRACTS LISTED; NO DEFAULT. All contracts, agreements, licenses,
leases, easements, permits, rights of way, commitments, and understandings,
written or oral connected with or relating in any respect to present or proposed
future operations of Thrucomm (except employment or other agreements terminable
at will and other agreements which, in the aggregate, are not material to the
business, properties or prospects of Thrucomm and except governmental licenses,
permits, authorizations, approvals and other matters referred to in Section
5.5), which would be required to be listed as exhibits to an Annual Report on
Form 10-K if Thrucomm were subject to the reporting requirements of the
Exchange Act (individually, the "Thrucomm Contract" and collectively, the
"Thrucomm Contracts"), are listed and described in the Disclosure Schedule.
Thrucomm is the holder of, or party to, all of the Thrucomm Contracts. To the
knowledge of Thrucomm, the Thrucomm Contracts are valid, binding and enforceable
by the signatory thereto against the other parties thereto in accordance with
their terms. Neither Thrucomm nor any signatory thereto is in default or breach
of any material provision of the Thrucomm Contracts. Thrucomm's operation of
its business has been, is, and will, between the date hereof and the Closing
Date (as hereinafter defined), continue to be, consistent with the material
terms and conditions of the Thrucomm Contracts.
5.9 TAXES. Thrucomm has duly filed all Returns required by any law or
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regulation to be filed by it except for extensions duly obtained. All such
Returns were, when filed, and to the best of Thrucomm's knowledge are, accurate
and complete in all material respects and were prepared in conformity with
applicable laws and regulations. Thrucomm has paid or will pay in full or has
adequately reserved against all Taxes otherwise assessed against it through the
Closing Date, and the assessment of any material amount of additional Taxes in
excess of those paid and reported is not reasonably expected.
Thrucomm is not a party to any pending action or proceeding by any
governmental authority for the assessment of any Tax, and no claim for
assessment or collection of any Tax has been asserted against Thrucomm that has
not been paid. There are no Tax liens upon the assets of Thrucomm (other than
the lien of personal property taxes not yet due and payable). There is no valid
basis, to the best of Thrucomm's knowledge, except as set forth in the
Disclosure Schedule, for any assessment, deficiency, notice, 30-day letter or
similar intention to assess any Tax to be issued to Thrucomm by any governmental
authority.
5.10 LITIGATION. Except as disclosed in the Disclosure Schedule, there is
no claim action, proceeding or investigation pending or, to Thrucomm's
knowledge, threatened against or affecting Thrucomm before or by any court,
arbitrator or governmental agency or authority which in the reasonable judgment
of Thruco could have a materially adverse effect on Thrucomm. There are no
decrees, injunctions or orders of any court, governmental department, agency or
arbitration outstanding against Thrucomm.
5.11 COMPLIANCE WITH LAWS AND REGULATIONS. To its knowledge, Thrucomm is in
compliance, in all material respects, with all laws, rules, regulations, orders
and requirements (federal, state and local) applicable to it in all
jurisdictions in which the business of Thrucomm is currently conducted or to
which Thrucomm is currently subject, which may have a material impact on
Thrucomm, including, without limitation, all applicable civil rights and equal
opportunity employment laws and regulations, all state and federal antitrust,
antimonopolies and fair trade practice laws and the Federal Occupational Health
and Safety Act. Thrucomm does not know of any assertion by any party that
Thrucomm is in violation of any such laws, rules, regulations, orders,
restrictions or requirements with respect to its current operations, and no
notice in that regard has been received by Thrucomm. To Thrucomm's knowledge,
there is not presently pending any proceeding, hearing or investigation with
respect to the adoption of amendments or modifications of existing laws, rules,
regulations, orders, restrictions or requirements which, if adopted, would
materially adversely affect the current operations of Thrucomm
5.12 GOVERNMENTAL LICENSES, PERMITS, ETC. To its knowledge, Thrucomm has all
governmental licenses, permits, authorizations and approvals necessary for
the conduct of its business as currently conducted. All such licenses,
permits, authorizations and approvals are in full force and effect, and
no proceedings for the suspension or cancellation of any thereof is pending
or threatened.
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5.13 BROKERS. Thrucomm has not made any agreement or taken any action with
any person or taken any action which would cause any person to be entitled
to any agent's, broker's or finder's fee or commission in connection with the
transactions contemplated by this Agreement.
5.14 EMPLOYEE PLANS. Except as listed in the Disclosure Schedule,
Thrucomm has no Employee Plans or Compensation Agreements.
5.15 NO OMISSIONS OR UNTRUE STATEMENTS. No representation or warranty made
by Thrucomm to the Partnerships in this Agreement or in any certificate
of a Thrucomm officer required to be delivered to the Partnerships pursuant to
the terms of this Agreement contains or will contain any untrue statement of a
material fact, outs or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading as of the date hereof and
as of the Closing Date.
5.16 DISCLOSURE SCHEDULE COMPLETE. Thrucomm shall promptly supplement the
Disclosure Schedule if events occur prior to the Closing Date that would have
been required to be disclosed had they existed at the time of executing this
Agreement. The Disclosure Schedule, as supplemented prior to the Closing Date,
will contain a true, correct and complete fist and description of all items
required to be set forth therein. The Disclosure Schedule, as supplemented prior
to the Closing Date, is expressly incorporated herein by reference.
Notwithstanding the foregoing, any such supplement to the Disclosure Schedule
following the date hereof shall not in any way affect Thrucomm's right not to
consummate the transactions contemplated hereby as set forth in Article VII
hereof
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VI. PARTNER/STOCKHOLDER APPROVAL; CLOSING; CLOSING DELIVERIES
6.1 PARTNER/STOCKHOLDER APPROVAL.
(A) DATALINC. Pursuant to the Agreement of Limited
Partnership of Datalinc, the affirmative vote of the holders of at least
two-thirds of all of the outstanding voting rights of the Units is necessary to
approve and adopt the Reorganization. If a Limited Partner does not consent to
the Reorganization but the Reorganization is approved by the requisite vote
of other Limited Partners, such Limited Partner is bound by such approval.
(B) FASTCOM. The Board of Directors of the Fastcom General
Partner, without dissent or abstention, has approved the Reorganization.
Datalinc owns approximately 80% of all of the outstanding voting rights of the
Units of Fastcom and the Datalinc General Partner has given written consent to
the Reorganization, which consent is sufficient to give Fastcom's approval to
the Reorganization Agreement and Reorganization.
(C) THRUCOMM. The Board of Directors of Thrucomm, without
dissent or abstention, and Datalinc, the sole stockholder of Thrucomm, have
approved the Reorganization.
6.2 CLOSING. Subject to the other provisions of this Agreement,
the parties shall hold a closing (the "Closing") no later than the fifth
business day (or such later date as the parties hereto may agree) following the
later of (a) the date that all of the parties hereto give their consent to the
approval and adoption of the Reorganization and this Agreement; or (b) the
business day on which the last of the conditions set forth in Articles VII and
VIII is fulfilled or waived (such later date, the "Closing Date") at 10:00 a.m.
at the offices of Thrucomm or at such other time and place as the parties may
agree upon.
6.3 CLOSING DELIVERIES.
(A) DATALINC. At the Closing, Datalinc shall deliver, or cause to be
delivered to Fastcom and Thrucomm:
(1) a certificate, dated as of the Closing Date, to the effect
that the representations and warranties of Datalinc contained in this Agreement
are true and correct in all material respects at and as of the Closing Date
and that Datalinc has complied with or performed in all material respects all
terms, covenants and conditions to be complied with or performed by Datalinc
on or prior to the Closing Date;
(2) a certificate, dated as of the Closing Date, executed by
the Datalinc General Partner, certifying the Certificate of Limited Partnership
and Agreement of Limited Partnership of Datalinc, the incumbency and signature
of the Datalinc General Partner and copies of the Datalinc General Partner's
resolutions approving and authorizing the execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby;
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(3) the books and records of Datalinc;
(4) documentation satisfactory to Thrucomm evidencing the fact
that the signatories on all relevant bank accounts of Datalinc have been
changed to signatories designated by Thrucomm;
(4) such other documents, at the Closing or subsequently, as
may be reasonably requested by Fastcom and Thrucomm as necessary for the
implementation and consummation of this Agreement and the transactions
contemplated hereby; and
(5) an opinion of Datalinc's counsel in form and substance
reasonably satisfactory to Fastcom and Thrucomm in a form mutually agreed
to prior to the Closing.
(b) FASTCOM. At the Closing, Fastcom shall deliver, or cause to be
delivered to Datalinc and Thrucomm:
(1) a certificate, dated as of the Closing Date, to the effect
that the representations and warranties of Fastcom contained in this Agreement
are true and correct in all material respects at and as of the Closing Date
and that Datalinc has complied with or performed in all material respects all
terms, covenants and conditions to be complied with or performed by Fastcom
on or prior to the Closing Date;
(2) a certificate, dated as of the Closing Date, executed by the
Fastcom General Partner, certifying the Certificate of Limited Partnership and
Agreement of Limited Partnership of Fastcom the incumbency and signature of the
Fastcom General Partner and copies of the Fastcom General Partner's resolutions
approving and authorizing the execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby;
(3) the books and records of Fastcom;
(4) documentation satisfactory to Thrucomm evidencing the fact
that the signatories on all relevant bank accounts of Fastcom have been changed
to signatories designated by Thrucomm;
(4) such other documents, at the Closing or subsequently, as
may be reasonably requested by Datalinc and Thrucomm as necessary for the
implementation and consummation of this Agreement and the transactions
contemplated hereby; and
(5) an opinion of Fastcom's counsel in form and substance
reasonably satisfactory to Datalinc and Thrucomm in a form mutually agreed to
prior to the Closing.
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(c) THRUCOMM. At the Closing, Thrucomm shall deliver, or cause to
be delivered, to the Partnerships:
(1) a certificate of Thrucomm, dated as of the Closing Date,
to the effect that the representations and warranties of Thrucomm contained in
this Agreement are true and correct in all material respects and that Thrucomm
has complied with or performed in all material respects all terms, covenants
and conditions to be complied with or performed by Thrucomm on or prior to the
Closing Date;
(2) a certificate, dated as of the Closing Date, executed by the
Secretary of Thrucomm, certifying the Articles of Incorporation and Bylaws of
Thrucomm, the incumbency and signatures of the officers of Thrucomm and copies
of the directors' resolutions of Thrucomm approving and authorizing the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(3) certificates representing the Reorganization Stock issuable
upon consummation of the Reorganization;
(4) Insert verify employment agreements, in the form attached
hereto as Schedule 6.3(c), with those particular officers and directors of
Thrucomm as listed therein;
(5) a written consent by insert verify whether bank consent is
required as to the consummation of the Reorganization; and
(6) an opinion of Thrucomm's counsel in form and substance
reasonably satisfactory to the Partnerships in a form mutually agreed to prior
to the Closing.
VII. CONDITIONS TO OBLIGATIONS OF THRUCOMM
The obligations of Thrucomm to consummate the Closing are subject to
the following conditions, any of which may be waived by Thrucomm in its sole
discretion:
7.1 DATALINC.
(a) COMPLIANCE BY DATALINC. Datalinc shall have performed and
complied in all material respects with all agreements and conditions required
by this Agreement to be performed or complied with by Datalinc prior to or on
the Closing Date.
(b) ACCURACY OF THE REPRESENTATIONS AND WARRANTIES OF DATALINC. The
representations and warranties of Datalinc contained in this Agreement
(including the Disclosure Schedule) or any schedule,
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certificate or other instrument delivered pursuant to the provisions hereof or
in connection with the transactions contemplated hereby shall be true and
correct in all material respects at and as of the Closing Date (except for such
changes permitted by this Agreement) and shall be deemed to be made again as of
the Closing Date.
(c) MATERIAL ADVERSE CHANGE. No material adverse change shall have occurred
subsequent to December 31, 1996, in the financial position, results of
operations, assets, liabilities or prospects of Datalinc, nor shall any event or
circumstance have occurred which would result in a material adverse change in
the financial position, results of operations, assets, liabilities or prospects
of Datalinc within the reasonable discretion of Thrucomm.
(d) DOCUMENTS. All documents and instruments delivered by Datalinc to
Thrucomm at the Closing shall be in form and substance reasonably satisfactory
to Thrucomm and its counsel.
(e) CAPITALIZATION. At the Closing Date, the number of Partnership Units of
Datalinc which are issued and outstanding shall be as set forth in the
Disclosure Schedule.
(f) REORGANIZATION. Insert verify The Reorganization shall qualify as a
reorganization under Section 368 of the Code and further there are no material
adverse tax consequences to the Reorganization.
(g) LITIGATION. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on, account hereof shall be
pending or, to the knowledge of Datalinc, be threatened.
(h) CERTAIN CONSENTS. Other than as set forth herein, Datalinc shall have
received all applicable consents contemplated by the Disclosure Schedule in
writing, in form and substance reasonably satisfactory to Thrucomm and its
counsel, to Datalinc's entry into this Agreement and consummation of the
Reorganization.
(i) PARTNER APPROVAL. Datalinc shall have received Partner approval of the
Reorganization and this Agreement as set forth in Section 6.1 hereof.
(j) ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS. Other than as set forth
herein, Datalinc shall assign or cause to be assigned to Thrucomm all of its
right, title and interest in and to that certain intellectual property as set
forth on Schedule 7. 10).
(k) LIABILITIES DISCLOSED. Subsequent to the satisfaction of that certain
debt as set forth on Schedule 7. 1 (k) of this Agreement, at the Closing Date,
the liabilities, contingent and otherwise, of Datalinc shall in the aggregate
not exceed $300,000.
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(1) SATISFACTION OF DEBT. Datalinc shall contemporaneous with the
Closing, satisfy in full those certain debt obligations as set forth on
Schedule 7. I (I) of this Agreement.
7.2 FASTCOM.
(a) COMPLIANCE BY FASTCOM. Fastcom shall have performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with by Fastcom prior to or on the Closing Date.
(b) ACCURACY OF THE REPRESENTATIONS AND WARRANTIES OF FASTCOM. The
representations and warranties of Fastcom contained in this Agreement (including
the Disclosure Schedule) or any schedule, certificate or other instrument
delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true and correct in all material
respects at and as of the Closing Date (except for such changes permitted by
this Agreement) and shall be deemed to be made again as of the Closing Date.
(c) MATERIAL ADVERSE CHANGE. No material adverse change shall have occurred
subsequent to December 31, 1996, in the financial position, results of
operations, assets, liabilities or prospects of Fastcom, nor shall any event or
circumstance have occurred which would result in a material adverse change in
the financial position, results of operations, assets, liabilities or prospects
of Fastcom within the reasonable discretion of Thrucomm.
(d) DOCUMENTS. All documents and instruments delivered by Fastcom to
Thrucomm at the Closing shall be in form and substance reasonably satisfactory
to Thrucomm and its counsel.
(e) CAPITALIZATION. At the Closing Date, the number of Partnership Units of
Fastcom which are issued and outstanding shall be as set forth in the Disclosure
Schedule.
(f) REORGANIZATION. Insert verify The Reorganization shall qualify as a
reorganization under Section 368 of the Code and further there are no material
adverse tax consequences to the Reorganization.
(g) LITIGATION. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on, account hereof shall be
pending or, to the knowledge of Fastcom, be threatened.
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(h) CERTAIN CONSENTS Other than as set forth herein, Fastcom shall have
received all applicable consents contemplated by the Disclosure Schedule in
writing, in form and substance reasonably satisfactory to Thrucomm and its
counsel, to Fastcom's entry into this Agreement and consummation of the
Reorganization.
(i) PARTNER APPROVAL. Fastcom shall have received Partner approval of the
Reorganization and this Agreement as set forth in Section 6.2 hereof
(j) ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS. Other than as set forth
herein, Fastcom shall assign or cause to be assigned to Thrucomm all of its
right, title and interest in and to that certain intellectual property as set
forth on Schedule 7.20).
(k) LIABILITIES DISCLOSED. Subsequent to the satisfaction of that certain
debt as set forth on Schedule 7.2(k) of this Agreement, at the Closing Date, the
liabilities, contingent and otherwise, of Datalinc shall in the aggregate not
exceed $300,000.
(1) SATISFACTION OF DEBT. Datalinc shall contemporaneous with the Closing,
satisfy in full those certain debt obligations as set forth on Schedule 7.2(l)
of this Agreement.
VIII. CONDITIONS TO THE PARTNERSHIPS OBLIGATIONS
The obligations of the Partnerships to consummate the Closing are
subject to the following conditions, any of which may be waived by the
Partnerships in their sole discretion:
8.1 COMPLIANCE BY THRUCOMM. Thrucomm shall have performed and complied in
all material respects with all agreements and conditions required by this
Agreement to be performed or complied with prior to or on the Closing Date.
8.2 ACCURACY OF THRUCOMM'S REPRESENTATIONS. Thrucomm's representations and
warranties contained in this Agreement (including the exhibits hereto and
the Disclosure Schedule) or any schedule, certificate or other instrument
delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true and correct in all material
respects at and as of the Closing Date (except for such changes permitted by
this Agreement) and shall be deemed to be made again as of the Closing Date.
8.3 MATERIAL ADVERSE CHANGE. No material adverse change shall have
occurred subsequent to December 31, 1996 in the financial position, results
of operations, assets, liabilities or prospects of Thrucomm taken as a whole,
nor shall any event or circumstance have occurred which would result in a
material adverse change in the business, assets or condition, financial or
otherwise, of Thrucomm taken as a whole, within reasonable discretion of
Thrucomm.
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8.4 LITIGATION. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or, to Thrucomm's knowledge, be threatened.
8.5 REORGANIZATION. Insert verify the Reorganization shall qualify as a
reorganization under Section 368 of the Code and further there are no material
adverse tax consequences to the Reorganization.
8.6 DOCUMENTS. All documents and instruments delivered by Thrucomm to the
Partnerships at the Closing shall be in form and substance reasonably
satisfactory to the Partnerships and their counsel.
III. INDEMNIFICATION
9.1 BY THE PARTNERSHIPS. Subject to Section 9.4, the Partnerships shall
indemnify, defend and hold Thrucomm, its directors, officers, shareholders,
attorneys, agents and affiliates, harmless from and against any and all losses,
costs, liabilities, damages, and expenses (including legal and other expenses
incident thereto) of every kind, nature and description (collectively, "Losses")
that result from or arise out of (i) the breach of any representation or
warranty of Datalinc or Fastcom set forth in this Agreement or in any
certificate delivered to Thrucomm pursuant hereto; or (ii) the breach of any of
the covenants of Datalinc or Fastcom contained in or arising out of this
Agreement or the transactions contemplated hereby.
9.2 BY THRUCOMM. Subject to Section 9.4, Thrucomm shall indemnify, defend,
and hold the Partnerships insert add language re: its partners, etc.? harmless
from and against any and all Losses that arise out of (i) the breach of any
representation or warranty of Thrucomm set forth in this Agreement or in any
certificate delivered to Datalinc or Fastcom pursuant hereto; or (ii) the breach
of any of the covenants of Thrucomm contained in or arising out of this
Agreement or the transactions contemplated hereby.
9.3 CLAIMS PROCEDURE. Should any claim covered by Sections 9.1 or 9.2 be
asserted against a party entitled to indemnification under this Article (the
"Indemnitees"), the Indemnitee shall promptly notify the party obligated to make
indemnification (the "Indemnitor"); provided, however, that any delay or failure
in notifying the Indemnitor shall not affect the Indemnitor's liability under
this Article if such delay or failure was not prejudicial to the Indemnitor. The
Indemnitor upon receipt of such notice shall assume the defense thereof with
counsel reasonably satisfactory to the Indemnitee and the Indemnitee shall
extend reasonable cooperation to the Indemnitor in connection with such defense.
No settlement of any such claim shall be made without the consent of the
Indemnitor and Indemnitee, such consent not to be unreasonably withheld or
delayed, nor shall any such settlement be made by the Indemnitor which does not
provide
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for the absolute, complete and unconditional release of the Indemnitee from such
claim. In the event that the Indemnitor shall fail, within a reasonable time, to
defend a claim, the Indemnitee shall have the fight to assume the defense
thereof without prejudice to its rights to indemnification hereunder.
9.4 LIMITATIONS ON LIABILITIES. Neither Datalinc nor Fastcom nor Thrucomm
shall be liable hereunder as a result of any misrepresentation or breach of such
party's representations, warranties or covenants contained in this Agreement
unless and until the Losses incurred by Datalinc, Fastcom or Thrucomm, as the
case may be, as a result of such misrepresentations or breaches under this
Agreement shall exceed, in the aggregate, $50,000 (in which case the party
liable therefor shall be liable for the entire amount of such claims, including
the first $50,000).
X. TERMINATION
10.1 TERMINATION PRIOR TO CLOSING.
(a) If the Closing has not occurred by insert, 1997, any of
the parties hereto may terminate this Agreement at any time thereafter by giving
written notice of termination to the other parties; provided, however, that no
party may terminate this Agreement if such party has willfully or materially
breached any of the terms and conditions hereof
(b) Prior to insert, 1997, either Datalinc, Fastcom or Thrucomm may
terminate this Agreement following the insolvency or bankruptcy of the other, or
if any one or more of the conditions to Closing set forth in Articles VI, VII or
VIII shall become incapable of fulfillment and shall not have been waived by the
party for whose benefit the condition was established, then either Datalinc,
Fastcom or Thrucomm may terminate this Agreement.
10.2 CONSEQUENCES OF TERMINATION. Upon termination of this Agreement
pursuant to this Article X or any other express right of termination provided
elsewhere in this Agreement, the parties shall be relieved of any further
obligation to the others except as specified in Section 12.3. No termination of
this Agreement, however, whether pursuant to this Article X hereof or under any
other express fight of termination provided elsewhere in this Agreement, shall
operate to release any party from any liability to any other party incurred
before the date of such termination or from any liability resulting from any
willful misrepresentation made in connection with this Agreement or willful
breach hereof
XI. ADDITIONAL COVENANTS
11.1 MUTUAL COOPERATION. The parties hereto will cooperate with each other,
and will use all reasonable efforts to cause the fulfillment of the conditions
to the parties' obligations hereunder and to obtain as promptly as possible all
consents, authorizations, orders or approvals from each and every third party,
whether private or governmental, required in connection with the transactions
contemplated by this Agreement.
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11.2 CHANGES IN REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIPS. Between
the date of this Agreement and the Closing Date, neither Datalinc nor Fastcom
shall, directly or indirectly, enter into any transaction, take any action, or
by inaction permit an event to occur, which would result in any of the
representations and warranties of Datalinc or Fastcom herein contained not being
true and correct at and as of (a) the time immediately following the occurrence
of such transaction or event- or (b) the Closing Date. The Partnerships shall
promptly give written notice to Thrucomm upon becoming aware of (i) any fact
which, if known on the date hereof, would have been required to be set forth or
disclosed pursuant to this Agreement; and (ii) any impending or threatened
breach in any material respect of any of the representations and warranties of
the Partnerships contained in this Agreement and with respect to the latter
shall use all reasonable efforts to remedy same.
11.3 CHANGES IN REPRESENTATIONS AND WARRANTIES OF THRUCOMM. Between the
date of this Agreement and the Closing Date, Thrucomm shall not, directly or
indirectly, enter into any transaction, take any action, or by inaction permit
an event to occur, which would result in any of the representations and
warranties of Thrucomm herein contained not being true and correct at and as of
(a) the time immediately following the occurrence of such transaction or event;
or (b) the Closing Date. Thrucomm shall promptly give written notice to the
Partnerships upon becoming aware of (i) any fact which, if known on the date
hereof, would have been required to be set forth or disclosed pursuant to this
Agreement; and (ii) any impending or threatened breach in any material respect
of any of the representations and warranties of Thrucomm contained in this
Agreement and with respect to the latter shall use all reasonable efforts to
remedy same.
XII. MISCELLANEOUS
12.1 EXPENSES. Datalinc, Fastcom and Thrucomm shall each pay its own
expenses incident to the negotiation, preparation and carrying out of this
Agreement, including all fees and expenses of its counsel and accountants for
all activities of such counsel and accountants undertaken pursuant to this
Agreement, whether or not the transactions contemplated hereby are consummated.
12.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All statements
contained in this Agreement or in any certificate delivered by or on behalf of
Datalinc, Fastcom or Thrucomm pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed representations, warranties and
covenants by Datalinc, Fastcom or Thrucomm, as the case may be, hereunder. All
representations, warranties and covenants made by Datalinc, Fastcom and Thrucomm
in this Agreement, or pursuant hereto, shall survive for a period of two (2)
years subsequent to the Closing.
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12.3 NONDISCLOSURE. Neither Datalinc nor Fastcom will at any time after the
date of this Agreement, without Thrucomm's consent, divulge, furnish to or make
accessible to anyone (other than to its representatives as part of its due
diligence or corporate investigation) any knowledge or information with respect
to confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable or
not, with respect to any confidential or secret aspects (including, without
limitation, customers or suppliers) ("Confidential Information") of Thrucomm.
Thrucomm will not at any time after the date of this Agreement, without
the consent of the Partnerships (except as may be required by law), use,
divulge, furnish to or make accessible to anyone any Confidential Information
(other than to its representatives as part of its due diligence or corporate
investigation) with respect to Datalinc or
Fastcom.
The undertakings set forth in the preceding two paragraphs of this
Section 12.3 shall lapse if the Closing takes place.
Any information, which (i) at or prior to the time of disclosure by
either of Datalinc, Fastcom or Thrucomm was generally available to the public
through no breach of this covenant; (ii) was available to the public on a
nonconfidential basis prior to its disclosure by Datalinc, Fastcom or Thrucomm;
or (iii) was made available to the public from a third party, provided that such
third party did not obtain or disseminate such information in breach of any
legal obligation to Datalinc, Fastcom or Thrucomm, shall not be deemed
Confidential Information for purposes hereof, and the undertakings in this
covenant with respect to Confidential Information shall not apply thereto.
12.4 SUCCESSION AND ASSIGNMENTS; THIRD PARTY BENEFICIARIES. This Agreement
may not be assigned (either voluntarily or involuntarily) by any party hereto
without the express written consent of the other party. Any attempted assignment
in violation of this Section shall be void and ineffective for all purposes. In
the event of an assignment permitted by this Section, this Agreement shall be
binding upon the heirs, successors and assigns of the parties hereto. Except as
expressly set forth in this Section, there shall be no third party beneficiaries
of this Agreement.
12.5 NOTICES. All notices, requests, demands or other communications with
respect to this Agreement shall be in writing and shall be (i) sent by facsimile
transmission; (ii) sent by the United States Postal Service, registered or
certified mail, return receipt requested; or (iii) personally delivered by a
nationally recognized express overnight courier service, charges prepaid, to the
following addresses (or such other addresses as the parties may specify from
time to time in accordance with this Section):
If to Datalinc:
1641 Commerce Avenue North
St. Petersburg, FL 33716
Attn: John F. Kolenda,
Chairman of the Board of Integrated Communication Networks, Inc.,
the General Partner
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If to Fastcom:
1641 Commerce Avenue North
St. Petersburg, FL 33716
Attn: John F. Kolenda,
Chairman of the Board of Fastcom Management, Inc., the General Partner
If to Thrucomm:
Thrucomm, Inc.
1641 Commerce Avenue North
St. Petersburg, FL 33716
Attn: Mark J. Gianinni
President
Any such notice shall, when sent in accordance with the preceding sentence, be
deemed to have been given and received on the earliest of (i) the day delivered
to such address or sent by facsimile transmission, (H) the fifth (5th) business
day following the date deposited with the United States Postal Service, or (iii)
twenty-four (24) hours after shipment by such courier service.
12.6 CONSTRUCTION. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Florida without giving effect
to the principles of conflicts of law thereof
12.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
12.8 NO IMPLIED WAIVER; REMEDIES. No failure or delay on the part of the
parties hereto to exercise any right, power or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. All rights, powers and privileges granted herein shall be in addition
to other rights and remedies to which the parties may be entitled at law or in
equity.
12.9 ENTIRE AGREEMENT. This Agreement, including the Exhibits and Schedules
attached hereto, sets forth the entire understandings of the parties with
respect to the subject matter hereof, and it incorporates and merges any and all
previous communications, understandings, oral or written, as to the subject
matter hereof, and cannot be amended or changed except in writing, signed by the
parties.
12.10 HEADINGS. The headings of the Sections of this Agreement, where
employed, are for the convenience of reference only and do not form a part
hereof and in no way modify, interpret or construe the meanings of the parties.
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12.11 SEVERABILITY. To the extent that any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted therefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect.
12.12 PUBLIC DISCLOSURE. From and after the date hereof through the Closing
Date, neither Datalinc nor Fastcom nor Thrucomm shall issue a press release or
any other public announcement with respect to the transactions contemplated
hereby without the prior consent of the other party, which consent shall not be
unreasonably withheld or delayed.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, HAVE HAD THE
OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOICE, AND
UNDERSTAND EACH OF THE PROVISIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
DATALINC, LTD.,
a Florida limited partnership
By: Integrated Communication Networks, Inc.,
a Florida corporation
General Partner
By: John F. Kolenda
Chairman of the Board
FASTCOM, LTD., a Florida limited partnership
By: Fastcom Management, Inc.,
a Florida corporation
General Partner
THRUCOMM, INC.
By: Mark J. Gianinni
Chairman of the Board
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Fairness Opinion
for
The Boards of Directors of
Integrated Communication Networks, Inc.
as General Partner of Datalinc, Ltd. and
Fastcom Management, Inc.
as General Partner of Fastcom, Ltd.
May 1, 1997
<PAGE>
May 1, 1997
The Boards of Directors of
Integrated Communication Networks, Inc.
as General Partner of Datalinc, Ltd. and
Fastcom Management, Inc.
as General Partner of Fastcom, Ltd.
1641 Commerce Avenue North
St. Petersburg, Florida 33716
Members of the Boards:
You have requested our opinion as to the fairness, from a financial point of
view, of the considerations to be received by Datalinc, Ltd. (A Datalinc) and
Fastcom, Ltd. (A Fastcom) pursuant to the terms and subject to the conditions
set forth in the proposed Agreement and Plan of Reorganization (the
A Reorganization Agreement) by and among Thrucomm, Inc., a newly organized
Florida corporation (A Thrucomm), Fastcom and Datalinc, (Fastcom and Datalinc
collectively referred to as the A Partnerships). Certain capitalized terms used
in this opinion are defined in the Consent Statement/Prospectus of Thrucomm. We
understand that Datalinc holds approximately 80 percent of the outstanding Units
of Fastcom and that Integrated Communication Networks, Inc., as General Partner
of Datalinc, has given Datalinc written Consent to the Reorganization.
Accordingly, the Reorganization Agreement has been approved by Fastcom. As more
fully described in the Reorganization Agreement, the businesses of the
Partnerships will be combined into Thrucomm by, among other things:
(i) The transfer of all rights, title and interests in the assets and
liabilities of Datalinc and Fastcom to Thrucomm (the A Transfer), upon the terms
and conditions described in the Reorganization Agreement; (ii) In exchange for
the Transfer, Datalinc will receive one share of each series of Thrucomm
Mandatory Convertible Preferred Stock, Series A-H. Datalinc sole assets
will be one share of common stock and Preferred Stock of Thrucomm. Fastcom
will receive one share of each series of Thrucomm Mandatory Convertible
Preferred Stock, Series I-O, which will be Fastcom sole asset;
(iii) The Preferred Stock will be held by the Partnerships and the
Investors shall remain limited partners in Fastcom and/or Datalinc. Datalinc and
Fastcom will cease operations and Thrucomm will continue the Partnerships'
former businesses under a single, corporate management;
(iv) Fastcom and Datalinc will hold the Preferred Shares of Thrucomm, until
the occurrence of a single triggering event (a AMandatory Conversion Event@ or
AMandatory Conversion@), at which time the Preferred Stock will be converted
into shares of Thrucomm non-cumulative, common stock, no par value (the
A Underlying Shares@ or the ACommon Stock);
(v) Following a Mandatory Conversion of the Preferred Stock, Datalinc and
Fastcom will commence the dissolution of the Partnerships and the assets of the
Partnerships, the Underlying Shares, shall be distributed to the Investors.
After the dissolution of the Partnerships, the Investors will become
shareholders of Thrucomm, and Thrucomm will be a corporate, consolidation of the
businesses of the Partnerships.
B-1
<PAGE>
Our opinion expressed herein relates solely to the consideration received by
Datalinc and Fastcom in exchange for the Transfer and ultimately distributed by
the Partnerships to the Investors in accordance with the Amended and Restated
Agreements of Limited Partnerships, respectively. We have not been engaged to
conduct a valuation of the Partnerships. The General Partners have developed a
Formula for purposes of determining the allocation of value between Fastcom and
Datalinc. The basis for the Formula is the the value of Thrucomm determined upon
the occurrence of the Mandatory Conversion Event. The value apportioned to
Fastcom is equal to the value of Thrucomm less the value of Datalinc, determined
by the Board of Directors of Datalinc to be a minimum of $9 million. However,
the value of Datalinc will be adjusted to a maximum of 25% of the value of
Thrucomm assuming a conversion value of between $30 million and $60 million and
to a maximum of 20% of the value of Thrucomm assuming a conversion value of
between $60 million and $90 million. Management has provided illustrations of
the Mandatory Conversion Event assuming values of $30 million, $60 million, and
$90 million. See attached Exhibits A, B and C. These Exhibits illustrate the
receipt by the Partnerships, in terms of dollar value, the Underlying Shares of
Thrucomm and the distribution to the various classes of Investors in dissolution
of each Partnership. The Partner allocations as shown in the Exhibits are
provided for in Sections 9.2, 9.3 and 9.4 of the Amended and Restated Agreement
of Limited Partnership of Fastcom and Article VIII and Section 11.9 of the
Amended Agreement of Limited Partnership of Datalinc. The provisions for each
Partnership are summarized on pages 24 through 30 of the Consent
Statement/Prospectus of Thrucomm, Inc. The allocations reflected in Exhibits A,
B and C are consistent with the terms of such Partnership Agreements.
In determining fairness of the proposed Reorganization, from a financial point
of view, management prepared a sensitivy analysis using various alternative
amounts in apportioning the overall value of Thrucomm to Datalinc and Fastcom.
We reviewed the sensitivity analysis prepared by management and provided a
summary assuming Conversion Values of Thrucomm at $30 million and $90 million,
attached as Exhibit D. Footnotes A, B and C of Exhibit D describe the
alternative apportionment values between Fastcom and Datalinc, Footnote B is the
apportionment method used in the proposed Reorganization. The return on
investment shown in Exhibit D does not take into account the time value of money
and has been calculated as the value received in excess of capital contributed
divided by capital contributed. The return on investment is provided for
illustrative purposes only, no representation is made relative to the actual
return on investment. The aggregate variance in return on investment to the
Investors of Datalinc assuming the two alternatives of apportioning value
between Datalinc and Fastcom relative to the method proposed in the
Reorganization is approximately 1.41% and -.069%, respectively, based on a
Conversion Value of $30 million and 4.95% and -1.80%, respectively, based on a
Conversion Value of $90 million. As a result of Datalinc holding approximately
80 percent of the outstanding voting rights of Fastcom the variance attributable
to Fastcom was not considered.
Other factors considered in determining fairness of the proposed Reorganization
are summarized in Exhibit E. Due to the nature of the existing Partnerships, the
continued losses incurred since inception of each Partnership, and the
additional capital infusion required for the Partnerships to achieve operational
goals, including desired investment performance, historical market price was
considered more relavant for purposes of determining fairness overall.
Other aspects of the Reorganization is beyond the scope of this opinion.
However, in rendering our opinion, we reviewed the Reorganization Agreement and
held discussions with certain representatives and advisors of Datalinc and
Fastcom concerning the businesses, operations and prospects of Datalinc and
Fastcom. We examined certain business and financial information relating to
Datalinc and Fastcom, audited historical financial statements as well as certain
financial forecasts and other data for Datalinc and Fastcom which were provided
to us by the respective managements of Datalinc and Fastcom, including
information relating to certain strategic implications and operational benefits
anticipated from the Reorganization. We reviewed the financial terms of the
Reorganization as set forth in the Reorganization Agreement in relation to,
among other things: the respective companies= historical and projected earnings
and financial condition. We also evaluated the potential pro-forma financial
impact of the Reorganization on Thrucomm. In addition to the foregoing, we
conducted such other analyses and examinations and considered such other
financial and economic criteria as we deemed appropriate to arrive at our
opinion.
2
<PAGE>
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information furnished to or otherwise reviewed by or discussed with us. With
respect to financial forecasts and other information provided to or otherwise
reviewed by or discussed with us, we have been advised by the managements of
Datalinc and Fastcom that such forecasts and other information were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the managements of Datalinc and Fastcom as to the future financial
performance of Datalinc and Fastcom and the strategic implications and
operational benefits anticipated from the Reorganization. We have assumed, with
your consent, that the Transfer will be treated as a tax free capital
transaction for federal income tax purposes. Our opinion, as set forth herein,
relates to the fairness of the consideration received by Datalinc and Fastcom
and distributed to the Investors in accordance with the Partnership Agreements,
respectively. We also are not expressing any opinion as to what the value of the
Thrucomm Common Stock actually will be when issued to holders of Datalinc and
Fastcom Partnership Interests pursuant to a Mandatory Conversion Event or if the
Thrucomm Common Stock will become publicly traded or the price at which the
Thrucomm Common Stock will trade subsequent to a Mandatory Conversion Event. We
have not made or been provided with an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of Datalinc or Fastcom nor
have we made any physical inspection of the properties or assets of Datalinc or
Fastcom. Our opinion is necessarily based upon information made available to us,
financial and other conditions and circumstances existing and disclosed to us,
as of the date hereof.
We will receive a fee upon the delivery of this opinion. Our opinion expressed
herein is provided for the use of the Boards of Directors of Integrated
Communication Networks, Inc., as General Partner of Datalinc, and Fastcom
Management, Inc., as General Partner of Fastcom, in their evaluation of the
proposed Reorganization, and our opinion is not intended to be and does not
constitute a recommendation to any partner as to how such partner should vote on
the proposed Reorganization. Except for disclosure purposes in the Consent
Statement/Prospectus of Thrucomm, our opinion may not be published or otherwise
used or referred to, nor shall any public reference to Michael Davis & Company,
P.A. be made, without our prior written consent.
Based upon and subject to the foregoing, our experience as independent certified
public accountants, our work as described above and other factors we deemed
relevant, we are of the opinion that, as of the date hereof, the consideration
is fair, from a financial point of view, to Datalinc and Fastcom, respectively,
and the distributions to the Investors, as illustrated in the attached Exhibits
A through C are consistent with the terms of the Partnership Agreements.
Very truly yours,
MICHAEL DAVIS & COMPANY, P.A.
3
<PAGE>
THRUCOMM, INC.
Mandatory Convertible
Preferred Stock
Series A-O
CONSENT STATEMENT/PROSPECTUS
June ___, 1997
<PAGE>
===============================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Consent
Statement/Prospectus and, if given or made, such information or representation
must not be relied upon as having been authorized by Thrucomm. This Consent
Statement/Prospectus does not constitute an offer to sell or a solicitation of
any offer to buy any security other than the Preferred Stock offered hereby, nor
does it constitute an offer to sell or a solicitation to any person in any
jurisdiction or under any circumstances in which such offering would be
unlawful. Neither the delivery of this Consent Statement/Prospectus nor any sale
made hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
-----------------
TABLE OF CONTENTS
Page
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . v
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Selected Financial Information . . . . . . . . . . . . . . . . . . . . . . 12
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Equity Ownership of the Partnerships . . . . . . . . . . . . . . . . . . . 24
The Formula. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Thrucomm Ownership Tables. . . . . . . . . . . . . . . . . . . . . . . . . 35
Recommendation of the General Partners . . . . . . . . . . . . . . . . . . 40
Consent Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Certain Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . 47
Comparative Rights of Investors. . . . . . . . . . . . . . . . . . . . . . 47
Pro Forma Condensed Financial Information. . . . . . . . . . . . . . . . . 53
Datalinc Ltd., Management's Discussion and Analysis
of Financial Condition and Results of Operations. . . . . . . . . . . 59
Fastcom Ltd., Management's Discussion and Analysis
of Financial Condition and Results of Operations. . . . . . . . . . . 63
Business - Fastcom . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Business - Datalinc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Principal Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Description of Thrucomm's Securities . . . . . . . . . . . . . . . . . . . 84
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . .F-1
AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . .A-1
OPINION OF MICHAEL DAVIS & CO., P.A. . . . . . . . . . . . . . . . . . . .B-1
Until ______________, 1997 (25 days after commencement of the offering), all
dealers effecting transactions in the registered securities, whether or not
participating in this description, may be required to deliver a Consent
Statement/Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 607.0850(1) of the Florida Business Corporation Act ("FBCA")
permits a Florida corporation to indemnify any person who may be a party to any
third party proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, against liability
incurred in connection with such proceeding (including any appeal thereof)
if he acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
Section 607.0850(2) of the FBCA
permits a Florida corporation to indemnify any person who may be a
party to a derivative action if such person acted in any of the capacities set
forth in the preceding paragraph, against expenses and amounts paid in
settlement not exceeding, in the judgement of the board of directors, the
estimated expenses of litigating the proceeding to conclusion, actually and
reasonably incurred in connection with the defense or settlement of such
proceeding including appeals, provided that the person acted under the standards
set forth in the preceding paragraph. However, no indemnification shall be made
for any claim, issue or matter for which such person is found to be liable
unless, and only to the extent that, the court determines that, despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnification for such
expenses which the court deems proper.
Section 607.0850(4) of the FCBA
provides that any indemnification made under the above provisions,
unless pursuant to a court determination, may be made only after a determination
that the person to be indemnified has met the standard of conduct described
above. This determination is to be made by a majority vote of a quorum
consisting of the disinterested directors of the board of directors, by
independent legal counsel, or by a majority vote of the disinterested
shareholders. The board of directors also may designate a special committee of
disinterested directors to make this determination.
Section 607.0850(3), however, provides that a Florida corporation must
indemnify any director or officer of a corporation that has been successful in
the defense of any proceeding referred to in Section 607.0850(1) or (2), or in
the defense of any claim, issue or matter therein, against expenses actually and
reasonably incurred by him in connection therewith.
Expenses incurred by a director or officer in defending a civil or criminal
proceeding may be paid by the corporation in advance of the final disposition
thereof upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it is ultimately determined that such director
or officer is not entitled to indemnification under Section 607.0850.
Section 607.0850 of the FBCA
further provides that the indemnification provisions contained therein are
not exclusive and it specifically empowers a corporation to make any other
further indemnification or advancement of expenses under any bylaw, agreement,
vote of shareholders or disinterested directors or otherwise, for actions in an
official capacity and in other capacities while holding an office. However, a
corporation cannot indemnify or advance expenses if a judgment or other final
adjudication establishes that the actions of the director or officer were
material to the adjudicated cause of action and the director or officer (a)
violated criminal law, unless the director or officer had reasonable cause to
believe his conduct was unlawful, (b) derived an improper personal benefit from
a transaction, (c) was or is a director in a circumstance where the liability
II-1
<PAGE>
under Section 607.0834 (relating to unlawful distributions) applies, or (d)
engages in willful misconduct or conscious disregard for the best interests of
the corporation in a proceeding by or in right of the corporation to procure a
judgment in its favor or in a proceeding by or in right of a shareholder.
THE FOREGOING IS ONLY A GENERAL SUMMARY OF CERTAIN ASPECTS OF FLORIDA LAW
DEALING WITH INDEMNIFICATION OF DIRECTORS AND OFFICERS AND DOES NOT PURPORT TO
BE COMPLETE. IT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE RELEVANT
STATUTES OF THE FBCA .
Reference is made to Article 7 of the Company's Articles of Incorporation
filed as Exhibit 3.2 hereto.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed with or incorporated by reference in this
Registration Statement:
Exhibit No. Description of Exhibit
2.1 Agreement and Plan of Reorganization, by and among Datalinc, Ltd.,
Fastcom, Ltd. and Thrucomm, Inc., dated May 5, 1997 - Included as
Appendix A to the Consent Statement/Prospectus.
3.1 Articles of Incorporation of Thruco, Inc.
3.1.1 Articles of Amendment to Articles of Incorporation of Thruco, Inc.*
3.1.2 Designation of Class, Series, Preferences and Right of Preferred
Shares by Thrucomm, Inc.*
3.2 By-laws of Thruco, Inc.
5.1 Opinion of Michael T. Williams, P.A.*
8.1 Opinion of Schifino & Fleischer, P.A.*
10.1 Purchase Agreement by and between Blue Chip/Datalinc Corporation,
Integrated Communication Networks, Inc., John F. Kolenda, Mark J.
Gianinni and Datalinc, Ltd., dated as of September 1, 1993. *
10.1.1 Amendment to Purchase Agreement, dated September 1, 1993 *.
10.2 Option Agreement by and between Datalinc, Ltd. and CFG Securities
Corp.
10.3 Managing Dealer Agreement by and between Fastcom, Ltd. and CFG
Securities Corp., dated as of April 24, 1996.
10.4.1 Agreement by and between Information Leasing Corporation, Datalinc,
Ltd. and Fastcom, Ltd., dated as of September 6, 1995.
10.4.2 Master Lease Agreement by and between Information Leasing
Corporation, Datalinc, Ltd. and Fastcom, Ltd., dated as of
November 7, 1995.
10.5 Payment Agreement by and between Fastcom, Ltd. and Nova
Engineering. *
10.6 Form of Employment Agreement to be entered into by and among
Thrucomm, Inc. and Messrs. Kolenda and Gianinni. *
10.7 Incentive and Non-Statutory Stock Option Plan.
10.8 Non-Employee Directors Non-Statutory Stock Option Plan.
10.9 Datalinc, Ltd., Management Incentive Plan.
10.10.1 Thruco, Inc.'s $600,000 Line of Credit with United Bank and
Trust Co., dated as of March 24, 1997. *
10.10.2 Datalinc's $300,000 Line of Credit with United Bank and Trust
Co., dated as of October 3, 1994. *
II-2
<PAGE>
10.11 Industrial Lease Agreement between Industrial Developments
International, Inc. and Datalinc-I, Ltd., dated as of
April 15, 1991. *
10.12 Customer Protection Letter from Hughes Network Systems.
23.1 Consent of Price Waterhouse LLP - Included at Page II-7.
23.2 Consent of Michael T. Williams, P.A.*
23.3 Consent of Schifino & Fleischer, P.A.*
23.4 Consent of Michael Davis and Company, P.A. - Included
in Exhibit 99.2.
24.1 Powers of Attorney - Included at Page II-6.
27.1 Financial Data Schedule.
99.1 Form of Written Consent of the Investors of Datalinc, Ltd. *
99.2 Opinion of Michael Davis & Company, P.A. - Included as Appendix B
to the Proxy Statement-Prospectus.
99.3 Amended Agreement of Limited Partnership of Datalinc, Ltd. *
99.4 Amended and Restated Agreement of Limited Partnership of
Fastcom, Ltd.
- -----------------
* To be filed by Amendment.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any consent statement/prospectus required by Section
10(a)(3) of the Securities Act.
(ii) To reflect in the consent statement/prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change in such information in the Registration Statement.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a -3 or Rule 14c -3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the consent statement/prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the consent statement/prospectus to provide such interim financial
information.
(d) (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
consent statement/prospectus which is a part of this Registration Statement, by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering consent
statement/prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The Registrant undertakes that every consent statement/prospectus
(i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Securities Act and
is used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the Registration Statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the consent
statement/prospectus pursuant to items 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
II-4
<PAGE>
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on May 8, 1997.
THRUCOMM, INC.
By: /s/Mark J. Gianinni
Mark J. Gianinni
President
POWER OF ATTORNEY
Each person whose signature to this Registration Statement appears below
hereby appoints Mark J. Gianinni and John F. Kolenda, or either of them, as his
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all amendments and post-effective amendments to this
Registration Statement, and any and all instruments or documents filed as a part
of or in connection with this Registration Statement or the amendments thereto,
and the attorney-in-fact, or either of them, may make such changes and additions
to this Registration Statement as the attorney-in-fact, or either of them, may
deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
- -------------------------------------------------------------------------------
/s/Mark J. Gianinni President and Director May 8, 1997
- -------------------------- (Principal Executive Officer)
Mark J. Gianinni
/s/John F. Kolenda Chairman of the Board and Chief May 8, 1997
- -------------------------- Financial Officer and Director
John F. Kolenda (Principal Financial and
Accounting Officer)
/s/Joseph F. Bert Director May 8, 1997
- --------------------------
Joseph F. Bert
/s/R. Brandon Harrison, Jr. Director May 8, 1997
- ---------------------------
R. Brandon Harrison, Jr.
/s/Z. David Patterson Director May 8, 1997
- ---------------------------
Z. David Patterson
/s/Vincent Rinaldi Director May 8, 1997
- ----------------------------
Vincent Rinaldi
II-6
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of our reports dated February 12, 1997
relating to the consolidated financial statements of Datalinc, Ltd., and the
financial statements of Fastcom, Ltd. and Thrucomm, Inc., which appear in such
Prospectus. We also consent to the references to us under the heading "Experts"
in such Prospectus.
/s/Price Waterhouse LLP
- -----------------------------
PRICE WATERHOUSE LLP
Tampa, Florida
May 7, 1997
II-7
<PAGE>
Exhibit No Description of Exhibits
- -------------------------------------------------------------------------------
2.1 Agreement and Plan of Reorganization, by and among Datalinc, Ltd.,
Fastcom, Ltd. and Thrucomm, Inc., dated May 5, 1997 - Included as
Appendix A to the Consent Statement/Prospectus.
3.1 Articles of Incorporation of Thruco, Inc.
3.1.1 Articles of Amendment to Articles of Incorporation of Thruco, Inc.*
3.1.2 Designation of Class, Series, Preferences and Right of Preferred
Shares by Thrucomm, Inc. *
3.2 By-laws of Thruco, Inc.
5.1 Opinion of Michael T. Williams, P.A.*
8.1 Opinion of Schifino & Fleischer, P.A.*
10.1 Purchase Agreement by and between Blue Chip/Datalinc Corporation,
Integrated Communication Networks, Inc., John F. Kolenda, Mark J.
Gianinni and Datalinc, Ltd., dated as of September 1, 1993. *
10.1.1 Amendment to Purchase Agreement, dated September 1, 1993 *.
10.2 Option Agreement by and between Datalinc, Ltd. and CFG Securities
Corp.
10.3 Managing Dealer Agreement by and between Fastcom, Ltd. and CFG
Securities Corp., dated as of April 24, 1996.
10.4.1 Agreement by and between Information Leasing Corporation,
Datalinc, Ltd. and Fastcom, Ltd., dated as of September 6, 1995.
10.4.2 Master Lease Agreement by and between Information Leasing
Corporation, Datalinc, Ltd. and Fastcom, Ltd., dated as of
November 7, 1995.
10.5 Payment Agreement by and between Fastcom, Ltd. and Nova
Engineering. *
10.6 Form of Employment Agreement to be entered into by and among
Thrucomm, Inc. and Messrs. Kolenda and Gianinni.*
10.7 Incentive and Non-Statutory Stock Option Plan.
10.8 Non-Employee Directors Non-Statutory Stock Option Plan.
10.9 Datalinc, Ltd., Management Incentive Plan.
10.10.1 Thruco, Inc.'s $600,000 Line of Credit with United Bank and
Trust Co., dated as of March 24, 1997. *
10.10.2 Datalinc's $300,000 Line of Credit with United Bank and Trust
Co., dated as of October 3, 1994. *
10.11 Industrial Lease Agreement between Industrial Developments
International, Inc. and Datalinc-I, Ltd., dated as of
April 15, 1991.*
10.12 Customer Protection Letter from Hughes Network Systems.
23.1 Consent of Price Waterhouse LLP. (Included at Page II-7)
23.2 Consent of Michael T. Williams, P.A.*
23.3 Consent of Schifino & Fleischer, P.A.*
23.4 Consent of Michael Davis and Company, P.A.- Included
in Exhibit 99.2.
24.1 Powers of Attorney - Included at Page II-6.
27.1 Fiancial Data Schedule.
99.1 Form of Written Consent of the Investors of Datalinc, Ltd. *
99.2 Opinion of Michael Davis & Company, P.A. - Included as Appendix B
to the Proxy Statement-Prospectus.
99.3 Amended Agreement of Limited Partnership of Datalinc, Ltd. *
99.4 Amended and Restated Agreement of Limited Partnership of
Fastcom, Ltd.
- -----------------
* To be filed by Amendment.
II-8
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EXHIBIT 3.1
Articles of Incorporation of Thruco, Inc.
<PAGE>
STATE OF FLORIDA
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of
Incorporation of THRUCO, INC., a Florida corporation, filed on December 16,1996,
as shown by the records of this office.
The document number of this corporation is P96000101198.
Given under my hand and the Great Seal of the State of Florida, at Tallahassee,
the Capital, this the Sixteenth Day of December, 1996
Sandra B. Mortham
Secretary of State
Great Seal of the State of Florida
CR2EO22 (2-95)
<PAGE>
ARTICLES OF INCORPORATION
OF
THRUCO, INC.
ARTICLE I - NAME AND MAILING ADDRESS
The name of this corporation is Thruco, Inc., and the mailing address
of this corporation is 1641 Commerce Avenue North, St. Petersburg, FL 33716.
ARTICLE 11 - DURATION
This corporation shall have perpetual existence.
ARTICLE III - PURPOSE
This corporation may engage in any activity or business permitted under
the laws of the State of Florida.
ARTICLE IV - CAPITAL STOCK
This corporation is authorized to issue One Hundred Million (100,000,000)
shares of common stock, no par value, which shall be designated as "Common
Stock," and Twenty-Five Million (25,000,000) shares of preferred stock,
which shall be designated as "Preferred Stock," issued in such series with
such designations, rights privileges and preferences, dividends, splits,
conversions or other issues as shall be determined by the Board of Directors
of the Corporation from time to time.
ARTICLE V - INITIAL REGISTERED OFFICE AND AGENT
The street address of the initial registered office of this corporation
is 1641 Commerce Avenue North, St. Petersburg, FL 33716, and the name of
the initial registered agent of this corporation at that address is
John F. Kolenda.
ARTICLE VI - INCORPORATOR
The name and address of the person signing these Articles of Incorporation
is:
Name Address
- --------------------------------------------------------------------------------
John F. Kolenda 1641 Commerce Avenue North
St. Petersburg, FL 33716
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ARTICLE VII - INDEMNIFICATION
This corporation shall indemnify any officer or director, or any former
officer or director, to the full extent permitted by law.
ARTICLE VIII - AMENDMENT
This corporation reserves the right to amend or repeal any provisions
contained in these Articles of Incorporation, or any amendment thereto, and any
right conferred upon the shareholders is subject to this reservation.
IN WITNESS WHEREOF, the undersigned incorporator has executed these Articles
of Incorporation this day of December, 1996.
/s/John F. Kolenda
-------------------------
John F. Kolenda
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<PAGE>
CERTIFICATE DESIGNATING REGISTERED AGENT
AND STREET ADDRESS FOR SERVICE OF PROCESS
WITHIN FLORIDA
Pursuant to Florida Statutes Section 48.091, THRUCO, INC., desiring to
organize a corporation under the laws of the State of Florida, hereby designates
John F. Kolenda, located at 1641 Commerce Avenue North, St. Petersburg, FL
33716, as its registered agent to accept service of process within the State of
Florida.
ACCEPTANCE OF DESIGNATION
The undersigned hereby accepts the above designation as registered agent to
accept service of process for the above-named corporation, at the place
designated above, and agrees to comply with the provisions of Florida Statutes
Section 48.091(2) relative to maintaining an office for the service of process.
/s/John F. Kolenda
------------------
John F. Kolenda
c:\carric\articles.thruco
3
<PAGE>
EXHIBIT 3-2
By-Laws of Thruco, Inc.
<PAGE>
BYLAWS
OF
THRUCO, INC.
ARTICLE I - MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders of this
corporation shall be held at the time and place designated by the Board of
Directors of the corporation. The annual meeting of shareholders for any year
shall be held no later than thirteen (13) months after the last preceding annual
meeting of shareholders. Business transacted at the annual meeting shall include
the election of directors of the corporation.
Section 2. Special Meetings. Special meetings of the shareholders shall be
held when directed by the Board of Directors, or when requested in writing by
the holders of not less than ten percent (10%) of all the shares entitled to
vote at the meeting. A meeting requested by shareholders shall be called for a
date not less than ten (10) or more than sixty (60) days after the request is
made, unless the shareholders requesting the meeting designate a later date. The
call for the meeting shall be issued by the Secretary, unless the President,
Board of Directors, or shareholders requesting the meeting designate another
person to do so.
Section 3. Place. Meetings of shareholders may be held within or without
the State of Florida.
Section 4. Notice. Written notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten (10) nor more than
sixty (60) days before the meeting, either personally or by first class mail, by
or at the direction of the President, the Secretary, or the officer or persons
calling the meeting to each shareholder of record 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 shareholder at his address as it
appears on the stock transfer books of the corporation, with postage thereon
prepaid.
Section 5. Notice of Adjourned Meetings. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. If, however, after the adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in this section to each shareholder
of record on the new record date entitled to vote at such meeting.
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Section 6. Closing of Transfer Books and Fixing Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholder of any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other purpose, the Board of Directors may provide that the stock transfer
books shall be closed for a stated period but not to exceed, in any case, sixty
(60) days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may fix
in advance a date as the record date for any determination of shareholders, such
date in any case to be not more than sixty (60) days and, in case of a meeting
of shareholders, not less than ten (10) days prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
If the stock transfer books are not closed and no record date is fixed for
the determination of shareholders entitled to notice or to vote at a meeting of
shareholders, or shareholders 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 shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date for the adjourned meeting.
Section 7. Voting Record. The officers or agent having charge of the stock
transfer books for shares of the corporation shall make, at least ten (10) days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, with the address of
and the number and class and series, if any, of shares held by each. The list,
for a period of ten (10) days prior to such meeting, shall be kept on file at
the registered office of the corporation, at the principal place of business of
the corporation or at the office of the transfer agent or register of the
corporation and any shareholder shall be entitled to inspect the list at any
time during usual business hours. The list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any shareholder at any time during the meeting.
If the requirements of this section have not been substantially complied
with, the meeting on demand of any shareholder in person or by proxy, shall be
adjourned until the requirements are complied with. If no such demand is made,
failure to comply with the requirements of this section shall not affect the
validity of any action taken at such meeting.
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<PAGE>
Section 8. Shareholder Quorum and Voting. A majority of the shares entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders. When a specified item of business is required to be
voted on by a class or series a majority of the shares of such class or series
shall constitute a quorum for the transaction of such item of business by that
class or series.
If a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders unless otherwise provided by law.
After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of
shareholders entitled to vote at the meeting below the number required for a
quorum, shall not affect the validity of any action taken at the meeting or any
adjournment thereof.
Section 9. Votinig of Shares. Each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders.
Treasury shares, shares of stock of this corporation owned by another
corporation the majority of the voting stock of which is owned or controlled by
this corporation, and shares of stock of this corporation held by 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.
A shareholder may vote either in person or by proxy executed in writing by
the shareholder or his duly authorized attorney-in-fact.
At each election for directors, every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected at
that time and for whose election he has a right to vote.
Shares standing in the name of another corporation, domestic or foreign,
may be voted by the officer, agent, or proxy designated by the bylaws of the
corporate shareholder; or, in the absence of any applicable bylaw, by such
person as the Board of Directors of the corporate shareholder may designate.
Proof of such designation may be made by presentation of a certified coy of the
bylaws or other instrument of the corporate shareholder. In the absence of any
such designation, or in case of conflicting designation by the corporate
shareholder, the chairman of the board, president, any vice president, secretary
and treasurer of the corporate shareholder shall be presumed to possess, in that
order, authority to vote such shares.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing gin 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
3
<PAGE>
held by him without a 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 so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee or his nominee shall be entitled to vote the shares so
transferred.
On and after the date on which written notice of redemption of redeemable
shares has been mailed to the holders thereof and a sum sufficient to redeem
such shares has been deposited with a bank or trust company with irrevocable
instruction and authority to pay the redemption price to the holders thereof
upon surrender of certificates therefor, such shares shall not be entitled to
vote on any matter and shall not be deemed to be outstanding shares.
Section 10. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting or a
shareholders' duly authorized attorney-in-fact may authorize another person or
persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No
proxy shall be valid after the expiration of eleven (I 1) months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except as otherwise provided by
law.
The authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless, before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the corporate officer responsible
for maintaining the list of shareholders.
If a proxy for the same shares confers authority upon two (2) or more
persons and does not otherwise provide, a majority of them present at the
meeting, or if only one (1) is present then that one, may exercise all the
powers conferred by the proxy; but if the proxy holders present at the meeting
are equally divided as to the right and manner of voting in any particular case,
the voting of such shares shall be prorated.
If a proxy expressly provides, any proxy holder may appoint in writing a
substitute to act in his place.
4
<PAGE>
Section 11. Voting Trusts. Any number of shareholders of this
corporation may create a voting trust for the purpose of conferring upon a
trustee or trustees the right to vote or otherwise represent their shares, as
provided by law. Where the counterpart of a voting trust agreement and the copy
of the record of the holders of voting trust certificates has been deposited
with the corporation as provided by law, such documents shall be subject to the
same right of examination by a shareholder of the corporation, in person or by
agent or attorney, as are the books and records of the corporation, and such
counterpart and such copy of such record shall be subject to examination by any
holder or record of voting trust certificates either in person or by agent or
attorney, at any reasonable time for any proper purpose.
Section 12. Shareholders' Agreements. Two (2) or more shareholders, of
this corporation may enter an agreement providing for the exercise of voting
rights in the manner provided in the agreement or relating to any phase of the
affairs of the corporation as provided by law. Nothing therein shall impair the
right of this corporation to treat the shareholders of record as entitled to
vote the shares standing in their names.
Section 13. Action by Shareholders Without a Meeting. Any action required
by law, these bylaws, or the articles of incorporation of this corporation to be
taken at any annual or special meeting of shareholders of the corporation, or
any action which may be taken at any annual or special meeting of such
shareholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted. If
any class of shares is entitled to vote thereon as a class, such written consent
shall be required of the holders of a majority of the shares of each class of
shares entitled to vote as a class thereon and of the total shares entitled to
vote thereon.
Within ten (10) days after obtaining such authorization by written consent,
notice shall be given to those shareholders who have not consented in writing.
The notice shall fairly summarize the material features of the authorized action
and, if the action be a merger, consolidated or sale or exchange of assets for
which dissenters rights are provided under this act, the notice shall contain a
clear statement of the right of shareholders dissenting therefrom to be paid the
fair value of their shares upon compliance with further provisions of this act
regarding the rights of dissenting shareholders.
ARTICLE 11 - DIRECTORS
Section 1. Function. All corporate powers shall be exercised by or under
the authority of, and business and affairs of the corporation shall be managed
under the direction of, the Board of Directors.
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<PAGE>
Section 2. Qualification. Directors need not be residents of this state
or shareholders of this corporation.
Section 3. Compensation. The Board of Directors shall have authority to
fix the compensation of directors.
Section 4. Duties of Directors. A director shall perform his duties as a
director, including his duties as a member of any committee of the board upon
which he may serve, in good faith, in a manner he reasonably believes to be in
the best interests of the corporation, and with such care as an ordinarily
prudent person in a like position would use under similar circumstances.
In performing his duties, a director shall be entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, in each case prepared or presented by:
(a) one (1) or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented;
(b) counsel, public accountants or other persons as to matters which the
director reasonably believes to be within such person's professional or expert
competence; or
(c) a committee of the board upon which he does not serve, duly designated
in accordance with a provision of the articles of incorporation or the bylaws,
as to matters within its designated authority, which committee the director
reasonable believes to merit confidence.
A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described above to be unwarranted.
A person who performs his duties in compliance with this section shall have
no liability by reason of being or having been a director of the corporation.
Section 5. Presumption of Assent. A director of the corporation who is
present at a meeting of its Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless he
votes against such action or abstains from voting in respect thereto because of
an asserted conflict of interest.
Section 6. Number. The corporation shall have at least one (1) director.
The minimum number of directors may be increased or decreased from time to time
by amendment to these bylaws, but no decrease shall have the effect of
shortening the terms of any incumbent director and no amendment shall decrease
the number of directors below one (1), unless the stockholders have voted to
operate the corporation.
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Section 7. Election and Term. Each person named in the articles of
incorporation as a member of the initial board of directors shall hold office
until the first annual meeting of shareholders, and until his successor shall
have been elected and qualified or until his earlier resignation, removal from
office or death.
At the first annual meeting of shareholders and at each annual meeting
thereafter, the shareholders shall elect directors to hold office until the next
succeeding annual meeting. Each director shall hold office for the term for
which he is elected and until his successor shall have been elected and
qualified or until his earlier resignation, removal from office or death.
Section 8. Vacancies. Any vacancy occurring in the Board of Directors, including
any vacancy created by reason of an increase in the number 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 hold office only until the next election of directors by the
shareholders.
Section 9. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director or the entire Board of Directors may be
removed, with or without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
Section 10. Quorum and Voting,. A majority of the number of directors fixed
by these bylaws shall constitute a quorum for the transaction of business. 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.
Section 11. Director Conflicts of Interest. No contract or other
transaction between this corporation and one (1) or more of its directors or any
other corporation, firm, association or entity in which one (1) or more of the
directors are directors or officers or are financially interested, shall be
either void or voidable because of such relationship or interest or because such
director or directors are present at the meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies such contract or
transaction or because his or their votes are counted for such purpose, if-
(a) The fact of such relationship or interest is disclosed or known to the
Board of Directors or committee which authorizes, approves or ratifies the
contract or transaction by a vote or consent sufficient for the purpose without
counting the votes or consents of such interested directors; or
(b) The fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or
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(c) The contract or transaction is fair and reasonable as to the
corporation at the time it is authorized by the board, a committee or
shareholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or a committee thereof which
authorizes, approves or ratifies such contract or transaction.
Section 12. Executive and Other Committees. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an executive committee and one (1) or more other
committees each of which, to the extent provided in such resolution shall have
and may exercise all the authority of the Board of Directors, except that no
committee shall have the authority to:
(a) approve or recommend to shareholders actions or proposals
required by law to be approved by shareholders,
(b) designate candidates for the office of director, for purposes
of proxy solicitation or otherwise,
(c) fill vacancies on the Board of Directors or any committee
thereof,
(d) amend the bylaws,
(e) authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the Board of
Directors, or
(f) authorize or approve the issuance or sale of, or any contract to
issue or sell, shares or designate the terms of a series of a class of shares,
except that the Board of Directors, having acted regarding general authorization
for the issuance or sale of shares, or any contract therefor, and, in the case
of a series, the designation thereof, may, pursuant to a general formula or
method specified by the Board of Directors, by resolution or by adoption of a
stock option or other plan, authorize a committee to fix the terms of any
contract for the sale of the shares and to fix the terms upon which such shares
may be issued or sold, including, without limitation, the price, the rate or
manner of payment of dividends, provisions for redemption, sinking fund,
conversion, voting or preferential rights, and provisions for other features of
a class of shares, or a series of a class of shares, with full power in such
committee to adopt any final resolution setting forth all the terms thereof and
to authorize the statement of the terms of a series for filing with the
Department of State.
The Board of Directors, by resolution adopted in accordance with this
section, may designate one (1) or more directors as alternate members of any
such committee, who may act in the place and stead of any member or members at
any meeting of such committee.
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Section 13. Place of Meetings. Regular and special meetings by the Board
of Directors may be held within or without the State of Florida.
Section 14. Time, Notice and Call of Meetings. Regular meetings by the
Board of Directors shall be held without notice. Written notice of the time and
place of special meetings of the Board of Directors shall be given to each
director by either personal delivery, telegram or cablegram at least two (2)
days before the meeting or by notice mailed to the director at least five (5)
days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the 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 notice of such meeting.
A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of any such adjourned meeting shall be given to the directors who were
not present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors.
Meetings of the Board of Directors may be called by the chairman of the
board, by the president of the corporation, or by any two (2) directors.
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
Section 15. Action Without a Meeting. Any action required to be taken
at a meeting of the directors of a corporation, or any action which may be taken
at a meeting of the directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken, signed
by all of the directors, or all the members of the committee, as the case may
be, is filed in the minutes of the proceedings of the board or of the committee.
Such consent shall have the same effect as a unanimous vote.
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ARTICLE III - OFFICERS
Section 1. Officers. The officers of this corporation shall consist of
a president, a secretary and a treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers and agents as may
be deemed necessary may be elected or appointed by the Board of Directors from
time to time. Any two (2) or more offices may be held by the same person. The
failure to elect a president, secretary or treasurer shall not affect the
existence of this corporation.
Section 2. Duties. The officers of this corporation shall have the
following duties:
The President shall be the chief executive officer of the corporation,
shall have general and active management of the business and affairs of the
corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the stockholders and Board of Directors.
The Secretary shall have custody of, and maintain, all of the corporate
records except the financial records; shall record the minutes of all meetings
of the stockholders and Board of Directors, send all notice of meetings out, and
perform such other duties as may be prescribed by the Board of Directors or the
President.
The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of stockholders and whenever else
required by the Board of Directors or the President, and shall perform such
other duties as may be prescribed by the Board of Directors or the President.
Section 3. Removal of Officers. Any officer or agent elected or
appointed by the Board of Directors may be removed by the board whenever in its
judgment the best interest of the corporation will be served thereby.
Any officer or agent elected by the shareholders may be removed only by
vote of the shareholders, unless the shareholders shall have authorized the
directors to remove such officer or agent.
Any vacancy, however occurring, in any office may be filled by the
Board of Directors, unless the bylaws shall have expressly reserved such power
to the shareholders.
Removal of any officer shall be without prejudice to the contract
rights, if any, of the person so removed; however, election or appointment of an
officer or agent shall not of itself create contract rights.
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ARTICLE IV - STOCK CERTIFICATES
Section 1. Issuance. Every holder of shares in this corporation shall
be entitled to have a certificate, representing all shares to which he is
entitled. No certificate shall be issued for any share until such share is fully
paid.
Section 2. Form. Certificates representing shares in this corporation
shall be signed by the President or Vice-President and the Secretary or an
Assistant Secretary and may be sealed with the seal of this corporation or a
facsimile thereof. The signatures of the President or Vice-President and the
Secretary or Assistant Secretary may be facsimiles if the certificate is
manually signed on behalf of a transfer agent or a registrar, other than the
corporation itself or an employee of the corporation. In case any officer who
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the corporation with the same effect as if he were such officer at the
date of its issuance.
Every certificate representing shares which are restricted as to the
sale, disposition or other transfer of such shares shall state that such shares
are restricted as to transfer and shall set forth or fairly summarize upon the
certificate, or shall state that the corporation will furnish to any shareholder
upon request and without charge a full statement of, such restrictions.
Each certificate representing shares shall state upon the fact thereof.
the name of the corporation; that the corporation is organized under the laws of
this state; the name of the person or persons to whom issued; the number and
class of shares, and the designation of the series, if any, which such
certificate represents; and the par value of each share represented by such
certificate, or a statement that the shares are without par value.
Section 3. Transfer of Stock. The corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder or record of by his duly authorized attorney, and the signature of
such person has been guaranteed by a commercial bank or trust company or by a
member of the New York or American Stock Exchange.
Section 4. Lost, Stolen, or Destroyed Certificates. The corporation
shall issue a new stock certificate in the place of any certificate previously
issued if the holder of record of the certificate (a) makes proof in affidavit
form that it has been lost, destroyed or wrongfully taken; (b) requests the
issue of a new certificate before the corporation has notice that the
certificate has been acquired by a purchaser for value in good faith and without
notice of any adverse claim; (c) gives bond in such form as the corporation may
direct, to indemnify the corporation, the transfer agent, and registrar against
any claim that may be made on account of the alleged loss, destruction, or theft
of a certificate; and (d) satisfies any other reasonable requirements
imposed by the corporation.
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<PAGE>
ARTICLE V - BOOKS AND RECORDS
Section 1. Books and Records. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders, board of directors and committees of directors.
This corporation shall keep at its registered office or principal place
of business, or at the office of its transfer agent or registrar, a records of
its shareholders, giving the names and addresses of all shareholders, and the
number, class and series, if any, of the shares held by each.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
Section 2. Shareholders' Inspection Rights. Any person who shall have
been a holder of record of shares or of voting trust certificates therefor at
least six (6) months immediately preceding his demand or shall be the holder of
record of, or the holder of record of voting trust certificates for, at least
five percent (5%) of the outstanding shares of any class or series of the
corporation, upon written demand stating the purpose thereof, shall have the
right to examine, in person or by agent or attorney, at any reasonable time or
times, for any proper purpose its relevant books and records of accounts,
minutes and records of shareholders and to make extracts therefrom.
Section 3. Financial Information. Not later than four (4) months after
the close of each fiscal year, this corporation shall prepare a balance sheet
showing in reasonable detail the financial condition of the corporation as of
the close of its fiscal year, and a profit and loss statement showing the
results of the operations of the corporation during its fiscal year.
Upon the written request of any shareholder or holder of voting trust
certificates for shares of the corporation, the corporation shall mail to such
shareholder or holder of voting trust certificates a copy of the most recent
such balance sheet and profit and loss statement.
The balance sheets and profit and loss statements shall be filed in the
registered office of the corporation in this state, shall be kept for at least
five (5) years, and shall be subject to inspection during business hours by any
shareholder or holder of voting trust certificates, in person or by agent.
ARTICLE VI - DIVIDENDS
The Board of Directors of this corporation may, from time to time,
declare and the corporation may pay dividends on its shares in cash, property or
its own shares, except when the corporation is insolvent or when the payment
thereof would render the corporation insolvent or when the declaration or
payment thereof would be contrary to
12
<PAGE>
any restrictions contained in the articles of incorporation, subject to the
following provisions:
(a) Dividends in cash or property may be declared and paid, except as
otherwise provided in this section, only out of the unreserved- and unrestricted
earned surplus of the corporation or out of capital surplus, howsoever arising
but each dividend paid out of capital surplus, and the amount per share paid
from such surplus shall be disclosed to the shareholders receiving the same
concurrently with the distribution.
(b) Dividends may be declared and paid in the corporation's own
treasury shares.
(c) Dividends may be declared and paid in the corporation's own
authorized but unissued shares out of any unreserved and unrestricted surplus
of the corporation upon the following conditions:
(1) If a dividend is payable in shares having a par value,
such shares shall be issued at not less than the par value thereof and
there shall be transferred to stated capital at the time such dividend
is paid an amount of surplus equal to the aggregate par value of the
shares to be issued as a dividend.
(2) If a dividend is payable in shares without a par value,
such shares shall be issued at such stated value as shall be fixed by the Board
of Directors by resolution adopted at the time such dividend is declared,
and there shall be transferred to stated capital at the time such dividend
is paid an amount of surplus equal to the aggregate stated value so fixed in
respect of such shares; and the amount per share so transferred to stated
capital shall be disclosed to the shareholders receiving such dividend
concurrently with the payment thereof.
(d) No dividend payable in shares of any class shall be paid to the
holders of shares of any other class unless the articles of incorporation so
provide or such payment is authorized by the affirmative vote or the written
consent of the holders of at least a majority of the outstanding shares of the
class in which the payment is to be made.
(e) A split-up or division of the issued shares of any class into a
greater number of shares of the same class without increasing the stated capital
of the corporation shall not be construed to be a share dividend within the
meaning of this section.
ARTICLE VII - CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation as
it appears on page I of these bylaws.
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<PAGE>
ARTICLE VIII - AMENDMENTS
These bylaws may be repealed or amended, and new bylaws may be adopted,
by the Board of Directors.
End of bylaws adopted by the Board of Directors.
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<PAGE>
EXHIBIT 10-2
Option Agreement by and between Datalinc, Ltd. and CFG Securities Corp.
<PAGE>
STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of _____________, ______by and between
Certified Financial Group, Inc, a Florida corporation or its assigns
("Optionee"), and Datalinc, Ltd., a Florida limited Partnership ("Grantor").
RECITALS
WHEREAS, Grantor desires to grant to Optionee and Optionee desires to
obtain an option (the "Option") to acquire from Grantor a 4% interest in
Grantor, as further set forth in and subject to all the provisions of Grantor's
Agreement of Limited Partnership (the "Managing Dealer Units"); and
WHEREAS, the parties hereto desire to document their understanding
regarding the Option to purchase the Managing Dealer Units.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. Grant of Option and Nature of Managing Dealer Units. For and in
consideration of the payment of $1.00, Grantor hereby grants to Optionee the
Option to acquire the Managing Dealer Units from Grantor at the option price of
$1.00 for all Managing Dealer Units. All Managing Dealer Units acquired
hereunder shall be subject to all provisions of Grantor's Agreement of Limited
Partnership, including dilution, as amended from time-to-time.
2. Exercise of Option. The Option shall be exercisable at any time, in
whole or in part, at any time for period commencing on the date hereof and
ending on the termination of the Partnership, with Grantor being required to
give Optionee written notice thirty (30) days prior to such termination.
3. Method of Exercise. The Option shall be exercisable by a written signed
by an authorized representative of Optionee or his assigns which shall (a) state
Optionee's election to exercise the Option; (b) the person in whose name the
certificate for such Managing Dealer Units is to be registered, his address and
social security number; (c) be delivered in person or by certified mail to
Grantor.
4. Assignability of Option. The Option may be assigned by Optionee at any
time during the term of the Option by providing to Grantor a written notice of
assignment.
5. Representations and Warranties of Grantor. Upon exercise of the Option
in full by Optionee or his assigns, the Managing Dealer Units underlying the
Option shall be free and clear of all liens, claims, charges and encumbrances.
Grantor agrees to indemnify and hold harmless Optionee in connection with any
claim, loss, damage or expense, including attorneys' fees, trial and appellate
levels, in connection with any breach of the foregoing.
6. Survival of Representations and Warranties. The representations,
warranties, covenants and agreements set forth herein shall be continuous and
shall survive the termination of this Agreement or any part thereof.
7. Miscellaneous.
a. Entire Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the transactions contemplated
hereby, and this Agreement supersedes in all respects all written or oral
understandings and agreements heretofore existing between the parties
hereto.
b Counterparts. This Agreement may be executed in one or more
counterparts, and all such counterparts shall constitute one and the same
instrument. c. Notices. All notices, consents, requests, instructions, approvals
and other communications provided for herein and all legal process with regard
hereto shall be in writing and shall be deemed to have been duly given, when
delivered by hand or three (3) days after deposited into the United States mail,
by registered or certified mail, return receipt requested, postage prepaid.
d. Additional Documents. At any time and from time, the parties
hereto shall execute such documents as are necessary to effect this Agreement.
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<PAGE>
e. Jurisdiction; Venue. The parties to this Agreement agree that
jurisdiction and venue shall properly lie in the Thirteenth Judicial
Circuit of the State of Florida, in and for Hillsborough County, Florida, or in
the United States District Court for the Middle District of Florida (Tampa
Division), with respect to any legal proceedings arising from this Agreement. f.
Attorneys' Fees. In the event any suit or legal proceeding is brought for the
enforcement of any of the provisions of this Agreement, the parties hereto agree
that the prevailing party or parties shall be entitled to recover from the other
party or parties upon final judgment on the merits reasonable attorneys' fees,
including attorneys' fees for any appeal, and costs incurred in bringing such
suit or proceeding.
g. Governing Law. This Agreement has been negotiated and prepared
and shall be performed in the State of Florida, and the validity,
construction and enforcement of, and the remedies under, this Agreement shall be
governed in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement the
day and year first above written.
OPTIONEE:
Certified Financial Group, Inc.,
a Florida Corporation
By:___________________________________
Its:____________________________________
GRANTOR:
DATALINC, LTD.
By: Integrated Communication Networks, Inc.,
General Partner
By:___________________________________
Its:____________________________________
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<PAGE>
EXHIBIT 10.3
Managing Dealer Agreement by and between Fastcom, Ltd. and CFG Securities
Corp., dated as of April 24, 1996
<PAGE>
MANAGING DEALER AGREEMENT
THIS MANAGING DEALER AGREEMENT (the 'Agreement") made and entered into
this 21st day of 1996, by and between Fastcom, Ltd., a Florida Limited
Partnership (the "Partnerships), and CFG Securities Corp. (the "Managing
Dealer").
R E C I T A L S:
A. The Partnership is offering a maximum of 300 Limited Partnership
Units - Series 200 (the "Units") in the amount of $ 10,000 each, payable in cash
upon subscription.
B. The Partnership desires to engage the Managing Dealer on a
non-exclusive basis to sell up to 300 Units of the Partnership on a
best-efforts basis, and the Managing Dealer desires to agree to sell
such Units on behalf of the Partnership on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of mutual covenants contained herein
and other good and valuable consideration, the parties hereto agree as follows:
1. The Partnership represents and warrants to the Managing Dealer that:
a. The Partnership is duly organized and validly existing as a
Limited Partnership in good standing under the laws of the State of Florida.
b. This Agreement has been duly authorized, executed and delivered
by the Partnership and is a valid and binding Agreement on its part.
c. The Partnership's performance under this Agreement and
consummation of the transactions herein contemplated will not result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any statute, indenture, mortgage, deed or trust, or other
Agreement or instrument to which the Partnership is a party or by which it is
bound, or any order, rule or regulation of any court or governnental agency
or body having jurisdiction over the Partnership or any of its properties,
and no other consent approval, authorization or action is required for
consummation of the transactions herein contemplated.
d. The Partnership will prepare a Memorandum (the "Memorandum") for
the offer relating to the Units.
e. There are no material legal or governnental proceedings pending
to which the Partnership is a party or of which any of the Paruiership's assets
is the subject.
2. The Managing Dealer represents and war-rants to the Partnership that:
a. The Managing Dealer is duly organized and validly existing as a
corporation in good standing under the laws of the State of Virginia.
b. This Agreement has been duly authorized, executed and delivered
by the Managing Dealer and is a valid and binding Agreement on its part.
c. The Managing Dealer's performance under this Agreement and
consummation of the transactions herein contemplated will not result in a breach
or violation of any of the tentis or provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, or other Agreement or
instnanent to which the Managing Dealer is a party or by which it is bound, or
any order, rule or regulation of any court or govenunental agency or body having
jurisdiction over the Managing Dealer or any of its properties; and no other
consent, approval, authorization or action is required for consununation of the
transactions herein contemplated.
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<PAGE>
d. The Managing Dealer is duly registered pursuant to the provisions of
the Securities Exchange Act of 1933 as a broker/dealer, is a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD"), and
is duly registered as a broker/dealer in such states as it is required in order
to carry out its obligations as contemplated by this Agreement. e. The Managing
Dealer is familiar with the requirements under the Act and confirms that it will
comply therewith.
f The Managing Dealer shall maintain in its files such documents
as are necessary to demonstrate the suitability of each investor to whom the
Managing Dealer sells a Unit or Units hereunder.
g. The Managing Dealer acknowledges that the Units will be offered
and sold pursuant to the Memorandum.
3. Subject to the terms and conditions herein set forth, the Managing
Dealer agrees to use its best efforts during the subscription period, as stated
in the Memorandwn, to sell as Managing bealer for the Partnership, up to the
maximum number of Units as stated in the Memorandum at the stated offering
price, and in accordance with the provisions of SEC Rule l5c24 to cause all
ftinds received for the sale of a Unit to be promptly deposited with the Escrow
Agent until the Minimum Offering is sold, and the Partnership thereafter upon
the receipt of the executed Subscription Agreement and related funds by the
Managing Dealer by or before noon of the next business day following the sale of
said Units. The Managing Dealer's compensation shall be eight percent (8%) of
the sales price of the Units sold by it. The Managing Dealer shall also be paid
an amount up to two M=t (2%) of the sales price of each Unit sold by it as a
Non-Accountable Expense Allowance. The compensation shall be payable within five
(5) business days of the receipt of subscription funds from the Managing Dealer.
In addition, the Partnership will enter into certain agreements with the
Managing Dealer pursuant to which the Managing Dealer will be granted an option
to acquire a 1.2% interest in the Partnership for $120,000, pro rated based upon
the amount of @ raised if more than $500,000 but less than $ 1,000,000 is raised
in this offering on or before June 30, 1996, and an additional option to acquire
an additional 1.2% interest in the Partnership for an additional $120,000 if
more than $1,000,000israisedintWsoffenngonorbeforeJune 30, 1996. During the
subscriptionperiod, the Managing Dealershall obtain from each subscriber for
Units an executed Subscription Agreement in the form set forth in the
Memorandwn, and shall deliver the Subscription Agreement to the Escrow Agent
with a copy to the Partnership until the Minimum Offering is sold, and the
Partnership thereafter. The Managing Dealer shall retain on behalf of the
Partnership, a copy of the Subscription Agreement, submitted by each subscriber,
and shall maintain an accurate record of the name and address of each
subscriber, the number of Units subscribed for, and the date and amount of each
subscription within five (5) business days after receipt, subject to the maxlmwn
limits on the number of Units being sold. If a subscription is not expressly
rejected by written notice to the subscriber with five (5) business days, the
subscription shall be deemed accepted.
4. The Managing Dealer agrees that the Units are available for offer and
sale only to bona fide residents of such states as are authorized by the
Partnership, and further agrees that no offer or sale of Units will be made to
any persons other than residents of those states.
5. During the offering, the Partnership agrees to furnish the Managing
Dealer with the Memorandum and any other information or documentation required
by the Managing Dealer to determine the adequacy and the accuracy of the
disclosures made in the Memorandum.
6. The Managing Dealer shall offer the Units for sale upon the terms and
conditions set forth in the Memorandum, including, %vithout limitation, that it
will limit the offering of the Units to persons who it has reasonable grounds to
believe meet the suitability requirements set forth in the Memorandum. The
Managing Dealer shall offer and sell the Units directly to retail purchasers.
7. The Partnership will furnish the Managing Dealer with copies of the
Memorandum and any amendments or supplements thereto in such quantities as the
Managing Dealer may from time to time reasonably request.
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<PAGE>
8. The Partnership covenants and agrees with the Managing Dealer that,
except for the Managing Dealer's compensation, the Partnership will pay or cause
to be paid all orpanizational and other expenses of the offering, including, but
not limited to, accounting and legal fees, the costs and expenses incident to
the preparation, printing and transmitting of the Memorandum, Blue Sky expenses
and filing fees.
9. a. The Partnership will indemnify and hold the Managing Dealer
harmless against any losses, claims, damages or liabilities, joint or several
to which the Managing Dealer may become subject under the Act, the various state
securities laws, or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Memorandum or arise out of or are based upon the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Managing Dealer for any legal or
other expenses reasonably incurred in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Partnership shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Memorandum in reliance upon and in conformity with information
ftirnished to the Partnership by the Managing Dealer specifically for use in the
preparation thereof The foregoing indemnity shall extend upon the same terms and
conditions to, and shall inure to the benefit of, each person, if any, who
controls the Managing Dealer within the meaning of the Act.
b. The Managing Dealer will indmmify and hold harmless the Partnership,
all officers, directors, employees, affiliates and legal counsel for the
Partnership against any losses, claims, damages or liabilities (or actions in
respect thereto which arise out of or are based upon the Managing Dealer's
obligations under this Agreement, or any untrue statement or alleged untrue
statement of any material fact contained in the Memorandum otherwise or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
not nusleading, in each such case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement was made or such omission or
alleged omission was omitted to be made in the Memorandum in reliance upon and
in conformity with information fumished to the Partnership by the Managing
Dealer specifically for use in the preparation of, and the Managing Dealer will
reimburse such parties for any legal or other expenses reasonably incurred in
connection with investigating or defending such loss, claim, damage, liability
or action. The foregoing indemnify shall extend upon the same terms and
conditions to, and shall inure to the benefit or, each person, if any, who
controls the Partnership within the meaning of the Act upon formation as legal
entities, and to counsel for the Partnership.
c. Promptly after receipt by an indemnified party of notice of the
commencement of any action, such indemnifyng party shall, if a claim in respect
thereof is to be made against the indemnifying party trader paragraphs (a)
and (b) of this section 9, notify the indemnifying party in writing of the
commencement thereof, but the omission to so notify the indemnifying party
shall not relieve it from any liability which it may have to any indemnified
party otherwise than under such paragraphs. In case any such action shall
be brought against such indemnified party, and it shall notify, the
indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in, and, to the extent that it shall desire, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified and indemnifying parties,
and after the indemnified party shall have received notice from the agreed-upon
counsel that the defense under such paragraph has been so assumed, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof.
10. This Agreement shall become effective upon the execution thereof by
the parties hereto. Either party may temiinate this Agreementfor a willful
violation by the other party of any securities or other law, upon tcii (10) days
written notice being given to the other party. This Agreement may also be
terminated by a written instrument signed by the parties thereto.
11. All notices, requests and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered or mailed,
certified mail, return receipt requested.
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<PAGE>
12. This Agreement shall be binding upon and inure solely to the
benefit of the Managing Dealer and the Partnership and to the extent provided in
section 9 hereof, any person who controls the Partnership or the Managing
Dealer, and their respective heirs, executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. No purchaser of any of the Units from the Managing Dealer
shall be deemed a successor or assign by reason merely of such purchase.
13. The respective representations, warranties and covenants of the
Partnership and the Managing Dealer herein and the indemnities contained herein
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Managing Dealer or the Partnership
within the meaning of the Act and shall survive delivery of the Units.
14. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Florida.
15. This Agreement may be amnended, modified, or supplemented only by a
written instrument signed by the parties hereto. Any purported oral amendment,
modification or supplement shall be void.
16. This Agreement constitutes the entire Agreement between the parties
hereto and the parties shall not be bound by any promises, representations or
agreements except as are herein expressly set forth.
Fastcom, Ltd.
By: Fastcom, Inc., General Partner
/s/ John Kolenda
- -----------------------------------------
By: John Kolenda, CEO
CFG Securities Corp.
/s/ Barry M. Smith
- --------------------------------------------
By: Barry M. Smith, CEO
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<PAGE>
EXHIBIT 10.4.1.
Agreement by and between Information Leasing Corporation, Datalinc, Ltd.
and Fastcom, Ltd., dated as of September 6, 1995
<PAGE>
AGREEMENT
This Agreement is entered into this day of ,
1995 between Information Leasing Corporation, an Ohio corporation, with its'
principal place of business at 1023 West Eighth Street, Cincinnati, Ohio 45203
("ILC") and Datalinc Ltd., a Florida Limited partnership with its' principal
place of business at 1641 Commerce Avenue North, St. Petersburg, Florida
33716, ("Datalinc") and Fastcom, LTD. also a Florida Limited Partnership
with offices at 1641 Commerce Avenue North St., Petersburg, Florida 33716
("Fastcom") both parties, sometimes referred to collectively.
The Agreement spells out the terms under which ILC will provide
financing for Fastcom, a radio/satellite communications equipment provider and
its' owner, Datalinc.
WHEREAS, ILC and Fastcom/Datalinc have devoted substantial time,
expertise and other resources to the development of an integrated services
agreement and a transaction structure to enable Fastcom/Datalinc to provide
radio and satellite communications equipment and services to its' customers; and
WHEREAS, each of the parties hereto desires to agree to and protect
it's proprietary interest in the resulting product; and
WHEREAS, each of the parties hereto desires to agree to a sharing
arrangement regarding rentals, fees and other revenues arising
from such business; and
WHEREAS, each of the parties hereto desires to perpetuate the business
relationship with each other under mutually agreeable terms and conditions;
NOW THEREFORE, in consideration of the mutual premises and covenants
stated herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. TERM
.
The term of this Agreement (the "Term') shall be three years commencing
on the date hereof, which shall automatically renew for consecutive terms of two
(2) years unless and until written notice of termination is delivered by either
party to the other not less than one hundred eighty (1 80) days prior to the
expiration of any such term. The word 'Term' shall include all such renewal
periods.
Any and all rights and obligations of the parties hereto which arise
hereunder during the Term, with the exception of Paragraph 2 below, shall
survive a termination of this Agreement pursuant to this Section 1
1
<PAGE>
2. EXCLUSIVITY
A. ILC and Fastcom/Datalinc agree that the structure of transactions
(the "Transaction Structure") by which Fastcom/Datalinc provides radio
transmission and satellite communications services to its customer ("Customer")
Is as follows:
ILC and Fastcom/Datalinc enter into a master lease agreement ("MLA")
under which ILC leases to Fastcom/Datalinc the radio equipment and personal
earth stations described on one or more schedules thereto (the "Equipment).
Fastcom/Datalinc enters into an integrated services agreement ("ISA") with its
Customer pursuant to which it subleases the Equipment and provides integral
services to the Customer based on its use of certain hub access equipment.
Fastcom/Datalinc conditionally assigns the ISA to ILO or ILC's lender ("Lender")
and ILC conditionally assigns its lease schedule with Fastcom/Datalinc to the
Lender, If any. The Customer is directed to make one periodic payment, which
covers both the Equipment and services, to ILC or the Lender, as the case may
be, which will act as Paying Agent. The Paying Agent in turn distributes the
Customer's payment, as agreed between the parties, to Fastcom/Datalinc, Inc.
payment for its services, and retains the portion allocable to amortize ILC's
recourse or non-recourse debt on the Equipment or pays it to ILC, as
appropriate.
Fastcom/Datalinc hereby agrees that it will not enter into any transaction
with the same or substantially similar Transaction Structure with any lessor or
financing source other than ILO, for the Term, unless and until it has offered
ILC a right of first refusal and otherwise complied with the provisions of
Section 2C hereof. Datalinc further agrees that ILC's MLA, the ISA, the Paying
Agent Agreement, and any and all other documentation which has been provided by
ILC or which ILC has helped to develop, which are listed on Schedule A hereto
(the "Documents') and incorporated herein by reference, will be treated
confidentially and will not be shared with or divulged to any other party not
previously in possession of the same for the Term hereof.
B. As long as Fastcom/Datalinc is not In default of this agreement,
ILC hereby agrees that it will not enter into any transaction with the same or
substantially similar Transaction Structure as that outlined herein with any
other hub licensee or other provider of similar services for the Term.
C. Any proposed satellite communications transaction based on the
Transaction Structure ('Proposed Transaction") shall be first offered to ILC,
which shall have the right to accept or reject the same as follows:
Fastcom/Datalinc shall deliver to ILC current financial statements of the
Customer for the prior two years, the commencement date of the lease, an
estimate of equipment cost for Radio transmission equipment, Personal Earth
Station and HUB Access Equipment and the location of equipment sites
(the "Required Information"). ILC shall have ten (10) days after receipt of the
Required Information to advise Fastcom/Datalinc of its intention to accept such
Proposed Transaction. In the event that ILC rejects such Proposed Transaction,
Fastcom/Datalinc shall have the right to seek alternative financing or leasing
arrangements without default or breach hereunder. In the event that ILC accepts
such Proposed Transaction, ILC shall have ten days after receipt by ILC or its
Lender of all documentation required by Lender from the Customer or
Fastcom/Datalinc to close and fund the Proposed Transaction. In the event that
ILC fails to so close the Proposed Transaction, Fastcom/Datalinc shall have the
right to seek alternative financing or leasing arrangements without default or
breach hereunder. Any "economic change" to the Proposed Transaction, meaning a
degradation of the Customer's credit, or a change in pricing, either
voluntarily, by Fastcom/Datalinc, or as a result of competitive pricing
pressures, will add ten days to the applicable deadline under this subsection.
Any failure to respond to the above deadlines by ILC shall be deemed a rejection
of the Proposed Transaction.
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<PAGE>
D. The parties agree that the Transaction Structure and the Documents
are unique assets and essential to the business efforts of both parties. The
parties agree that irreparable injury will inevitably occur to the non-breaching
party in the event of any breach of the terms of this Section 2., and that the
non-breaching party shall be entitled, in addition to any other remedies
available to it, with or without proof of monetary or immediate damage, to
maintain an action for an injunction to restrain any violation hereof.
E. Default. In the event either Datalinc or Fastcom should breach any
of the covenants, representations and warranties contained in this Agreement,
and should such breach continue for a period of ten (1 0) days following written
notice sent by ILC to defaulting party, then the defaulting party shall be
considered in default hereunder and ILC shall have all of the rights and
remedies provided at law or in equity Including the right to terminate this
Agreement and to seek the recovery of damages from the defaulting party.
3. Transaction Structure
ILC will finance the radios, VSATS and the Infrastructure to support
the radios in stages. Each stage will be priced individually based on the
following Criteria.
1. The risk associated with the project, specifically
performance issues related to Fastcom per the ISA.
2. Financial strength of Fastcom/Datalinc.
3. Credit worthiness of customers.
4. Terms and conditions of the ISA between Fastcom/Datalinc
and the Customer.
5. Amount financed for radios In excess of Fascom/Datalinc
costs.
6. Availability and amount of a guaranteed buy back or
restocking of some of the equipment by the vendor.
7. Salvage value of the equipment.
Stage Size:
The first stage will be radio and related infrastructure to support
approximately 500 radios with natural breakpoints based on yet to be determined
specific size of individual contracts. The second phase would be from
approximately 500 to 5,000 radios with the third stage being over 5,000 total
radios.
Financing Term:
Anticipated to be 36 months but ILC and Fastcom/Datalinc will work
together to structure transactions tailored to individual customer needs.
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Financing Structure:
ILC will lease the equipment to Fastcom/Datalinc who will lease it to
the end user using the Integrated Services Agreement (IBA).
Fastcom/Datalinc will then assign its interest in the ISA to ILC as security
against default. ILC will remain the owners of the equipment throughout the
term and any renewal periods.
End of the Term Options:
At the end of the initial term, Fastcom/Datalinc shall have the
option, to structure a lease renewal or purchase of the equipment so long as the
overall return to ILC for the initial term, any renewal terms, and the purchase
price comprises a 19% net return to ILC on the first phase; a 17% net return on
the second phase and a 15% net return on the third phase.
Prorated Rents:
ILC and Fastcom/Datalinc will split evenly any interim or prorated
rents paid by the end user customer prior to the commencement date of the ISA
term.
Equity in Fastcom:
ILC will receive an ownership interest in Fastcom or its successors of
1% of the total equity of the company for the first $1 million of equipment
financed under ILC leases and .5% for each $3 million of equipment financed
thereafter up to a total of 5% of the equity of Fastcom, No equity will be
earned it less than $1 million of lease financing is provided but after the $1
million level is reached in lease financings, additional equity will be given to
ILC on a prorated basis at the .5% rate for each $3 million.
Board of Directors:
Fastcom will grant to ILC one position on the Board of Directors of
Fastcom Management Incorporated. It is anticipated that Fastcom's board will
consist of five members. Should Fastcom increase the size of its board of
directors, Fastcom must grant to ILC a sufficient number of positions to
maintain its initial representation on the board.
Right of first refusal:
Fastcom will grant to ILC the right of first refusal to provide lease
financing after the initial three phases as outlined in this agreement. ILC's
all in yield for these ISA's will be at 300 basis points over the debt rate that
can be obtained under non-recourse financing or 600 basis points over three year
treasuries for transactions which ILO finances on a recourse basis.
Servicing Fee:
Fastcom will pay a servicing fee to ILC to be negotiated as specific
transactions occur. In return for this fee, ILC agrees to invoice and collect
all amounts due from the customer under the ISA and remit the amounts in excess
of the funds required to cover the equipment financing and servicing fee to
Fastcom.
Interest Rate Disclaimer.
This proposal is subject to changes in the short term interest rate
market. ILC reserves the right to change this pricing should any changes in
rates occur whether positively or negatively.
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4. Further Assurances.
ILC and Datalinc hereby agree to execute all such further
documents or instruments an to take such further action as may be necessary or
appropriate to effect the transactions contemplated by this Agreement.
5. Binding Effect.
This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of each party. Specifically, in the event
that either party shall merge, consolidate, or effect any other corporate
restructuring, including the sale of 50% or more of its stock or assets, each
party hereby agrees to cause any such successor, purchaser, surviving
corporation, assignee or transferee, to execute an acknowledgement of the
binding effect of this Agreement thereupon.
6. Enforcement.
In any action taken to enforce any provisions this Agreement,
either administrative or judicial, the prevailing party shall be entitled to
payment of all expenses, including attorney's fees, from the other party.
7. Governing Law and Jurisdiction.
This Agreement shall be governed by the laws of the State of Ohio without
regard to their conflicts of laws principals. Exclusive jurisdiction for any
dispute arising in connection with this Agreement shall lie in the appropriate
courts of the State Ohio this Agreement having been executed in Ohio and to be
performed in Ohio by payment of all monies due therein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INFORMATION LEASING CORPORATION FASTCOM, LTD.
By: By,
Vincent D. Rinaldi Title:
President
DATALINC LTD.
By:
Title:
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EXHIBIT 10.4.2
Master Lease Agreement by and between Information Leasing Corporation,
Datalinc, Ltd. and Fastcom, Ltd., dated as of November 7, 1995
<PAGE>
INFORMATION LEASING CORPORATION
MASTER LEASE AGREEMENT
dated as of November 7, 1995 by and between
Lessor: Information Leasing Corporation
1023 W. Eighth St.
Cincinnati, OH 45203
Contact: Contract Administration
Phone: (513)421-9191 and
Lessee: Fastcom, Ltd.
6900 Fairfield Business Center Drive
Building D
Fairfield, Ohio 45014
Contact: Mike Mothershead
Phone: (513) 860-6600
LEASE. Lessor agrees to lease to Lessee and Lessee agrees to lease from
Lessor the personal property including intangibles (the "Equipment") described
in one or more Rental Schedules (herein called "Schedule(s)") to this Master
Lease Agreement. Each such Schedule incorporates by this reference, the terms
and conditions set forth in this Master Lease Agreement and constitutes a
separate lease ("the"Lease"). The lease of Equipment under each Iease shall be
for such term and such rents as may be agreed to by execution of the Schedules
and this Master Lease Agreement shall control and be effective as to all such
Schedules, the same as though set forth herein unless expressly amended or
modified in writing for particular Schedules. The term "Equipment" as used in
this Master Lease Agreement shall refer to items leased under all Schedules and
the terms hereof, unless expressly amended or modified in writing, shall apply
equally to all such Equipment.
2. TERM AND RENT. The Initial Term for each item of Equipment shall be
for the period specified in the Schedules, and Lessee shall pay Lessor,
throughout the Initial Term for the use of the Equipment, the Rent specified in
the Schedules. The Initial Term and Rent with respect to each item of Equipment
shall commence as set out in the applicable Schedule.
3. LATE CHARGES. Time is of the essence in this Lease. If any Rent or
other amount due hereunder are not paid within five(5) business days after the
due date thereof, Lessor shall have the right to add and collect and Lessee
agrees to pay a late charge on, and in addition to, such unpaid Rent or other
charges, equal to one percent (1%) of such unpaid Rent or a lesser amount if
established by any state of federal statute applicable thereto.
4. DISCLAIMER OF WARRANTIES. Lessee acknowledges that Lessor is not the
manufacturer of the Equipment, nor manufacturer's agent, and Lessee represents
that Lessee has selected the Equipment leased hereunder based upon Lessee's
judgment prior to having requested Lessor to purchase the same for leasing to
Lessee, and Lessee agrees that as between Lessor and Lessee, the Equipment
leased hereunder is of a design, size, fitness and capacity selected
by Lessee and that Lessee is satisfied that the same is suitable and fit for
its intended purposes. LESSEE FURTHER AGREES THAT LESSOR HAS MADE AND MAKES
NO REPRESENTATIONS OR WARRANTIES OF WHATSOEVER NATURE, DIRECTLY OR
INDIRECTLY, EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO SUITABILITY, DURABILITY, FITNESS
FOR USE AND MERCHANTABILITY OF ANY SUCH EQUIPMENT, THE PURPOSES AND USES OF THE
LESSEE THE CHARACTERIZATION OF THE LEASE FOR TAX, ACCOUNTING OR OTHER PURPOSES,
COMPLIANCE OF THE EQUIPMENT WITH APPLICABLE GOVERNMENTAL REQUIREMENTS, OR
OTHERWISE. Lessee specifically waives all rights to make claim against Lessor
herein for breach of any warranty of any kind whatsoever. Notwithstanding the
foregoing, Lessee shall be entitled to the benefit of any applicable
manufacturer's warranties received by Lessor and to the extent assignable,
such warranties are hereby assigned by Lessor to Lessee for the term of the
applicable
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Schedules. To the extent such warranties are not assignable, Lessor agrees to
request from the manufacturer, on behalf of the Lessee, performance of any
applicable manufacturer's warranties. Lessor shall not be liable to Lessee for
any loss, damage or expense of any kind or nature caused directly or indirectly
by any Equipment leased hereunder or for the use or maintenance thereof, or for
the failure of operations thereof, or for the repairs, service or adjustment
thereto, or by any delay or failure to provide any thereof, or by any
interruption of service or loss of use thereof or for any loss of business or
any other damage whatsoever and howsoever caused. No defect or unfitness of the
Equipment shall relieve Lessee of the obligation to pay Rent, or to perform any
other obligation under this Lease.
5. USE, OPERATION AND MAINTENANCE. Lessee shall use the Equipment in
the manner for which it was designed and intended, solely for Lessee's business
purposes, in accordance with all manufacturer manuals and instructions and in
compliance with all applicable laws, regulations and orders. Lessee, at Lessee's
own cost and expense, shall keep the Equipment in good repair, condition and
working order, ordinary wear and tear excepted, and shall furnish all parts,
mechanisms, devices and servicing required therefor and necessary to comply with
all applicable health and safety standards. The equipment, upon return to
Lessor, shall qualify for a maintenance agreement with the manufacturer thereof
or such other party as may be acceptable to Lessor and Lessee, without
additional expense to the Lessor. All replacement parts and repairs at any time
made to or placed upon the Equipment shall become the property of Lessor. Lessee
may, with Lessor's prior written consent, which shall not be unreasonably
withheld, make such alterations, modifications or additions to the Equipment as
Lessee may deem desirable in the conduct of its business; provided the same
shall not diminish the value or utility of the Equipment, or cause the loss of
any warranty thereon or any certification necessary for the maintenance thereof,
and shall be readily removable without causing damage to the Equipment. Upon
return to Lessor the Equipment as to which such alterations, modifications or
additions have been made, Lessee, if requested to do so by Lessor, shall remove
the same and restore the Equipment to its original condition, reasonable wear
and tear only being excepted, and, if not so removed, title thereto shall
automatically vest in Lessor.
Lessee shall keep the Equipment free and clear from all liens, charges,
encumbrances, legal process and claims. Lessee shall not assign, sublet,
hypothecate, sell, transfer or part with possession of the Equipment or any
interest in this Lease, and any attempt to do so shall be null and void and
shall constitute a default hereunder. Lessee shall not move the Equipment from
the location noted in the Schedules without the prior written consent of Lessor,
which consent shall not be unreasonably withheld; with the express exception
that prior written consent shall not be required for movement of the Equipment
related to necessary maintenance. Neither this Lease nor any interest in the
Equipment is assignable or transferable by Lessee by operation of law. Lessee
agrees not to waive its right to use and possess the Equipment in favor of any
party other than Lessor and further agrees not to abandon the Equipment to any
party other than Lessor. So long as Lessee faithfully performs and meets each
and every term and condition to be performed or met by Lessee under this Lease,
Lessee's quiet and peaceful possession of the Equipment will not be disturbed by
Lessor or anyone claiming by, through or on behalf of Lessor.
6. TITLE. The Equipment is and at all times shall remain the sole and
exclusive personal property of Lessor (subject to Section 18 hereof). No right,
title or interest in the Equipment shall pass to Lessee other than the right to
maintain possession and use of the Equipment for the full lease term,
conditioned upon Lessee's compliance with the terms and conditions of this
Lease. If requested by Lessor, Lessee shall affix to or place on the Equipment,
at Lessors expense, plates or markings indicating Lessor's ownership. Lessee
covenants and agrees that the Equipment is, and will at all times, remain the
personal property of Lessor (subject to Section 18 hereof). If requested by
Lessor, Lessee will make reasonable efforts to obtain a waiver, in recordable
form, from all persons with a real property interest in the premises wherein the
Equipment may be located, waiving any claim with respect thereto. Lessor shall
have the right from time to time during normal business hours, with reasonable
notice, to enter upon Lessee's
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premises or elsewhere for the purpose of confirming the existence, condition,
and proper maintenance of the Equipment or for any other reasonable business
purpose.
7. RENT ADJUSTMENT. Not Applicable.
8. TAXES. Lessee shall promptly reimburse Lessor for, or shall pay
directly if so requested by Lessor, as additional Rent, all taxes, charges and
fees which may now or hereafter be imposed or levied by any governmental body or
agency upon or in connection with the purchase, ownership, lease, possession,
use or location of the Equipment or otherwise in connection with the
transactions contemplated by the Lease, excluding, however, all taxes on or
measured by the net income of Lessor, and shall keep the Equipment free and
clear of all levies, liens or encumbrances arising therefrom. Lessor shall file,
as owner and party responsible for payment of tax, personal property tax return
relating to the Equipment unless otherwise provided in writing. Lessee shall
promptly reimburse Lessor for all property taxes levied on or assessed against
the Equipment during the Initial Term and all renewals or extensions, without
any proration whatsoever. Failure of Lessee to promptly pay amounts due
hereunder shall be the same as failure to pay any installment of Rent. If Lessee
is requested by Lessor to file any returns or rent payments directly to any
governmental body or agency as provided for hereunder, Lessee shall provide
proof of said filing or payment to Lessor upon request.
9. LOSS OR DAMAGE OF EQUIPMENT. Lessee hereby assumes and shall bear the
risk of loss, for theft and for destruction of or damage to the Equipment from
any and every cause whatsoever, whether or not insured, until the Equipment is
returned to Lessor. No such loss or damage shall impair any obligation of Lessee
under this Lease which shall continue in full force and effect. In event of
damage to or theft, loss or destruction of the Equipment (or any item thereof),
Lessee shall promptly notify Lessor in writing of such fact and of all details
with respect thereto, and shall, within thirty (30) days of such event, at
Lessor's option, (a) place the same in good repair, condition and working order
or, (b) Lessee shall have the option to, at Lessee's expense, substitute
Equipment (or any item thereof) of the Identical Manufacture, Make, Model, and
Features, unless this option is expressly prohibited in a specific Lease, in
good repair, condition and working order and transfer clear title to such
replacement property to Lessor whereupon such property shall be subject to this
Lease and be deemed the Equipment for purposes hereof-, or, (c) pay Lessor an
amount equal to the sum of (i) all Rent accrued to the date of such payment,
plus (ii) the "Stipulated Loss Value" as set forth in the Schedules, whereupon
this Lease shall terminate, except for Lessee's duties under Section I I hereof,
solely with respect to the Equipment (or any item thereof) for which such
payment is received by Lessor. Upon payment of the amount set forth in (c), the
Rent for such Schedules shall be reduced proportionately. Any insurance proceeds
received with respect to the Equipment (or any item thereof) shall be applied,
in the event option (c) is elected, in reduction of the then unpaid obligations,
including the Stipulated Loss Value, of Lessee to Lessor, if not already paid by
Lessee, or, if already paid by Lessee, to reimburse Lessee for such payment, or,
in the event option (a) or (b) is elected, to reimburse Lessee for the costs of
repairing, restoring or replacing the Equipment (or any item thereof) upon
receipt by Lessor of evidence, satisfactory to Lessor, that such repair,
restoration or replacement has been completed, and an invoice therefor.
10. INSURANCE. Lessee shall keep the Equipment insured against theft
and all risks of loss or damage from every cause whatsoever for not less than
the replacement cost of the Equipment and shall carry public liability
insurance, both personal injury and property damage, covering the Equipment and
Lessee shall be liable for all deductible portions of all required insurance.
All said insurance shall be in form and amount and with companies satisfactory
to Lessor. All insurance for theft, loss or damage shall provide that losses, if
any, shall be payable to Lessor, and all such liability insurance shall name
Lessor (or Lessor's assignee as appropriate) as additional insured and shall be
endorsed to state that it shall be primary insurance as to Lessor. Any other
insurance obtained by or available to Lessor shall be secondary insurance.
Lessee shall pay the premiums therefor and deliver to Lessor a certificate of
insurance or other evidence satisfactory to Lessor that such insurance coverage
is in effect; provided, however, that Lessor
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shall be under no duty either to ascertain the existence of or to examine
such insurance policies or to advise Lessee in the event such insurance coverage
shall not comply with the requirements hereof. Each insurer shall agree by
endorsement upon the policy or policies issued by it or by independent
instrument furnished to Lessor, that it will give Lessor thirty (30) days
written notice prior to the effective date of any alteration or cancellation of
such policy. The proceeds of such insurance payable as a result of loss of or
damage to the Equipment shall be applied as set out in Section 9 hereof. After
thirty days of an event of loss or damage as set out in Section 9, Lessee hereby
irrevocably appoints Lessor as Lessee's attorney-in-fact to make claim for,
receive payment of, and execute and endorse all documents, checks or drafts
received in payment for loss or damage under any said insurance policies.
In case of the failure of Lessee to procure or maintain said insurance or to
comply with any other provision of this Lease, Lessor shall have the right but
shall not be obligated, to effect such insurance or compliance on behalf of
Lessee. In that event, all monies spent by and expenses of Lessor in effecting
such insurance or compliance shall be deemed to be additional Rent, and shall be
paid by Lessee to Lessor upon demand.
11. LESSEE INDEMNITY. Lessee assumes liability for and shall indemnify,
save, hold harmless (and, if requested by Lessor, defend) Lessor, it's officers,
directors, employees, agents or assignees from and against any and all claims,
actions, suits or proceedings of any kind and nature whatsoever, including all
damages, liabilities, penalties, costs, expenses and legal fees (hereinafter
"Claim(s)") based on, arising out of, connected with or resulting from this
Lease of the Equipment, including without limitation the manufacture, selection,
purchase, delivery, acceptance, rejection, possession, use, operation, return or
disposition of the Equipment, and including without limitation Claims arising in
contract or tort (including negligence, strict liability or otherwise), arising
out of latent defects (regardless of whether the same are discoverable by Lessor
or Lessee) or arising out of any trademark, patent or copyright infringement.
Provided, however, that Lessor shall itself be responsible for any and all
claims, actions, suits, or proceedings of any kind and nature whatsoever which a
court of competent jurisdiction issues a final judgment as to the negligence or
intentional acts or omissions of the Lessor, its officers, directors, employees,
agents or assignees. Lessee shall not be required under this paragraph to
indemnify, save and hold harmless Lessor, its officers, directors, employees,
agents or assignees from any and all claims, actions, suits, or proceedings of
any kind and nature whatsoever which arise out of the negligence or intentional
acts or ommissions of the Lessor, its officers, directors, employees, agents or
assignees. If any Claim is made against Lessee or Lessor, the party receiving
notice of such Claim shall promptly notify the other, but the failure of such
person receiving notice so to notify the other shall not relieve Lessee or
Lessor of any obligation hereunder.
12. TAX INDEMNITY. Not Applicable
13. RETURN OF EQUIPMENT. Lessee shall give Lessor forty-five (45) days
written notice prior to the expiration of the Initial Term of its intent to
return the Equipment. Upon expiration of the Initial Term or other termination
pursuant to the terms of this Lease, Lessee shall immediately return the
Equipment and all related accessories, to such place within the continental
United States, not to exceed 500 miles from Cincinnati, Ohio. The Equipment
shall, at Lessee's sole expense, be crated and shipped in accordance with the
manufacturer's specifications, freight prepaid and properly insured. If the
Equipment, upon its return, is not in good repair, condition and working order,
ordinary wear and tear excepted, and has not been maintained in accordance
with Section 5 hereof, Lessee shall promptly reimburse Lessor for all
reasonable costs incurred to place the Equipment in such condition. Lessor shall
notify Lessee if equipment is not in good repair, condition and working order,
ordinary wear and tear excepted, and has not been maintained in accordance with
Section 5 hereof, and Lessee shall have the right of inspection within a
reasonable period of time, not to exceed five days after receiving notice.
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14. AUTOMATIC RENEWAL. The Lease shall automatically extend as a
month-to-month rental if; (a) written notice as specified in Section 13 hereof
is not received by Lessor; or (b) such notice is received by lessor but the
Equipment is not returned upon the expiration of the Initial Term. Lessee shall
pay as Rent to Lessor an amount based on the average monthly rent during the
Initial Term on the due dates set out in the Schedules until terminated by
either party by giving ninety (90) days prior written notice. All terms and
conditions of this Lease shall continue in full force and effect during any
extension or renewal hereof.
15. DEFAULT AND REMEDIES. (a) Lessee shall be in default hereunder if
(i) Lessee fails to pay Rent or any other payment required hereunder within five
(5) business days of the due date thereof, and such default shall continue for a
period of 10 days after receipt of written notice thereof, (ii) Lessee fails to
observe, keep or perform any other term or condition of this Lease and such
failure continues for twenty (20) days following receipt of written notice
thereof from Lessor, (iii) any representation or warranty made by Lessee herein
or in any document delivered to Lessor in connection herewith shall prove to be
false or misleading, or (iv) Lessee defaults under any other obligation to
Lessor. (b) If Lessee is in default, Lessor shall have the right to take any one
or more of the following actions: (i) proceed by appropriate court action or
actions at law or in equity to enforce performance by Lessee of the term and
conditions of this Lease and/or recover damages for the breach thereof, and/or
(ii) by written notice to Lessee, which notice shall apply to all Schedules
hereunder except as specifically excluded therefrom by Lessor, declare due and
payable, and Lessee shall without further demand, forthwith pay to Lessor an
amount equal to any unpaid Rent then due as of the date of such notice plus, as
liquidated damages or loss of the bargain and not as a penalty, an amount equal
to the remainder of the Rents otherwise due through the expiration date as set
forth in the Schedules, and Iessee shall return the Equipment to Lessor as
provided in Section 13. Should Lessee fail to return the Equipment within
fifteen (15) days of receipt of such notice, Lessor may, personally, or by its
agents, and with or without notice of legal process, enter upon the premises
where the Equipment is located, without liability for trespass or other damages,
and repossess the Equipment free from all claims by Lessee. Return or
repossession of the Equipment shall not constitute a termination of this Lease
unless Lessor so notifies Lessee in writing. With respect to Equipment returned
to or repossessed by Lessor, if Lessor has not terminated this Lease, Lessor
will, in such manner and upon such terms as Lessor may determine in its sole
discretion, either sell such Equipment at one of more public or private sales or
re-lease the Equipment. The proceeds of sale or re-lease shall be applied in the
following order or priority: (i) to pay all Lessor's fees, costs and expenses
for which Lessee is obligated pursuant to (c), below; (ii) to the extent not
previously paid by Lessee, to pay Lessor its liquidated damages hereunder and
all other sums then remaining unpaid hereunder; and (iii) to reimburse Lessee
for any sums previously paid by Lessee to Lessor as liquidated damages; and (iv)
any surplus shall be retained by Lessor. In the event the proceeds of sale or
re-lease are less than the sum of the amounts payable under (i) and (ii), Lessee
shall pay Lessor such deficiency, forthwith. The Proceeds of a credit sale or
re-lease shall be discounted to their present value at the prime rate in effect
at the inception of the Schedules plus four hundred (400) basis points (4%). (c)
Lessee shall be liable for all legal and collection fees, costs and expenses
arising from Lessee's default and the exercise of Lessor's remedies hereunder,
including costs of repossessions, storage, repairs, reconditioning and sale or
releasing of the Equipment. (d) In the event that any court of competent
jurisdiction determines that any provision of this Section 15 is invalid or
unenforceable in whole or in part, such determination shall not prohibit Lessor
from establishing its damages sustained as a result of any breach of this Lease
in any action or proceeding in which Lessor seeks to recover such damages. Any
repossession of sale or re-lease of the Equipment shall not bar an action for
damages for breach of this Lease, as hereinabove provided, and the bringing of
an action or the entry of judgment against Lessee shall not bar Lessor's right
to repossess the Equipment. No express or implied waiver by Lessor of any
default shall in any way be, or be construed to be, a continuing waiver or a
waiver of any future or subsequent default.
16. FURTHER ASSURANCES. Lessee agrees, at the request of Lessor, to
execute and deliver to Lessor any reasonable financing statements, fixture
filings or other instruments necessary for expedient filing, recording or
perfecting the interest and title of Lessor in this Lease
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and the Equipment, agrees that a copy of this Lease and any Schedule may be so
filed, and agrees that all costs incurred in connection therewith (including,
without limitation, filing fees and taxes) shall be paid equally by Lessee and
Lessor, and agrees to promptly, at Lessee's expense, deliver such other
reasonable documents and assurances, and take such further action as Lessor may
request, in order to effectively carry out the intent and purpose of this Lease
and Schedules. Additionally, Lessee agrees that where permitted by law, a copy
of the financing statement may be filed in lieu of the original. Upon written
request by Lessor, Lessee shall, as soon as practicable, deliver to Lessor,
Datalinc, Ltd. future quarterly and annual reports of financial condition,
prepared in accordance with generally accepted accounting principles, in a
manner consistently applied; which reports Lessee represents and warrants shall
fully and fairly present the true financial condition of Datalinc, Ltd. Lessee's
covenants, representations, warranties and indemnities contained in Section 8,
11, 12 and 19 are made for the benefit of Lessor and shall survive, remain in
full force and effect and be enforceable after the expiration or termination of
this Lease for any reason.
17. ACCEPTANCE OF EQUIPMENT: NONCANCELLABLE. Lessee's acceptance of the
Equipment shall be conclusively and irrevocably evidenced by Lessee signing the
Certificate of Acceptance in the form of Annex A to the Schedules and upon
acceptance, the Schedules shall be noncancelable for the Initial Term thereof.
If Lessee cancels or terminates the Schedules after its execution and prior to
delivery of the Equipment or if Lessee fails or refuses to sign the Certificate
of Acceptance as to all or any part of the Equipment within a reasonable time,
not to exceed twelve (12) days, after the Equipment has been delivered, in which
event Lessee will be deemed to have cancelled the Schedule, Lessee shall
automatically assume all of Lessor's purchase obligations for the Equipment and
Lessee agrees to indemnify and defend Lessor from any claims, including any
demand for payment of the purchase price for the Equipment, by the manufacturer
or seller of the Equipment. In addition thereto, Lessee shall pay Lessor (a) all
of Lessor's out-of-pocket expenses and (b) a sum equal to one percent (I%) of
the total rents for the lease term as liquidated damages, the exact sum of which
would be extremely difficult to determine and is reasonably estimated hereby, to
reasonably compensate Lessor for credit review, document preparation, ordering
equipment and other administrative expenses. Lessor may apply any advance Rent
payments to sums due from Lessee under (a) and (b) above.
18. ASSIGNMENT. Lessee acknowledges and agrees that Lessor may, at any
time, without notice to or consent of Lessee, assign its rights but not its
obligations under this Lease and/or mortgage, or pledge or sell the Equipment.
Such assignee or mortgagee may re-assign this Lease and/or mortgage without
notice to Lessee. Any such assignee, buyer, transferee, grantee or mortgagee
shall have and be entitled to exercise any and all rights and powers of Lessor
under this Lease, but such assignee, buyer, transferee, grantee or mortgagee
shall not be obligated to perform any of the obligations of Lessor hereunder
other than Lessor's obligation not to disturb Lessee' quiet and peaceful
possession of the Equipment and unrestricted use thereof for its intended
purpose during the term thereof and for as long as Lessee is not in default of
any of the provisions hereof.
Each assignment, sale, transfer or grant shall be subject to the rights
of Lessee under the Lease or any renewal or extension or amendment thereof and
shall contain a covenant or covenants binding upon the assignee, buyer,
transferee, grantee or mortgagee to the effect that so long as an Event of
Default shall not exist under the Lease: (a) Lessee shall not be named as a
defendant, provided Lessee is not in default, in any foreclosure or other
proceeding which may be instituted by such assignee, buyer, transferee grantee
or mortgagee as to the Lease or as to the Equipment; and (b) Neither the
assignee, buyer, transferee, grantee or mortgagee shall interfere with the right
of Lessee to have unlimited quiet and peaceful use and possession of the
Equipment during the term of the Lease; and (c) Lessee may deal exclusively with
Lessor with respect to matters covered by the Lease and no consent of any
assignee, buyer, transferee, grantee or mortgagee shall be required as to such
matters. Lessor shall at all times during the term of the Lease be specifically
authorized by any assignee, buyer, transferee or grantee to act in the
assignee's, buyer's, transferee's or grantee's behalf in this regard, and shall
execute, and if requested by Lessee, obtain
6
<PAGE>
the assignee's, buyer's, transferee's or grantee's execution of, any documents
necessary or desirable to carry out the provisions of this clause and any other
clause referred to in this clause.
Without limiting the foregoing, Lessee further acknowledges and
agrees that in the event Lessee receives written notice of an assignment from
Lessor, Lessee will pay all Rent and any and all other amounts payable by Lessee
under any Schedule to such assignee or mortgagee or as instructed by Lessor,
notwithstanding any defense or claim of whatever nature, whether by reason of
breach of such Schedule or otherwise which it may now or hereafter have as
against Lessor (Lessee reserving its right to make claims directly against
Lessor). Lessee agrees to confirm in writing receipt of notice of assignment as
may be reasonably requested by assignee or mortgagee.
19. REPRESENTATIONS AND WARRANTIES. Lessee represents and warrants to
Lessor that: (i) the making of this Lease and any Schedule thereto executed by
Lessee are duly authorized on the part of Lessee and upon execution thereof by
Lessee and Lessor they shall constitute valid obligations binding upon, and
enforceable against, Lessee ; (ii) neither the making of this Lease or such
Schedule, nor the due performance thereof by Lessee, including the commitment
and payment of the Rent, shall result in any breach of, or constitute a default
under, or violation of, Lessee's certificate of incorporation, by-laws, or any
agreement to which Lessee is a party or by which Lessee is bound; (iii) Lessee
is in good standing in its state of incorporation and in any jurisdiction where
the Equipment is located, and is entitled to own properties and to carry on
business therein; and (iv) no approval, consent or withholding of objection is
required from any governmental authority or entity with respect to the entering
into, or performance of this Lease or such Schedules by Lessee.
Lessee shall provide Lessor an Opinion of Counsel and Master Certificate of
Incumbency substantially in the form of EXHIBIT C and Annex B respectively
hereto.
20. NOTICES. Any notice required or given hereunder shall be deemed
properly given three (3) business days after mailed first class, overnight, or
certified mail, return receipt requested, postage prepaid, addressed to the
designated recipient at its address set forth at the heading hereof or such
other address as such party may advise by notice given in accordance with this
provision or (ii) upon receipt by the party to whom addressed if given in
writing by personal delivery, commercial courier service, telecopy or other
means which provides a permanent record of the delivery of such notice.
21. LESSEE'S OBLIGATIONS UNCONDITIONAL: NO OFFSET. This Lease is a net
lease and except as expressly provided for herein, the Lessee shall not be
entitled to any abatement or reduction of rent and Lessee hereby agrees that
Lessee's obligation to pay all rent and other amounts hereunder shall be
absolute and unconditional under all circumstances.
22. COUNTERPARTS. Each Schedule may be executed in one or more
counterparts, each of which shall be deemed an original as between the parties
thereto, but there shall be a single executed original of each Schedule which
shall be marked "Counterpart No. I "; all other counterparts shall be marked
with other counterpart numbers. To the extent, if any, that a Lease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code)
no security interest in the Schedule may be created through the transfer or
possession of any counterpart other than Counterpart No. 1. The Master Lease
Agreement is incorporated by reference in each of the Schedules and shall not be
chattel paper by itself.
23. SPECIAL TERMS. Not Applicable.
24. GOVERNING LAW. This Lease and any Schedules thereto are entered into,
under and shall be construed in accordance with, and governed by, the laws of
the State of Ohio without giving effect to its conflicts of laws principles.
The State of Ohio shall have exclusive jurisdiction over any action or
proceeding brought to enforce or interpret this Lease or otherwise in
connection therewith.
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<PAGE>
25. MISCELLANEOUS. For purposes of this Lease, the term "Rent" as used
herein shall mean and include all amounts payable by Lessee to Lessor hereunder.
The captions of this Lease are for convenience only and shall not be read to
define or limit the intent of the provision which follows such captions. This
Lease contains the entire agreement and understanding between Lessor and Lessee
relating to the subject matter hereof. Any variation or modification hereof and
any waiver of any of the provisions or conditions hereof shall not be valid
unless in writing signed by an authorized representative of the parties hereto.
Any provision of this Lease which is unenforceable in any jurisdiction shall, as
to such Jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Lessor's failure
at any time to require strict performance by Lessee or any of the provisions
hereof shall not waive or diminish Lessor's right thereafter to demand strict
compliance therewith or with any other provision. The term "Lessee" as used
herein shall mean and include any and all Lessees who have signed this Lease,
each of whom shall be jointly and severally bound thereby.
THIS LEASE IS A NON-CANCELLABLE LEASE. THIS LEASE IS SUBJECT TO THE TERMS
AND CONDITIONS WRITTEN ABOVE WHICH LESSEE ACKNOWLEDGES HAVING READ. THIS
LEASE SHALL BE EFFECTIVE UPON EXECUTION BY LESSEE AND LESSOR.
LESSOR: LESSEE:
Information Leasing Corporation Fastcom, Ltd.
/s/Vicent Rinaldi /s/ Mark Gianinni
------------------------ -------------------------
By: V. Rinaldi By: Mark Gianinni
Title: President Title: General Partner
Date Accepted: 11/8/95 Date Accepted: 11/14/95
<PAGE>
ANNEX B
MASTER
CERTIFICATE OF INCUMBENCY
The undersigned being duly elected and acting as FASTCOM, LTD. (the
'Lessee') does hereby certify that the person or persons listed below are
authorized to enter into a lease with Information Leasing Corporation and the
persons listed below are duly authorized representatives of the Lessee in the
capacity set forth opposite their names and that their signatures are true and
correct and, as of the date hereof, have proper corporate power and authority to
execute and deliver any Lease Agreement between Lessee and Information Leasing
Corporation, any Lease Schedules pursuant thereto and the documents required
thereunder.
Name (print) Title Sample Signature
===============================================================================
Mark Gianinni President, General Partner /s/ Mark Gianinni
John Kolenda Chairman of General Partner /s/ John Kolenda
I hereby attest that this information is true and correct as of this 15th day
of November, 1995.
FASTCOM, LTD
/s/ John F. Kolenda
-------------------------
By: John F. Kolenda
Title: Chairman of G. P. FastCom Management, Inc.
Title
<PAGE>
EXHIBIT 10.6
Form of Employment Agreement to be entered into by and among Thrucomm, Inc.
and Messrs.Kolenda and Gianinni
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of this day of 1997 (the "Agreement"), by and
between Thrucomm, Inc., a Florida corporation ("Employer"), and John F. Kolenda
("Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee and Employee desires to be
employed by Employer as Chairman of the Board of Employer; and
WHEREAS, Employer recognizes the need of the knowledge, talents and
assistance of Employee and desires to enter into this Agreement to secure the
foregoing.
NOW, THEREFORE, in consideration of the promises herein contained, the
parties covenant and agree as follows:
1. EMPLOYMENT. Employer agrees to employ Employee and Employee agrees
to be employed by Employer and to perform work as determined by Employer, as
Chairman of the Board of Employer, on the terms and conditions set forth in this
Agreement. This Agreement shall be effective as of the date hereof (the
"Effective Date").
2. COMPENSATION. Employer agrees to employ Employee at the base
rate of compensation of One Hundred Fifty Thousand and No/Dollars
($150,000.00) per year. Compensation is to be paid on the 15th and last
day of each month.
In addition to the base compensation, Employer agrees to pay or provide
Employee with the following:
A. Other Benefits. Employer shall provide Employee with
other benefits as are set forth on Exhibit A attached hereto and
incorporated herein by reference.
B. Expenses. Reimbursement for reasonable expenses actually incurred
by Employeee in the furtherance of Employer's business, including, but not
limited to, telephone calls (including business related calls on Employee's
cellular phone and business related long distance calls), entertainment,
attendance at conferences, conventions and institutes, provided proper
itemization of said expenses is furnished Employer by Employee. All such
expenditures shall be subject to the reasonable control of Employer.
C. Medical and Disability Benefits. Employee shall be entitled to
participate in Employer's medical program, Employer-paid disability and other
benefit programs as other executives of Employer are entitled to participate
in, as is in place from
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time to time. If Employee desires to include any family members in the medical
plan, Employee shall be responsible for all additional costs.
D. Additional Benefits. Employee shall be entitled to participate in and
receive such additional benefits as Employer shall from time to time make
available to its executive employees including, without limitation, profit
sharing, stock purchase, stock option and other incentive plans.
3. DUTIES. Employee agrees to perform work as determined by
Employer, subject to the direction of Employer and agrees to subject himself
at all times during the Term (as hereinafter defined) to the direction
and control of Employer in respect to the work to be performed. Employee
shall devote his full business time and attention to the furtherance of
Employer's best interests. In that regard, and as further consideration for
this Agreement, Employee agrees to comply with, and abide by, such rules and
directives of Employer as may be reasonably established from time to time,
and recognizes the right of Employer, in its reasonable discretion, to
change, modify or adopt new policies and practices affecting the employment
relationship, not inconsistent with this Agreement, as deemed appropriate
by Employer. During the term of Employee's employment, Employee will not
undertake any new business ventures, partnerships consulting arrangements
or other enterprise or business other than those on behalf of Employer,
without Employer's prior written consent.
Employee's typical responsibilities include, but are not limited to,
those set forth on Exhibit B attached hereto and incorporated by reference
herein.
4. WORKING FACILITIES. Employee shall be furnished with office space,
secretarial services, and such other facilities and services suitable to
Employee's position and adequate for the performance of Employee's duties.
5. AGENCY. Employee shall have no authority to enter into any
contracts binding upon Employer, except as authorized in writing, in advance,
by Employer.
6. TERM OF EMPLOYMENT; SEVERANCE.
A. Employee's employment hereunder shall commence as of the Effective Date
hereof and continue for a period of five (5) years thereafter (the "Term").
B. Anything herein to the contrary notwithstanding, Employee's employment
hereunder may be termninated at any time and for any reason by either party upon
not less than one hundred twenty (120) days' prior written notice to the other
party. It is understood and acknowledged that Employer shall have the right to
effectuate such termination at will, with or without Reasonable Cause (as
hereinafter defined). Any such termination shall be effective as of the end of
such one hundred twenty (120) day period (the "Final Date").
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<PAGE>
C. If Employee's employment hereunder shall be terminated by Employer
without Reasonable Cause pursuant to paragraph 6.B. or because of Employee's
disability, as determined by Employer in good faith, or if Employee voluntarily
terminates employment hereunder for Good Reason or if this Agreement is not
renewed by Employer for any reason at the end of the Tenn, then Employee shall
be entitled to (i) severance compensation equal to Employee's then-current base
salary and benefits (which for purposes hereof shall include all compensation
payable hereunder, of any type) for a period equal to the Severance Period (as
defined below) and (ii) outplacement services at Employer's expense if Employee
actually utilizes such services (collectively, the "Severance Benefits"). Such
severance compensation payments consisting of cash shall be paid in a lump sum
on or before the Final Date. The Severance Benefits are intended to be in lieu
of all other payments to which Employee might otherwise be entitled in respect
of termination of Employee's employment without Reasonable Cause or in respect
of any action by Employer constituting Good Reason for voluntary termination.
D. If Employee's employment hereunder shall be terminated for
Reasonable Cause pursuant to paragraph 6.C., or if Employee voluntarily
terminates Employee's employment without Good Reason, Employee shall be entitled
to receive Employee's base salary as accrued through the effective date of such
termination, but shall not be entitled to any Severance Benefits or other
amounts in respect of such termination.
E. "Reasonable Cause," as used herein, shall mean Employee's
involvement in any action or inaction involving fraud resulting in a personal
benefit in excess of any payments to which Employee is entitled hereunder,
dishonesty, or material violation of Corporation policy and procedures. Employee
shall vacate the offices of Employer on such effective date.
F. "Good Reason," as used herein, means the occurrence of any of
the following events without Employee's consent:
i. a material diminution in Employee's duties and
responsibilities;
ii. a reduction in Employee's base salary;
iii. a forced relocation; or
iv. a Change of Control (as defined below) if Successor
Employer (as defined in paragraph 21 below) fails to assume this
Agreement in its entirety.
G. "Severance Period," as used herein, means twenty four (24)
months.
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<PAGE>
H. "Change of Control" means a sale outside the ordinary
course of business of more than fifty percent (50%) of the assets of
or equity interests in Employer to any person or entity.
7. COMPLIANCE WITH LAWS. Employee will comply with all federal and state
laws, rules and regulations relating to any of Employee's responsibilities and
duties with Employer and will not violate any such laws, rules and regulations.
8. COVENANT NOT TO COMPETE. Employee agrees to conform to the
following concerning non-competition.
A. Employer undertakes to train Employee and to give Employee
confidential information and knowledge about Employer's business policies,
accounts procedures and methods. For the purposes of this Agreement, the
term "confidential information" shall include but is not limited to any list
of suppliers, customers, investors, stockholders, including their names,
addresses, phone numbers, amount of investments and similar information. In
addition, any operational information of Employer, including but not limited to
information on Employer's methods of conducting business, profits and/or
losses of Employer, marketing material and any information that would
reasonably be considered proprietary or confidential in nature. Employer has
established a valuable and extensive trade in its products and services, which
business has been developed at a considerable expense to Employer. The nature
of the business is such that the relationship of its customers with Employer
must be maintained through the close personal contact of its employees.
B. Employee desires to enter into or continue in the employ of
Employer and by virtue of such employment by Employer, Employee will
become familiar with the manner, methods, secrets and confidential
information pertaining to such business. During the Term, Employee
will continue to receive additional confidential information of the same
kind. Through representatives of Employer, Employee will become personally
acquainted with the business of Employer and its methods of operation.
C. In consideration of the employment or continued employment
of Employee as herein provided, the training of Employee by Employer, and
the disclosure by Employer to employee of the knowledge and confidential
information described above, Employer requests and Employee makes the
covenants hereinafter set forth. Employee understands and acknowledges
that such covenants are required for the fair and reasonable protection
of the business of Employer carried on in the area to which the covenants are
applicable and that without the limited restrictions on Employee's activities
imposed by the covenants, the business of Employer would suffer irreparable
and immeasurable damage. The covenants on the part of Employee shall be
construed as an agreement independent of any other provision of this Agreement,
and existence of any claim or course of action whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
Employer of the covenants.
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<PAGE>
D. Employee agrees that during the term of Employee's employment and for
the period of twelve (12) months immediately following the termination of
employment (which said time period shall be increased by any time during which
Employee is in violation of this Agreement) Employee will not, within the
territory hereinafter defined, directly or indirectly, for Employee, or on
behalf of others, as an individual on Employee's own account, or as an employee,
agent, or representative for any other person, partnership, firm or corporation:
i. Compete with the business of Employer by engaging or
participating in or furnishing aid or assistance in competition with
the business of Employer.
ii. Engage, in any capacity, directly or indirectly, in or be
employed by any business similar to the kind or nature of business
conducted by Employer during the employment.
iii. For the purposes of this paragraph 8, the business of Employer
shall be limited to the wireless data transfer business, which means any
business primarily involving the wireless transfer of data on behalf of third
parties, but does not include any business involving the wireless transfer of
data in which Employee has a substantial proprietary interest to third parties
whose primary purpose is acquiring the content of such data from such Employee
rather than obtaining from such Employee the means of transferring wirelessly
such data.
E The territory referred to in this paragraph 8 shall be the United
States.
F. Each restrictive covenant is separate and distinct from any other
covenant set forth in this paragraph. In the event of the invalidity of any
covenant, the remaining obligation shall be deemed independent and divisible.
The parties agree that the territory set forth is reasonable and necessary for
the protection of Employer. In the event any term or condition is deemed to be
too broad or unenforceable, said provision shall be deemed reduced in scope to
the extent necessary to make said provision enforceable and binding.
G. The provisions of this paragraph 8 shall not apply if Employee's
employment is terminated by Employer without Reasonable Cause or by Employee for
Good Reason.
5
<PAGE>
9. INDUCING EMPLOYEE OF EMPLOYER TO LEAVE. Any attempt on the part of
Employee to induce others to leave Employer's employ or any efforts by Employee
to interfere with Employer's relationship with other employees would be harmful
and damaging to Employer. Employee expressly agrees that during the term of
Employee's employment and for a period of twelve (I 2) months thereafter
(provided said time period shall be increased by any time during which Employee
is in violation of this Agreement), Employee will not in any way directly or
indirectly:
A. Induce or attempt to induce an employee to sever his or her
employment with Employer;
B. Interfere with or disrupt Employer's relationship with other
employees; and
C. Solicit, entice, take away or employ any person employed with
Employer, excluding people Employee brings to Employer.
10. CONFIDENTIAL INFORMATION. It is understood between the parties
hereto that during the term of employment, Employee will be dealing with
confidential information, as defined above, which is Employer's property,
used in the course of its business. Employee will not disclose to anyone,
directly or indirectly, any of such confidential information or use such
information other than in the course of Employee's employment. All documents
that Employee prepares, or confidential information that might be given to
Employee in the course of employment, are the exclusive property of Employer
and shall remain in Employer's possession on the premises. Under no
circumstances shall any such information or documents be removed without
Employer's written consent first being obtained.
11. RETURN OF EMPLOYER'S PROPERTY. On termination of employment,
regardless of how termination is effected, or whenever requested by Employer,
Employee shall immediately return to Employer all of Employer's property used by
Employee rendering services hereunder or otherwise that is in Employee's
possession or under Employee's control.
12. VACATION. Employee shall be entitled to a vacation period of four (4)
weeks per calendar year. The vacation shall be taken by Employee at such time
during the year and for such period as determined by the Executive Committee
of Employer. All vacations must be taken in the year earned. No vacations
will be accrued.
13. REFERENCES. Employer agrees that, upon termination of this Agreement,
it will, upon written request of Employee, furnish references to third parties,
including prospective employers, regarding Employee. However, Employee
acknowledges that it is Employer's policy to confirm employment only and not to
release any additional information without a written release from Employee.
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<PAGE>
14. NOTICES. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be deemed to have been
delivered on the date personally delivered or the date mailed, postage prepaid
by certified mail, return receipt requested, or taxed and confirmed, if
addressed to the respective parties as follows:
If to Employer: Thrucomm, Inc.
1641 Commerce Avenue North St.
Petersburg, FL 33716
Attention: Mark J. Gianinni, President
If to Employee: John F. Kolenda
700 Apalachee Drive, N.E.
St. Petersburg FL 33702
Either party may change its address for the purpose of receiving notices,
demands, and other communications by giving written notice to the other party of
the change.
15. VOLUNTARY AGREEMENT. Employee represents that he has not been
pressured, misled or induced to enter this Agreement based upon any
representation by Employer not contained herein.
16. PROVISIONS TO SURVIVE. The parties hereto acknowledge that many of
the terms and conditions of this Agreement are intended to survive the
employment relationship. Therefore, any terms and conditions that are intended
by the nature of the promises or representations to survive the termination of
employment shall survive the term of employment regardless of whether such
provision is expressly stated as so surviving.
17. MERGER. This Agreement represents the entire Agreement between the
parties and shall not be subject to modification or amendment by any oral
representation, or any written statement by either party, except for a dated
written amendment to this Agreement signed by Employee and an authorized
officer of Employer.
18. VENUE AND APPLICABLE LAW. This Agreement shall be enforced and
construed in accordance with the laws of the State of Florida, and venue to
any action or arbitration under this Agreement shall be Pinellas County, FL.
19. SUBSIDIARIES AND AFFILIATED ENTITIES. Employee acknowledges and
agrees that Employer has or may have various subsidiaries and affiliated
entities. In rendering services to Employer, Employee will have considerable
contact with such subsidiaries and affiliates. Therefore, Employee agrees that
all provisions of paragraphs 7, 8, 9 and 10 shall apply to all such subsidiaries
and affiliates.
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<PAGE>
20. PERSONNEL INFORMATION. Employee shall not divulge or discuss
personnel information such as salaries, bonuses, commissions and benefits
relating to Employee or other employees of Employer or any of its subsidiaries
with any other person except the Executive Committee and the Board of Directors
of Employer.
21. ASSIGNMENT. This Agreement shall not be assignable by either party
without the written consent of the other party; provided, however, that this
Agreement shall be assignable to any corporation or entity which purchases the
assets of or succeeds to the business of Employer (a "Successor Employer").
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Employer
THRUCOMM, INC.
By:
Mark J. Gianinni
President
Employee
John F. Kolenda
-8-
<PAGE>
EXHIBIT A
Other Benefits
Employer shall provide Employee with a car allowance in the amount of $400.00
per month, which can be in the form of reimbursement for lease payments,
debt service and/or expenses of maintenance and operation.
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<PAGE>
EXHIBIT 10.7
Incentive and Non-Statutory Stock Option Plan
<PAGE>
INCENTIVE AND NON-STATUTORY
STOCK OPTION PLAN
SECTION 1. PURPOSE
This Incentive and Non-Statutory Stock Option Plan (the "Plan") is
intended as a performance incentive for officers and employees of THRUCOMM,
INC., a Florida corporation (the "Company") or its Subsidiaries (as hereinafter
defined) and for certain other individuals providing services to or acting as
directors of the Company or its Subsidiaries, to enable the persons to whom
options are granted (an "Optionee" or "Optionees") to acquire or increase a
proprietary interest in the success of the Company. The Company intends that
this purpose will be effected by the granting of incentive stock options
("Incentive Options") as defined in Section 422A(b) of the Internal Revenue Code
of 1986 (the "Code") and other stock options ("Non-statutory Options") under the
Plan. The term "Subsidiaries" means any corporations in which stock possessing
50% or more of the total combined voting power of all classes of stock is owned
directly or indirectly by the Company.
SECTION 2. OPTIONS TO BE GRANTED AND ADMINISTRATION
2.1 OPTIONS TO BE GRANTED. Options granted under the Plan may be either
Incentive Options or Non-statutory Options.
2.2 ADMINISTRATION BY THE BOARD. This Plan shall be administered by the
Board of Directors of the Company (the "Board"). The Board shall have full and
final authority to operate, manage and administer the Plan on behalf of the
Company. This authority includes, but is not limited to: (i) the power to grant
options conditionally or unconditionally; (ii) the power to prescribe the form
or forms of the instruments evidencing options granted under this Plan; (iii)
the power to 'interpret the Plan; (iv) the power to provide regulations for the
operation of the incentive features of the Plan, and otherwise to prescribe
regulations for interpretation, management and administration of the Plan; (v)
the power to delegate responsibility for Plan operation, management and
administration on such terms, consistent with the Plan, as the Board may
establish; (vi) the power to delegate to other persons the responsibility for
performing ministerial acts in furtherance of the Plan's purpose; and (vi]) the
power to engage the services of persons or organizations in furtherance of the
Plan's purpose, including but not limited to, banks, insurance companies,
brokerage firms and consultants.
In addition, as to each option, the Board shall have full and final
authority in its discretion: (i) to detemine the number of shares subject to
each option; (11) to determine the time or times at which options will be
granted; (iii) to determine the option price for the shares subject to each
option, which price shall be subject to the applicable requirements, if any, of
Section 5. 1 (e) hereof, and (iv) to determine the time or times when each
option shall become exercisable and the duration of the exercise period, which
shall not exceed the limitations specified in Section 5. 1 (a).
2.3 APPOINTMENT AND PROCEEDINGS OF COMMITTEE. The Board may appoint a
Stock Option Committee (the "Committee") which shall consist of at least two
members, at least one of whom shall be a member of the Board. Members of
the Committee shall all be "Non-Employee Directors." A "Non- Employee Director"
is defined in Rule 16b-3(b)(3)(i) of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended, as promulgated by the
Securities and Exchange Commission, and as such Rule is amended from time to
time. The Board may from time to time appoint members of the Committee in
substitution for or in addition to members previously appointed, and may
fill vacancies, however caused, in the Committee. The Committee shall
select one of its members as its chairman and shall hold its meetings at such
times and places as it shall deem advisable. If the Committee consists of only
two members, both members shall be required for a quorum and all actions of the
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<PAGE>
Committee shall require concurrence by both members. If the Committee
consists of more than two members, then a majority of its members shall
constitute a quorum, and all actions of the Committee shall be taken by a
majority of its members. Any action may be taken by a written and signed by
all of the members, and any action so taken shall be as fully effective as if
it had been taken by a vote of a majority of the members (or both members if
there are only two(2) as Committee members) at a meeting duly called and held.
2.4 POWERS OF COMMITTEE. Subject to the provisions of this Plan and the
approval of the Board, the Committee shall have the power to make
recommendations to the Board as to whom options should be granted, the number of
shares to be covered by each option, the time or times of option grants, and the
terms and conditions of each option. In addition, the Committee shall have
authority to interpret the Plan, to prescribe, ammend and rescind miles and
regulations relating to the Plan, and to exercise the administrative and
mimsterial powers of the Board with regard to aspects of the Plan other than the
granting of options. The interpretation and construction by the Committee of any
provisions of the Plan or of any option granted hereunder and the exercise of
any power delegated to it hereunder shall be final, unless otherwise determined
by the Board. No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted hereunder.
SECTION 3. STOCK
3.1 SHARES SUBJECT TO PLANS. The stock subject to the options granted
under the Plan shall be shares of the Company's authorized but unissued common
stock, no par value ("Common Stock"). The total number of shares that may be
issued pursuant to options granted under the Plan shall not exceed an aggregate
of 200,000 shares of Common Stock.
3.2 LAPSED OR UNEXERCISED OPTIONS. Whenever any outstanding option
under the Plan expires, is cancelled or is otherwise terminated (other than by
exercise), the shares of Common Stock allocable to the unexercised portion of
such option shall be restored to the Plan and be available for the grant of
other options under the Plan except as otherwise provided in Section 5.1(d).
SECTION 4. ELIGIBILITY
4.1 ELIGIBLE OPTIONEES. Incentive Options may be granted only to
officers and other employees of the Company or its Subsidiaries, including
members of the Board who are also employees of the Company or a Subsidiary.
Non-statutory Options may be granted to officers or other employees of the
Company or its Subsidiaries, to members of the Board or the board of directors
of any Subsidiary who are also employees of the Company or such Subsidiary, and
to certain other individuals providing services to the Company or its
Subsidiaries.
4.2 LIMITATIONS ON 10% STOCKHOLDERS. No Incentive Option shall be
granted to an individual who, at the time the Incentive Option is granted, owns
(including ownership attributed pursuant to Section 425(d)of the Code) more than
10% of the total combined voting power of all classes of stock of the Company or
any parent or Subsidiary of the Company (a "greater-than-1O% stockholder"),
unless such Incentive Option provides that (1) the purchase price per share
shall not be less than 110% of the fair market value of the Common Stock at the
time such Incentive Option is granted, and (ii) that such Incentive Option shall
not be exercisable to any extent after the expiration of five years from the
date it is granted.
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4.3 LIMITATION ON EXERCISABLE OPTIONS. The aggregate fair market value
(determined at the time the Incentive Option is granted) of the Common Stock
with respect to which Incentive Options are exercisable for the first time by
any person during any calendar year under the Plan and under any other
Incentive Option plan of the Company (or a parent or subsidiary as defined in
Section 425 of the Code) shall not exceed $100,000. Any option granted in
excess of the foregoing limitation shall be specifically designated as
being a Non-statutory Option.
Incentive Options shall only become exercisable after two (2) years
continued employment of the optionee with the Company or one of its
Subsidiaries. Incentive Options shall be exercisable only to the extent of forty
percent (40%) of the total number of shares subject to the Incentive Option
after the expiration of two (2) years following the date the Incentive Option is
granted, only to the extent of sixty percent (60%) of the total number of
optioned shares after the expiration of three (3) years following the date the
Option is granted, only to the extent of eighty percent (800/o) of the total
number of shares subject to the Incentive Option after the expiration of four
(4) years following the date the option is granted, and in full only after the
expiration of five (5) years following the date the Incentive Option is granted;
such limitations being calculated, in the case of any resulting fraction, to the
nearest lower whole number of shares. Incentive Options must be exercised before
the expiration of ten (I 0) years following the date of grant. Any Incentive
Option granted not subject to the provision requiring two years of employment
before exercise and the twenty percent (20%) vesting schedule shall be
specifically designated as being a Non-statutory Option. Notwithstanding the
foregoing, the Committee may, in its sole discretion, (i) prescribe longer time
periods and additional requirements with respect to the exercise of an Incentive
Option and (ii) terminate in whole or in part such portion of any Incentive
Option as has not yet become exercisable at the time of termination if it
determines that the optionee is not performing satisfactorily the duties to
which he was assigned on the date the Incentive Option was granted or exercised
unless the optionee is at the time of such exercise in the employ of the Company
or of a Subsidiary and shall have been continuously so employed since the grant
of his Incentive Option. Absence or leave approved by the management of the
Company shall not be considered an interruption of employment for any purpose
under the Plan.
SECTION 5. TERMS OF THE OPTION AGREEMENTS
5.1 MANDATORY TERMS. Each option agreement shall contain such provisions as
the Board or the Committee shall from time to time deem appropriate, and shall
include provisions relating to the method of exercise, payment of exercise
price, adjustments on changes in the Company's capitalization and the effect of
a merger, consolidation, liquidation, sale or other disposition of or involving
the Company. Option Agreements shall clearly identify whether the option is an
Incentive Option or a Non-statutory Option and if an Incentive Option,
explicitly state that such Option is only exercisable by the Optionee during his
lifetime. Option agreements need not be identical, but each option agreement by
appropriate language shall include the substance of all of the following
provisions:
(a) EXPIRATION. Notwithstanding any other provision of the Plan or of
any option agreement, each option shall expire on the date specified 'in the
option agreement, which date shall not be later than the tenth anniversary of
the date on which the option was granted (fifth anniversary in the case of a
greater-than-1O% stockholder).
(b) EXERCISE. Each option shall be deemed exercised when (i) the
Company has received written notice of such exercise in accordance with the
terms of the option, (ii) except in the event of loans to exercise options as
set forth in Section 5.1(c) or an alternative to payment as set forth in
Section 5.1(d), full
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payment of the aggregate option price of the shares of Common Stock as to which
the option is exercised has been made, and (111) arrangements that are
satisfactory to the Board or the Committee in its sole discretion have been made
for the optionee's payment to the Company of the amount that is necessary for
the Company or Subsidiary employing the optionee to withhold in accordance with
applicable federal or state tax withholding requirements. Unless further limited
by the Board or the Committee in any option, the option price of any shares of
Common Stock purchased shall be paid in cash, by certified or official bank
check, by money order, with shares of Common Stock or by a combination of the
above; provided further, however, that the Board or the Committee in its sole
discretion may accept a personal check 'in full or partial payment of any shares
of Common Stock. If the exercise price is paid 'in whole or in part with shares,
the value of the shares surrendered shall be their fair market value on the date
the option is exercised as determined 'in accordance with Section 5.1(f) hereof.
No optionee shall be deemed to be a holder of any shares of Common Stock subject
to an option unless and until a stock certificate or certificates for such
shares of Common Stock are issued to such person(s) under the terms of the Plan.
No adjustment shall be made for dividends (ordinary or extraordinary, whether
in cash securities or other property) or distributions or other rights for
which the record date is prior to the date such stock certificate is
issued, except as expressly provided in Section 6 hereof.
(c) LOANS FOR EXERCISE OF OPTIONS. The Company in its sole
discretion may, on an individual basis or pursuant to a general program
established in connection with this Plan, lend money to an optionee,
guarantee a loan to an optionee, or otherwise assist an optionee to obtain the
cash necessary to exercise all or a portion of an option granted hereunder or to
pay any tax liability of the optionee attributable to such exercise. If the
exercise price is paid in whole or in part with optionee's promissory note, such
note shall (i) provide for full recourse to the maker, (ii) be collateralized by
the pledge of the shares of Common Stock that the optionee purchases upon
exercise of such option, (iii) bear interest at the rate the Company pays to its
principal lender, from time to time, and (iv) contain such other terms as the
Board or the Commmittee in its sole discretion shall reasonably require. No
optionee shall be deemed to be a holder of any shares of Common Stock subject to
an option unless and until a stock certificate or certificates for such shares
of Common Stock are issued to such person(s) under the terms of the Plan.
(d) ALTERNATIVE TO PAYMENT. As an alternative to payment in full by
the optionee for the number of shares in respect of which an Incentive Option
is exercised, the Committee may provide alternative settlement methods as
follows:
(i) The Committee, in its discretion, may provide in the
initial grant of any Incentive Option, that the optionee may elect either
of the alternative settlement methods set forth 'in subsection (ii) below.
(ii) The alternative settlement methods are for the optionee,
upon exercise of the Incentive Option, to receive from the Company:
(1) cash in an amount equal to the excess of the value of one share over the
option price times the number of shares as to which the option is exercised;
or (2) the number of whole shares having an aggregate value not greater than
the cash amount calculated under Section 5.1(d)(ii)(1). For purposes of
determining an alternative settlement, the value per share shall be the
"fair market value" determined under the methods set forth in Section
5.1(f) hereof, applied as of the date of the exercise of the Incentive Option,
or such other price as the Committee shall determine to be the fair market
value of the Common Stock on the date of exercise.
An election of any of the alternative settlement methods provided for
under Section 5. 1 (d)(11) shall be binding on the optionee, when made. The
optionee may elect to what extent the alternative settlement method
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elected shall be paid in cash, in Common Stock, or partially in Common
Stock, provided that the aggregate value of the payments shall not be greater
than the cash amount calculated under Section 5.1(d)(ii)(1). No fractional
shares of Common Stock shall be issued, and the Committee shall determine
whether cash shall be paid in lieu of such fractional share interest or
whether such fractional share interest shall be eliminated.
The alternative settlement methods provided above in Section 5.1
(d)(ii) shall not be available unless the cash amount calculated thereunder
shall be positive, i.e. when the value of one share shall exceed the option
price per share.
Exercise of an option in any manner, including an exercise involving
an election of an alternative settlement method with respect to an option, shall
result in a decrease in the number of shares of Common Stock which thereafter
may be available under the Plan by the number of shares as to which the
Incentive Option is exercised.
To the extent that the exercise of options by one of the alternative
settlement methods provided for in Section 5.1(d)(ii) results 'in compensation
income to the optionee, the Company will withhold from the amount due to the
optionee utilizing such alternative settlement method, an appropriate amount for
federal, state and local taxes.
(e) EVENTS CAUSING IMMEDIATE EXERCISE. Unless otherwise
provided in any option, each outstanding option shall become immediately fully
exercisable.
(i) if there occurs any on (which shall include a series of
transactions occurring within sixty (60) days or occurring pursuant to a plan),
that has the result that stockholders of the Company immediately before such
transaction cease to own at least 51 percent (51%) of the voting stock of the
Company or of any entity that results from the participation of the
Company in a reorganization, consolidation, merger, liquidation or any
other form of corporate transaction;
(ii) if the stockholders of the Company shall approve a plan of
merger, consolidation, reorganization, liquidation or dissolution in which the
Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation or dissolution is subsequently abandoned); or
(iii) if the stockholders of the Company shall approve a plan
for the sale, lease, exchange or other disposition of all or substantially all
the property and assets of the Company (unless such plan is subsequently
abandoned).
The Board or the Committee may in its sole discretion accelerate the
date on which any option may be exercised and may accelerate the vesting of any
shares of Common Stock subject to any option or previously acquired by the
exercise of any option. However, 'in no event shall any option become fully
exercisable if the exercise created an "excess parachute payment" as that term
is defined 'in Section 280G of the Code.
(f) PURCHASE PRICE. The purchase price per share of the Common Stock
under each Incentive Option shall be not less than the fair market value of the
Common Stock on the date the option is granted (110% of the fair market value in
the case of a greater-than-10% stockholder). The price at which shares may be
purchased pursuant to Non-statutory Options shall be specified by the Board at
the time the option is granted, and may be less than, equal to or greater than
the fair market value of the shares of Common Stock on the date such
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Non-statutory Option is granted, but shall not be less than the par value of
shares of Common Stock.
For the purpose of the Plan, the "fair market value" per share of
Common Stock on any date of reference shall be the Closing Price of the Common
Stock of the Company which is referred to in either clause (i), (ii) or (iii)
below, on the business day immediately preceding such date, or if not referred
to in either clause (i), (ii) or (iii) below, "fair market value" per share of
Common Stock shall be such value as shall be determined by the Board or the
Committee, unless the Board or the Committee in its sole discretion shall
determine otherwise in a fair and uniform manner. For this purpose, the Closing
Price of the Common Stock on any business day shall be (i) if the Common Stock
is listed or admitted for trading on any United States national securities
exchange, or if actual transactions are otherwise reported on a consolidated
transaction reporting system the last reported sale price of Common Stock on
such exchange or reporting system, as reported in any newspaper of general
circulation, (ii) if the Common Stock is quoted on the National Association of
Securities Dealers Automated Quotations System ("NASDAQ"), or any similar system
of automated dissemination of quotations of securities prices in common use, the
mean between the closing high bid and low asked quotations for such day of
Common Stock on such system, or (iii) if neither clause (i) or (ii) is
applicable, the mean between the high bid and low asked quotations for the
Common Stock as reported by the National Quotation Bureau, Incorporated if at
least two (2) securities dealers have inserted both bid and asked quotations for
Common Stock on at least five (5) of the ten (10) preceding days.
(g) TRANSFERABILIIY OF OPTIONS. Incentive options granted under the
Plan and the rights and privileges conferred thereby may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by applicable laws of descent and distribution,
and shall not be subject to execution, attachment or similar process. Upon any
attempt so to transfer, assign, pledge, hypothecate or otherwise dispose of any
Incentive Option under the Plan or any right or privilege conferred hereby,
contrary to the provisions of the Plan, or upon the sale or levy or any
attachment or similar process upon the rights and privileges conferred hereby,
such option shall thereupon terminate and become null and void. Non-statutory
Options shall be transferable to the extent provided in the option agreements
under which they are granted.
(h) TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE. Except as
may be otherwise expressly provided in the terms and conditions of the
option granted to an Optionee, options granted hereunder shall terminate on
the earlier to occur of termination for cause or voluntary separation on
the part of the Optionee without the consent of the Company or Subsidiary;
(ii) the date of expiration thereof, or
(iii) other than the case of death of the Optionee or disability
of the Optionee within the meaning of Section 22(e)(3) of the Code
("disability"), (A) except for termination for cause, 90 days after
termination of the employment between the Company and the Optionee in the case
of an Incentive Option, except for termination for cause, 90 days after
termination of the employment or other relationship between the Company and
the Optionee, unless such termination provision is waived by resolution adopted
by the Board within 30 days of the termination of such relationship, in the case
of a Non-statutory Option.
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An employment relationship between the Company and the Optionee shall
be deemed to exist during any period during which the Optionee is employed by
the Company or by any Subsidiary. Whether authorized leave of absence or absence
on military government service shall constitute termination of the employment
relationship between the Company and the Optionee shall be determined by the
Board at the time thereof
Except as may othenwise be expressly provided in the terms and conditions
of the option granted to an Optionee, in the event of the death of an Optionee
while in an employment or other relationship with the Company and before the
date of expiration of such option, such option shall terminate one year
following the date of such death. After the death of the Optionee, his
executors, administrators or any person or persons to whom his option may be
transferred by will or by laws of descent and distribution, shall have the
night, at any time prior to such time termination, to exercise the option to the
extent the Optionee was entitled to exercise such option immediately prior to
his death.
Except as may otherwise be expressly provided in the terms and
conditions of the option granted to an Optionee, if an Optionee's employment or
other relationship with the Company terminates because of a disability or
retirement on the Optionee's retirement date, the Optionee's option shall become
immediately fully exercisable and the exercise thereof shall then terminate one
year following such disability or retirement.
(i) RIGHTS OF OPTIONEES. No Optionee shall be deemed for any purpose
to be the owner of any shares of Common Stock subject to any option unless and
until (i) the option shall have been exercised pursuant to the terms thereof,
(ii) the Company shall have issued and delivered the shares of the Optionee, and
(iii) the Optionee's name shall have been entered as a stockholder of record on
the books of the Company. Thereupon, the Optionee shall have full voting,
dividend and other ownership rights with respect to such shares of Common Stock.
SECTION 6. ADJUSTMENT OF SHARES OF COMMON STOCK
6.1 INCREASE OR DECREASE OF OUTSTANDING SHARES. If at any time
while the Plan is in effect or unexercised options are outstanding, there shall
be any increase or decrease 'in the number of issued and outstanding shares of
Common Stock through the declaration of a stock dividend or through any
recapitalization resulting in a stock split-up, combination or exchange of
shares of Common Stock, then and in such event (i) appropriate adjustment shall
be made in the maximum number of shares of Common Stock available for grant
under the Plan, so that the same percentage of the Company's issued and
outstanding shares of Common Stock shall continue to be subject to being so
optioned, and (ii) appropriate adjustment shall be made 'in the number of shares
and the exercise price per share of Common Stock thereof then subject to any
outstanding option, so that the same percentage of the Company's issued and
outstanding shares of Common Stock shall remain subject to purchase at the same
aggregate exercise price.
6.2 CONVERSION OF SHARES. Except as otherwise expressly provided
herein, the issuance by the Company of shares of its capital stock of any class,
or securities convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to the number of or
exercise price of shares of Common Stock then subject to outstanding options
granted under the Plan.
6.3 GENERAL. Without limiting the generality of the foregoing, the
existence of outstanding options granted under the Plan shall not affect in any
manner the night or power of the Company to make, authorize
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or consumate (i) any or all adjustments, recapitalizations, reorganizations or
other changes in the Company's capital structure or its business; (ii) any
merger or consolidation of the Company; (iii) any issue by the Company of debt
securities, or preferred or preference stock that would rank above the shares
subject to outstanding options; (iv) the dissolution or liquidation of the
Company; (v) any sale, transfer or assignment of all or any part of the assets
or business of the Company; or (vi) any other corporate act or proceeding,
whether of a similar character or otherwise.
SECTION 7. AMENDMENT OF THE PLAN
The Board may amend the Plan at any time, and from time to time,
subject to the limitation that no amendment shall be effective unless approved
by the stockholders of the Company in accordance with applicable law and
regulations at an annual or special meeting held within twelve (12) months
before or after the date of adoption of such amendment, in any instance in which
such amendment would: (i) increase the number of shares of Common Stock as to
which options may be granted under the Plan; of (ii) change in substance the
provisions of Section 4 hereof relating to eligibility to participate in the
Plan.
Rights and obligations under any option granted before any amendment of
the Plan shall not be altered or impaired by such amendment, except with the
consent of the Optionee.
SECTION 8. NON-EXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the approval of the Plan
by the stockholders of the Company shall be construed as creating any
limitations on the power of the Board to adopt such other 'incentive
arrangements as it may deem desirable, including without limitation the granting
the stock options otherwise than under the Plan, and such arrangements may be
either applicable generally or only in specific cases.
SECTION 9. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
The obligation of the Company to sell and deliver shares of Common Stock
with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by government
agencies as may be deemed necessary or appropriate by the Board or the
Committee. All shares sold under the Plan shall bear appropriate legends. The
Plan shall be governed by and construed in accordance with the laws of the State
of Florida.
SECTION 1O. EFFECTIVE DATE OF PLAN
The effective date of the Plan shall be the later date on which it is
approved by the Board or by the stockholders of the Company.
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EXHIBIT 10.8
Non-Employee Directors Non-Statutory Stock Option Plan
<PAGE>
NON-EMPLOYEE DIRECTORS
NON-STATUTORY STOCK OPTION PLAN
SECTION 1. PURPOSE
This Non-Statutory Stock Option Plan (the "Plan") is intended as an
incentive for members of the Board of Directors of THRUCOMM, INC., a Florida
corporation (the "Company"), who are not employed by the Company or its
Subsidiaries (as hereinafter defined), to enable such persons ("Optionee" or
"Optionees") to acquire or increase a proprietary interest in the success of
the Company.
SECTION 2. OPTIONS TO BE GRANTED AND ADMINISTRATION
2.1 OPTIONS TO THE GRANTED. Options granted under the Plan shall be
Non-statutory Options. It is intended that this Plan be considered a "formula
plan" as contemplated by Rule 16b-3, promulgated under the Securities Exchange
Act of1934, as amended (the "Act"). This Plan may be amended from time to time
by the Board to the extent necessary in order for transactions under the Plan
to be exempt from Section 16(b) of the Act.
2.2 APPOINTMENT AND PROCEEDINGS OF COMMITTEE. The Board of Directors of
the Company (the "Board") may appoint an Option Committee (the "Committee")
which shall consist of at least two members of the Board. The Board may from
time to time appoint members of the Committee in substitution for or in addition
to members previously appointed, and may fill vacancies, however caused, in the
Committee. The Committee shall select one of its members as its chairman and
shall hold its meetings at such times and places as it shall deem advisable. If
the Committee consists of only two members, both members shall be required for a
quorum and all actions of the Committee shall require concurrence by both
members. If the Committee consists of more than two members, then a majority of
its members shall constitute a quorum, and all actions of the Committee shall be
taken by a majority of its members. Any action may be taken by a written
instrument signed by all of the members, and any action so taken shall be
as fully effective as if it had been taken by a vote of a majority of the
members (or both members if there are only two Committee Members) at a meeting
duly called and held.
2.3 ADMINISTRATION BY THE COMMITTEE. This Plan shall be administered by
the Committee. The Committee shall have full and final authority to operate,
manage and administer the Plan on behalf of the Company. Subject to the
provisions of this Plan and the approval of the Board, the Committee shall
have the power to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, and to exercise the administrative and
ministerial powers of the Board with regard to aspects of the Plan. The
interpretation and construction by the Committee of any provisions of the Plan
or of any option granted hereunder and the exercise of any power delegated to it
hereunder shall be final, unless otherwise determined by the Board. No member
of the Board or the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any option granted hereunder.
SECTION 3. STOCK
3.1 SHARES SUBJECT TO PLANS. The stock subject to the options granted
under the Plan shall be shares of the Company's authorized but unissued common
stock, no par value ("Common Stock"). The total number of shares that may be
issued pursuant to options granted under the Plan shall not exceed an aggregate
of 100,000 shares of Common Stock.
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3.2 LAPSED OR UNEXERCISED OPTIONS. Whenever any outstanding option under
the Plan expires, is in cancelled or is otherwise terminated (other than by
exercise), the shares of Common Stock allocable to the unexercised
portion of such option shall be restored to the Plan and be available for
the grant of other options under the Plan.
SECTION 4. ELIGIBILITY
4.1 INITIAL GRANT OF OPTIONS. On the date of appointment to the Board,
each eligible Optionee shall be granted an option to purchase at the "fair
market value" from the Company an aggregate of 5,000 shares of Common Stock.
The option shall vest and become exercisable at the rate of 20% per year after
the expiration of the first year following the date on which the option is
granted and shall be exercisable in full only after the expiration of five (5)
years following the date the option is granted.
4.2 ANNUAL GRANT OF OPTIONS. On the date of the annual stockholders
meeting of the Company, each eligible Optionee shall be granted an option to
purchase at the "fair market value" from the Company an aggregate of 1,000
shares of Common Stock. The option shall vest and become exercisable one (1)
year from the date of grant.
4.3 ELIGIBLE OPTIONEES. Options shall be granted to each member of the
Board who, as of the date of grant, (i) is not an employee of the Company or a
Subsidiary, (ii) is appointed, elected, re-elected or otherwise continues to
serve on the Board, and (iii) with respect to annual grants under Section 4.2
above, has served on the Board for at least six (6) months.
SECTION 5. TERMS OF THE OPTION AGREEMENTS
5.1 MANDATORY TERMS. Each option agreement shall contain such provisions as
the Board or the Committee shall from time to time deem appropriate, and shall
include provisions relating to the method of exercise, payment of exercise
price, adjustments on changes 'in the Company's capitalization and the effect of
a merger, consolidation, liquidation, sale or other disposition of or involving
the Company. Option agreements shall include the following provisions:
5.1.1 EXPIRATION. Notwithstanding any other provision of the Plan or of
any option agreement, each option shall expire on the tenth anniversary of the
date on which the option was granted.
5.1.2 EXERCISE. Each option shall be deemed exercised when (i) the Company
has received written notice of such exercise in accordance with the terms of
the option, and (ii) except in the event of loans to exercise options as set
forth in Section 5.1.3, full payment of the aggregate option price of the
shares of Common Stock as to which the option is exercised has been made.
Unless further limited by the Board or the Committee in any option, the option
price of any shares of Common Stock purchased shall be paid in cash, by
certified or official bank check, by money order, with shares of Common Stock
or by a combination of the above; provided further, however, that the Board
or the Committee in its sole discretion may accept a personal check in full
or partial payment of any shares of Common Stock. If the exercise price
is paid 'in whole or 'in part with shares, the value of the shares surrendered
shall be their fair market value on the date the option is exercised as
determined in accordance with Section 5.1.5 hereof
5.1.3 LOANS FOR EXERCISE OF OPTIONS. The Company in its sole discretion
may, on an individual basis or pursuant to a general program established in
connection with this Plan, lend money to an optionee, guarantee a loan to an
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optionee, or otherwise assist an optionee to obtain the cash necessary to
exercise all or a portion of an option granted hereunder or to pay any tax
liability of the optionee attributable to such exercise. If the exercise
price is paid in whole or in part with optionee's promissory note, such note
shall (i) provide for full recourse to the maker, (ii) be collateralized by
the pledge of the shares of Common Stock that the optionee purchases upon
exercise of such option, (iii) bear interest at the rate the Company pays to
its principal lender, from time to time, and (iv) contain such other terms
as the Board or the Committee shall reasonably require.
5.1.4 EVENTS CAUSING IMMEDIATE EXERCISE. Unless otherwise provided in
any option, each outstanding option shall become immediately fully exercisable:
5.1.4.1 if there occurs any transaction (which shall include a series
of transactions occurring within sixty (60) days or occurring pursuant to a
plan), that has the result that stockholders of the Company immediately
before such transaction cease to own at least 51 percent (51%) of the voting
stock of the Company or of any entity that results from the participation of
the Company in a reorganization, consolidation, merger, liquidation or any
other form of corporate transaction;
5.1.4.2 if the stockholders of the Company shall approve a plan of
merger, consolidation, reorganization, liquidation or dissolution in which the
Company does not survive (unless the approved merger, consolidation,
reorganization, liquidation or dissolution is subsequently abandoned); or
5.1.4.3 if the stockholders of the Company shall approve a plan for the
sale, lease, exchange or other disposition of all or substantially all the
property and assets of the Company (unless such plan is subsequently abandoned).
The Board or the Committee may accelerate the date on which any
option may be exercised and may accelerate the vesting of any shares of Common
Stock subject to any option, subject to the limitations of Section 16(b)
of the Act.
5.1.5 PURCHASE PRICE. The purchase price per share of the Common Stock
under each option shall be not less than the fair market value of the Common
Stock on the date the option is granted.
For the purpose of the Plan, the "fair market value" per share of
Common Stock on any date of reference shall be the Closing Price of the Common
Stock of the Company which is referred to in either clause (i), (ii) or (iii)
below, on the business day immediately preceding such date, or if not referred
to in either clause (i), (ii) or (iii) below, "fair market value" per share of
Common Stock shall be such value as shall be determined by the Board or the
Committee, unless the Board or the Committee in its sole discretion shall
determine otherwise in a fair and uniform manner. For this purpose, the Closing
Price of the Common Stock or on any business day shall be (i) if the Common
Stock is listed or admitted for trading on any United States national securities
exchange, or if actual transactions are otherwise reported on a consolidated
transaction reporting system, the last reported sale price of Common Stock on
such exchange or reporting system, as reported in any newspaper of general
circulation, (ii) if the Common Stock is quoted on the National Association
of Securities Dealers Automated Quotations System ("NASDAQ"), or any similar
system of automated dissemination of quotations of securities prices in
common use, the mean between the closing high bid and low asked quotations for
such day of Common Stock on such system, or (iii) if neither clause (i) or (ii)
is applicable, the mean between the high bid and low asked quotations for the
Common Stock as reported by the National Quotation Bureau, Incorporated if at
3
<PAGE>
last two securities dealers have inserted both bid and asked quotations for
Common Stock on at least five (5) of the ten (10) preceding days.
5.1.6 TRANSFERABILITY OF OPTIONS. Options granted under the Plan and
the rights and privileges conferred thereby may not be transferred, assigned,
pledged or hypothecated in any manner (whether by operation of law or otherwise)
other than by will or by applicable laws of descent and distribution or pursuant
to a qualified domestic relations order as defined by the Internal Revenue Code
of 1986, as amended, or Title I of the Employee Retirement Income Security Act
or Rules thereunder. Upon any attempt so to transfer, assign, pledge,
hypothecate or otherwise dispose of any option under the Plan or any night
or privilege conferred hereby, contrary to the provisions of the Plan, or
upon the sale or levy or any attachment or similar process upon the
rights and privileges conferred hereby, such option shall thereupon
terminate and become null and void.
5.1.7 TERMINATION OF SERVICE OR DEATH OF OPTIONEE. Except as may be
otherwise expressly provided in the terms and conditions of the option granted
to an Optionee, options granted hereunder shall terminate on the earlier to
occur of:
5.1.7.1 the date of removal from the Board;
5.1.7.2 the date of the expiration of the term thereof (the
"Expiration Date"); or
5.1.7.3 the termination of the Optionee as a member of the Board by
Reason of voluntary resignation by the Optionee or the expiration of the
Optionee's elected or appointed term and other than the case of death of the
Optionee or disability of the Optionee within the meaning of Section 22(e)(3)
of the Code ("disability"), the Optionee shall have the fight, within three (3
months after the date on which Optionee shall have ceased to be a member of
the Board, to exercise the unexercised portion of the options granted to the
extent, if any, that such options were exercisable by the Optionee on
the date of such termination.
In the event of the death of an Optionee while a member of the Board or
within three (3) months after the term of the Optionee as a member of the
Board, except for temination pursuant to Section 5.1.7.1 above, such option
shall become immediately fully exercisable and shall terminate on the earlier of
the Expiration Date thereof or one year following the date of such death. After
the death of the Optionee, his executors, administrators or any person or
persons to whom his option may be transferred by will or by laws of descent and
distribution, shall have the right, at any time during such period, to exercise
the option.
If an Optionee's service on the Board terminates because of a
disability, the Optionee's option shall become immediately fully exercisable and
shall terminate on the earlier of the Expiration Date thereof or one year
following the termination of service on the Board.
5.1.8 RIGHTS OF OPTIONEES. No Optionee shall be deemed for any
purpose to be the owner of any shares of Common Stock subject to any option
unless and until (i) the option shall have been exercised pursuant to the terms
thereof, (ii) the Company shall have issued and delivered the shares to the
Optionee, and (iii) the Optionee's name shall have been entered as a stockholder
of record on the books to the Company. Thereupon the Optionee shall have full
voting, dividend and other ownership rights with respect to such shares of
Common Stock. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such shares of
Common Stock are issued, except as expressly provided in Section 6 hereof
4
<PAGE>
SECTION 6. ADJUSTMENT OF SHARES OF COMMON STOCK
6.1 INCREASE OR DECREASE OF OUTSTANDING SHARES. If at any time while
the Plan is in effect or unexercised options are outstanding, there shall be any
increase or decrease in the number of issued and outstanding shares of Common
Stock through the declaration of a stock dividend or through any
recapitalization resulting in a stock split-up, combination or exchange of
shares of Common Stock, then and in such event (i) appropriate adjustment shall
be made in the maximum number of shares of Common Stock available for grant
under the Plan, so that the same percentage of the Company's issued and
outstanding shares of Common Stock shall continue to be subject to being so
optioned, (ii) appropriate adjustment shall be made in the number of shares and
the exercise price per share of Common Stock thereof then subject to any
outstanding option, so that the same percentage of the Company's issued and
outstanding shares of Common Stock shall remain subject to purchase at the same
aggregate exercise price, and (iii) appropriate adjustment shall be made as to
the number of shares of Common Stock to be subject to each future grant under
the Plan, so that the same percentage of the Company's number of shares of
Common Stock available under the Plan shall continue to be subject to each
option granted.
6.2 CONVERSION OF SHARES. Except as otherwise expressly provided
herein, the issuance by the Company of shares of its capital stock of any class,
or securities convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants to
subscribe therefore, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect and no
adjustment by reason thereof shall be made with respect to the number of or
exercise price of shares of Common Stock then subject to outstanding options
granted under the Plan.
6.3 GENERAL. Without limiting the generality of the foregoing, the
existence of outstanding options granted under the Plan shall not affect in any
manner the night or power of the Company to make, authorize or consummate
(1) any or all adjustments, recapitalizations, reorganizations or other changes
in the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt
securities, or preferred or preference stock that would rank above the
shares subject to outstanding options; (iv) the dissolution or liquidation of
the Company; (v) any sale, transfer or assignment of all or any part of the
assets or business of the Company; or (vi) any other corporate act or
proceeding, whether of a similar character or otherwise.
SECTION 7. AMENDMENT OF THE PLAN
The Board may not amend the Plan more than once every six months. In
addition, no amendment shall be effective unless approved by the stockholders of
the Company in accordance with applicable law and regulations at an annual or
special meeting held within 12 months before or after the date of adoption of
such amendment, in any instance in which such amendment would materially: (i)
increase the benefits of the Plan; (ii) increase the number of shares of Common
Stock as to which options may be granted under the Plan; or (iii) change in
substance the provisions of Section IV hereof relating to eligibility to
participate in the Plan.
Rights and obligations under any option granted before any amendment of
the Plan shall not be altered or impaired by such amendment, except with the
consent of the Optionee.
5
<PAGE>
SECTION 8. NON-EXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the approval of the
Plan by the stockholders of the Company shall be construed as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including without limitation the granting the stock
options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
SECTION 9. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
The obligation of the Company to sell and deliver shares of Common
Stock with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by government
agencies as may be deemed necessary or appropriate by the Board or the
Committee. If necessary, all shares sold under the Plan shall bear appropriate
legends. The Plan shall be governed by and construed in accordance with the laws
of the State of Florida.
SECTION 1O. EFFECTIVE DATE OF PLAN
The effective date of the Plan shall be the later date on which it is
approved by the Board or by the stockholders of the Company.
SECTION I 1. TERMINATION DATE OF PLAN
The Plan shall terminate on the ten-year anniversary of the effective
date of the Plan, and no options may be granted under the Plan thereafter.
6
EXHIBIT 10.9
Datalinc, Ltd. Management Incentive Plan
<PAGE>
DATALINC, LTD. MANAGEMENT INCENTIVE PLAN
1. Name and Purpose. This Plan shall be known as the Datalinc, Ltd.
Management Incentive Plan (the "Plan"). The purpose of the Plan is to provide
deferred compensation to certain Participants of Datalinc, Ltd. (the
"Partnership") and to advance the interests of the Datalinc, Ltd. by providing a
material incentive for exceptional performance and the continued services of
such Participants.
2. Administration. The Plan shall be administered by the Board of Directors
(the "Board") of Integrated Communications Networks, Inc., the General Partner
(the "General Partner") of the Partnership. The Board may establish, subject to
the provisions of the Plan, such rules and regulations as it deems necessary for
the proper administration of the Plan, and has the authority to construe and
interpret the terms of this Plan whenever any question of meaning arises under
it and make such determinations and take such action in connection therewith or
in relation to the Plan as it deems necessary or advisable, consistent with the
Plan. Any such construction or interpretation shall be binding both on the
Partnership and on the Participant, his personal representatives, the
representatives of his estate, his heirs, or anyone else having or claiming to
have an interest under this Plan. Determinations by the Board shall be by
majority vote and shall be binding on all parties with respect to all matters
relating to the Plan.
3. Eligibility. Regular full-time employees of the Partnership who are key
employees of the Partnership shall be eligible to participate in the Plan. Such
employees are herein referred to as "Participants."
4. Grant of Units. (a) The Board may from time to time, in its discretion
and subject to the provisions of the Plan, grant performance units (the "Units")
to any or all Participants. Each grant shall be embodied in a Management
Incentive Agreement (the "Agreement") signed by the Participant and the
Partnership providing that the grant of Units shall be subject to the provisions
of this Plan and containing such other provisions as the Board may prescribe not
inconsistent with the Plan. The "Date of Grant" for each Unit shall be the date
determined by the Board. The aggregate number of Units available for grant under
the Plan is five hundred (500) Units. Unless otherwise provided herein or in the
Agreement, all rights of Participants to Units vest as follows: Anniversary Date
of Grant Percentage of Vested Units First 33 3/3% Second 66 2/3% Third100%
5. Units. Units granted to a Participant shall be credited to a Unit
account (the "Account") established and maintained for such Participant. The
Account of a Participant shall be the record of Units granted to the Participant
under the Plan. The Account is solely for accounting purposes and there shall
not be a segregation of any Partnership assets. Each Unit shall be valued in the
manner provided in Section 8.
6. Forfeiture of Units or Distributions Received thereon. The tables
attached hereto as Exhibit A, Exhibit B and Exhibit C, incorporated by reference
herein, shall govern forfeiture of units or distributions received thereon. For
purposes of Exhibit A:
(i) a Participant will be considered disabled if, in the determination of
the Board, he is subject to a physical or mental condition which is expected to
render the Participant unable to perform his usual duties or any comparable
duties for the Partnership; and
(ii) a Participant will be considered retired if the Participant's
employment with the Partnership terminates at or after the date the Participant
attains the age of 65.
7. Non-transferability. Units granted under the Plan, and any rights and
privileges pertaining thereto, may not be transferred, assigned, pledged or
hypothecated in any manner, by operation of law or otherwise, other than by will
or by the laws of descent and distribution, and shall not be subject to
execution, attachment or similar process. In the event of a Participant's death,
the right to any amount due pursuant to the terms of paragraph 9 hereto shall be
made to the duly appointed and qualified executor or other personal
representative of the Participant to be distributed in accordance with the
Participant's will or applicable intestacy law; or in the event that there shall
be no such representative duly appointed and qualified within six (6) months
after the date of death of such deceased Participant, then to such persons as,
at the date of his death, would be entitled to share in the distribution of such
deceased Participant's personal estate under the provisions of the applicable
statute then in force governing the descent of intestate property, in the
proportions specified in such statute.
1
<PAGE>
8. Valuation of Units. The value of the Units is determined pursuant to the
formula (the Formula) used to determine the number of shares (the Shares) of
Thrucomm, Inc., a Florida corporation (Thrucomm), to be issued or other assets
(including cash) to be distributed (Assets) upon a Mandatory Conversion Event of
the Mandatory Convertible Reorganization Stock, Series F ("Series F Stock") of
Thrucomm, all as further set forth in the Statement of Rights and Preferences
for such Series F Stock filed or to be filed with the Secretary of State of
Florida.
9. Distributions to Participant.
(a) Upon a Mandatory Conversion Event, subject to the vesting provisions of
paragraph 4 above, the Participant will be entitled to receive from the
Partnership such Participant's pro-rata share of the Shares or Assets issued
upon the conversion of the Series F Stock, based upon the ratio of the number of
Units issued to Participant to the total number of Units issued under the Plan.
(b) All Shares or Assets distributed upon a Manditory Conversion Event with
respect to unvested Units shall be held in trust by the Partnership (or a
shareholder of the General Partner of the Partnership if the Partnership is
terminated) for the Participant until vesting has occurred, and shall be
forfeited to the Partnership if such vesting does not occur. SEQ 4_1 \* Arabic
\n
10. Covenant Not To Compete. Participant agrees to conform to the following
concerning non-competition.
(a) Partnership undertakes to train Participant and to give Participant
confidential information and knowledge about Partnership's business policies,
accounts procedures and methods. For the purposes of this Agreement, the term
"confidential information" shall include but is not limited to any list of
suppliers, customers, investors, stockholders, including their names, addresses,
phone numbers, amount of investments and similar information, and in addition,
any operational information of Partnership, including but not limited to
information on Partnership's methods of conducting business, profits and/or
losses of Partnership, marketing material and any information that would
reasonably be considered proprietary or confidential in nature. Partnership has
established a valuable and extensive trade in its products and services, which
business has been developed at a considerable expense to Partnership. The nature
of the business is such that the relationship of its customers with Partnership
must be maintained through the close personal contact of its employees.
(b) Participant desires to enter into or continue in the employ of
Partnership and by virtue of such employment by Partnership, Participant will
become familiar with the manner, methods, secrets and confidential information
pertaining to such business. During the term of such employment, Participant
will continue to receive additional confidential information of the same kind.
Through representatives of Partnership, Participant will become personally
acquainted with the business of Partnership and its methods of operation.
(c) In consideration of the employment or continued employment of
Participant and the rights as herein provided, the training of Participant by
Partnership, and the disclosure by Partnership to Participant of the knowledge
and confidential information described above, Partnership requests and
Participant makes the covenants hereinafter set forth. Participant understands
and acknowledges that such covenants are required for the fair and reasonable
protection of the business of Partnership carried on in the area to which the
covenants are applicable and that without the limited restrictions on
Participant's activities imposed by the covenants, the business of Partnership
would suffer irreparable and immeasurable damage. The covenants on the part of
Participant shall be construed as an agreement independent of any other
provision of this Agreement, and existence of any claim or course of action
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Partnership of the covenants.
(d) Participant agrees that during the term of Participant's employment and
for the period of twelve (12) months immediately following the termination of
employment (which said time period shall be increased by any time during which
Participant is in violation of this Agreement) Participant will not, within the
territory hereinafter defined, directly or indirectly, for Participant, or on
behalf of others, as an individual on Participant's own account, or as an
Participant, agent, or representative for any other person, partnership, firm or
corporation:
(i) Compete with the business of Partnership by engaging or participating
in or furnishing aid or assistance in competition with the business of
Partnership.
2
<PAGE>
(ii) Engage, in any capacity, directly or indirectly, in or be employed by
any business similar to the kind or nature of business conducted by Partnership
during the employment.
(iii) For the purposes of this paragraph 10, the business of Partnership
shall be limited to the wireless data transfer business, which means any
business primarily involving the wireless transfer of data on behalf of third
parties.
(e) The territory referred to in this paragraph 10 shall be the United
States.
(f) Each restrictive covenant is separate and distinct from any other
covenant set forth in this paragraph. In the event of the invalidity of any
covenant, the remaining obligation shall be deemed independent and divisible.
The parties agree that the territory set forth is reasonable and necessary for
the protection of Partnership . In the event any term or condition is deemed to
be too broad or unenforceable, said provision shall be deemed reduced in scope
to the extent necessary to make said provision enforceable and binding.
11. Inducing Employees Of Partnership To Leave. Any attempt on the part of
Participant to induce others to leave Partnership's employ or any efforts by
Participant to interfere with Partnership's relationship with other employees
would be harmful and damaging to Partnership. Participant expressly agrees that
during the term of Participant's employment and for a period of twelve (12)
months thereafter (provided said time period shall be increased by any time
during which Participant is in violation of this Agreement), Participant will
not in any way directly or indirectly:
(a) Induce or attempt to induce an employee to sever his or her employment
with Partnership;
(b) Interfere with or disrupt Partnership's relationship with other
employees; and
(c) Solicit, entice, take away or employ any person employed with
Partnership.
12. Confidential Information. It is understood between the parties hereto
that during the term of employment, Participant will be dealing with
confidential information, as defined above, which is Partnership's property,
used in the course of its business. Participant will not disclose to anyone,
directly or indirectly, any of such confidential information or use such
information other than in the course of Participant's employment. All documents
that Participant prepares, or confidential information that might be given to
Participant in the course of employment, are the exclusive property of
Partnership and shall remain in Partnership's possession on the premises. Under
no circumstances shall any such information or documents be removed without
Partnership's written consent first being obtained.
13. Adjustments. Participant acknowledges that the number of Shares issued
or Assets distributed upon a Mandatory Conversion Event for the Series F Stock
is subject to change, including dilution, in accordance with the Rights and
Preferences of the Series F Stock, and Participant has no right to object
thereto.
14. Termination. The Board may amend or terminate this Plan at any time or
from time to time, but may not reduce the number of Units previously issued to
Participant. If the Plan is terminated, any issued Units shall continue to be
subject to the terms of this Plan as if it had not been terminated.
15. Partnership Responsibility. All expenses of this Plan, including the
cost of maintaining records, shall be borne by the Partnership. The Partnership
shall have no responsibility or liability for any act or thing done or left
undone with respect to the grant or exercise of Units under the terms of the
Plan, so long as the Partnership acts in good faith.
16. Implied Consent of Participants. Every Participant, by his acceptance
of a grant of Units under this Plan, shall be deemed to have consented to be
bound, on his own behalf and on behalf of his heirs, assigns, and legal
representatives, by all of the terms and conditions of this Plan. Nothing in
this Plan shall be construed to give a Participant any rights, or any interest,
beneficial or otherwise whatsoever to any interest in the Partnership or
Thrucomm.
3
<PAGE>
17. Withholding. The Partnership shall have the right to deduct from all
amounts paid pursuant to the Plan any taxes required by law to be withheld with
respect to such awards.
18. Voting. No Participant shall be entitled to any voting rights with
respect to Units credited to his Account.
19. Miscellaneous Provisions.
(a) No Participant or other person shall have any claim or right to be
granted an award under the Plan. Neither the Plan nor any action taken hereunder
shall be construed as giving any Participant any right to be retained in the
employ of the Partnership.
(b) The Plan shall at all times be entirely unfunded and no provision shall
at any time be made with respect to segregating assets of the Partnership for
payment of any benefits hereunder. No Participant or other person shall have any
interest in any particular assets of the Partnership by reason of the right to
receive a benefit under the Plan and any such Participant or other person shall
have only the rights of a general unsecured creditor of the Partnership with
respect to any rights under the Plan.
20. Effectiveness and Terms of Plan. The effective date of the Plan shall
be June 1, 1996.
21. Assumption of Rights and Obligations by Thrucomm. Upon the consummation
of the contemplated reorganization of the Partnerships business into Thrucomm,
all rights, obligations and liabilities under this Plan shall be transferred to
and assumed by Thrucomm, with no further action of Partnership or Participant
required, and Thrucomm shall be substituted for Partnership throughout this
Plan. If, prior to such time, the Participant is an employee of Thrucomm, all
provisions applicable to the Participant and the Partnership shall be
interpreted by substituting Thrucomm for the Partnership in this Plan.
IN WITNESS WHEREOF, Partnership has caused this instrument to be
executed as of this 1st day of June, 1996.
DATALINC, LTD.
By: Integrated Communication Networks, Inc.,
General Partner
By:___________________________________
Its:____________________________________
DATALINC, LTD.
MANAGEMENT INCENTIVE AGREEMENT
The Board of Directors of Integrated Communications Network, Inc., the General
Partner of Datalinc, Ltd. (the "Partnership") has granted the following units
(the "Units") to the Participant named below, in accordance with the Partnership
Management Incentive Plan (the "Plan"). Name of
Participant:___________________________ Date of
Grant:________________________________ Number of Units
Granted:_______________________ Subject to the terms and conditions specified in
the Plan, a copy of which is attached hereto and made a part hereof, the
Participant has been granted the number of Units shown in Line 3 above. The
Board of Directors has the authority to construe and to interpret the terms of
this grant whenever any question of meaning arises under it, and any such
construction or interpretation shall be binding both on the Partnership and on
the Participant, his personal representatives, the representatives of his
estate, his heirs, or anyone else having or claiming to have an interest under
this grant. This grant shall be construed and administered in accordance with
and governed by the laws of the State of Florida. The Participant, by his
acceptance of this grant of Units, shall be bound on his own behalf and on
behalf of his heirs, legal representatives, and any other person claiming
through or under him, by all of the terms and conditions of this grant and of
the Plan.
4
<PAGE>
EXHIBIT A
- -------------------------------------------------------------------------------
| EVENT | REASON(S) | WHAT IS | FORFEITURE
| | | AFFECTED: |
| | | UNITS/SHARES/ |
| | | ASSETS/RIGHTS |
- --------------------------------------------------------------------------------
Termination of | 1. Death | All Units | No Forfeiture
employment with | | Granted to a |
the Partnership | 2. Disability | Participant |
or Thrucomm | | 100% Vested |
| 3. Retirement | |
| | |
| 4. By the | |
| Partnership | |
| for any reason | |
| other than | |
| set forth in | |
| Exhibit B | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
- --------------------------------------------------------------------------------
5
<PAGE>
EXHIBIT B
- -------------------------------------------------------------------------------
| EVENT | REASON(S) | WHAT IS | FORFEITURE
| | | AFFECTED: |
| | | UNITS/SHARES/ |
| | | ASSETS/RIGHTS |
- --------------------------------------------------------------------------------
Any of the events | 1. Participant is | If there has not | Forfeited by
in Column 2 - | discharged from | been a Mandatory | Participant to the
Reason(s) - occur,| employment with | Conversion Event:| Partnership for
whether or not | the Partnership | | no consideration
they result in | or Thrucomm for | Rights with |
termination of | cause, which | respect to Units |
employment with | shall mean | which have not |
the Partnership | Partipant's | vested |
| involvement in | |
| any action or | All Units vested |
| inaction | |
| involving fraud | If there has been|
| dishonesty, or | a Mandatory |
| material | Conversion Event;|
| violation of | |
| Partnership or | Shares or Assets |
| Thrucomm Policy | held in trust |
| and procedures | hereunder |
| | |
|2. The Participant | |
| breaches | |
| paragraphs 10, | |
| 11, 12, or 13 | |
| hereto. | |
| | |
|3. The Participant | All Shares and |
| performs acts of| any other non- |
| willful | monetary |
| malfeasance or | assets received |
| or gross | by such |
| negligence in a | Participant |
| matter of | pursuant to the |
| material | terms of this |
| importance | Plan and not |
| to the | previously sold |
| Partnership | in compliance |
| | with all |
|4. The Participant | securities |
| does not agree | laws, rules and |
| to be bound by | regulations |
| or does not | |
| otherwise comply| |
| with the terms | Whether or not |
| of any lock-up | Manditory |
| requirements or | Conversion has |
| resale | occured; |
| restrictions | |
| (by agreement or| |
| under law) | All other rights |
| imposed on the | of Participant |
| shares by the | under the Plan |
| underwriters for| |
| the IPO or | |
| otherwise upon | |
| Mandatory | |
| Conversion Event| |
- --------------------------------------------------------------------------------
6
<PAGE>
EXHIBIT C
- -------------------------------------------------------------------------------
| EVENT | REASON(S) | WHAT IS | FORFEITURE
| | | AFFECTED: |
| | | UNITS/SHARES/ |
| | | ASSETS/RIGHTS |
- --------------------------------------------------------------------------------
Termination of | By the Participant | If there has not | Forfeited by
employment with | for any reason | been a Mandatory | Particpant
the Partnership | except: | Conversion Event:| to the Partnership
or Thrucomm | | | for no
| 1. Death | Rights with | consideration
| | respect to Units |
| 2. Disability | which have not |
| | vested |
| 3. Retirement | |
| | All Units Vested |
| | |
| | If there has been|
| | a Mandatory |
| | Conversion Event:|
| | |
| | Shares or Assets |
| | held in trust |
| | hereunder |
| | |
| | All Shares and |
| | any other non- |
| | monetary assets |
| | received by such |
| | Participant |
| | pursuant to the |
| | terms of this |
| | Plan and not |
| | previously sold |
| | in compliance |
| | with all |
| | securities laws, |
| | rules and |
| | regulations |
| | |
| | Whether or not |
| | Manditory |
| | Conversion has |
| | occured: |
| | |
| | All other rights |
| | of Participant |
| | under the Plan |
| | |
| | |
| | |
| | |
| | |
| | |
- --------------------------------------------------------------------------------
7
<PAGE>
EXHIBIT - 10.12
Customer Protection Letter from Hughes Network Systems
<PAGE>
HUGHES
NETWORK SYSTEMS
===========================
A HUGHES ELECTRONIC COMPANY
March 12, 1997
Dear :
This letter will set forth the obligation of Hughes Network Systems, Inc.,
11717 Exploration Lane, Germantown, Maryland 20876 ("HNS") to provide service to
Customer, as a customer of THRUCOMM, Inc. ("THRUCOMM"), in the "Event of
THRUCOMM Default" (defined below) by THRUCOMM under the integrated Services
Agreement dated , entered into between Customer and THRUCOMM.
Please be advised that HNS hereby agrees to enter into an agreement to
provide telecommunication services substantially similar to those provided by
THRUCOMM pursuant to the Agreement, upon request by Customer, in the event of
occurrence of an Event of THRUCOMM Default. For purposes of this letter, an
Event of THRUCOMM Default is defined as THRUCOMM ceases doing business as an
ongoing concern. In such event, HNS will ensure that Customer receives services
substantially complying with this requirements of the Agreement, whether through
the same telecommunications medium contemplated in the Agreement or through some
other medium, provided HNS has been supplied with a copy of the Agreement and
HNS has expressly given its approval to the terms of the Agreement. For the
avoidance of doubt, a copy of the Agreement is appended to this letter, the
terms of which are hereby deemed acceptable to HNS.
In the event that HNS is required to provide services pursuant to the
terms of this letter, Customer hereby agrees to continue to comply with the
terms of the Agreement, including but not limited to making applicable payments,
for the duration of the term of the Agreement.
HNS agrees that any services to be provided thereby present to this
letter will be available to Customer within days of its receipt of the aforesaid
request from Customer.
111717 Exploration Lane, Germantown, MD 20876
Tel: (301) 428-5500 TWX: 710-828-0541
FAX: (301) 428-1868/2830
<PAGE>
If the above letter sets forth accurately the agreement between HNS and
Customer, please execute the enclosed duplicate original of this letter and
return to the undersigned at your earliest convenience.
Very truly yours,
/s/Betty Vicinte for Phillip O'Brien
------------------------------------
Phillip K. O'Brien
Senior Director, VSAT Contracts
ACCEPTED AND AGREED TO THIS
Day of 1997
CUSTOMER
TITLE:
THE PROVISIONS OF THE ABOVE LETTER
ARE ACCEPTED AND AGREED TO THIS
DAY OF 1997
THRUCOMM, INC.
TITLE:
<PAGE>
EXHIBIT 27.1
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
THRUCOMM, INC. FINANCIAL STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0001038599
<NAME> THRUCOMM, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Dec-16-1996
<PERIOD-END> Dec-31-1996
<CASH> 3,001
<SECURITIES> 0
<RECEIVABLES> 314,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 321,290
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 321,290
<CURRENT-LIABILITIES> 322,011
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 321,290
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 722
<INCOME-PRETAX> (722)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (722)
<EPS-PRIMARY> (722)
<EPS-DILUTED> (722)
<PAGE>
</TABLE>
EXHIBIT 99.4
Amended and Restated Agreement of Limited Partnership of Fastcom, Ltd.
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
FASTCOM, LTD.
AGREEMENT OF LIMITED PARTNERSHIP made as of the _____ day of
_____________, 1994, by and among FASTCOM MANAGEMENT, INC., a Florida
corporation, having a business address of 1641 Commerce Avenue North, St.
Petersburg, Florida 33716, as the general partner (hereinafter referred to as
the "General Partner") and those Persons who have executed this Agreement as
limited partners (hereinafter collectively referred to as the "Limited Partners"
and severally as "Limited Partner;" the said General Partner and Limited
Partners are hereinafter collectively referred to as the "Partners" and
severally as "Partner").
R E C I T A L S
A. A Certificate of Limited Partnership was filed on March 31, 1994, with
the office of the Secretary of State of Florida, by the General Partner.
B. Pursuant to the Certificate of Limited Partnership, the General
Partner and Datalinc as a Limited Partner formed a limited partnership under and
subject to the laws of the State of Florida for the purposes of acquiring,
owning, developing, constructing, managing, leasing, operating, and otherwise
dealing with the Network (as hereinafter defined), and to own or lease such
other realty, personalty and/or fixtures as reasonably may be related to the
ownership or operation of the Network, and to conduct such other business
activities and operations as are consistent with and reasonably related to the
foregoing purposes.
C. Series 200 Limited Partners desire to be admitted as Limited
Partners of the Limited Partnership.
D. The parties desire to enter into this Agreement of Limited
Partnership, to define formally and express the terms and conditions of such
limited partnership and their respective rights and obligations with respect
thereto and to provide for the admission of the Limited Partners as Limited
Partners of the Limited Partnership all as of the date first above written.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and conditions herein contained, and other good and valuable
consideration, the receipt and sufficiency of which hereby is acknowledged by
each party to the others, the parties hereto, for themselves, their respective
successors and assigns, hereby agree as follows:
<PAGE>
ARTICLE I
CERTAIN DEFINED TERMS
As used herein, the following terms shall have the following meanings:
"Act" shall mean the Florida Revised Uniform Limited Partnership Act.
"Adjusted Capital Investment" shall mean total cash Contributions of a
Limited Partner to the Partnership less Distributions of any kind from the
Partnership.
"Affiliate" or "Affiliated Person" shall mean, when used with reference
to a specified person, (a) any person that directly or indirectly through one or
more intermediaries controls or is controlled by or is under common control with
the specified person, (b) any person who is an officer, partner or trustee of,
or which serves in a similar capacity with respect to, the specified person or
of which the specified person is an officer, partner or trustee, or with respect
to which the specified person serves in a similar capacity, (c) any person
which, directly or indirectly, is the beneficial owner of 10% or more of any
class of equity securities of, or otherwise has a substantial beneficial
interest in, the specified person or of which the specified person is directly
or indirectly the owner of 10% or more of any class of equity securities or in
which the specified per on has a substantial beneficial interest and (d) a
spouse or child living in the household of the specified person.
"Agreement" shall mean this Agreement of Limited Partnership, as
amended from time to time, as the context requires. Words such as "herein,"
"hereinafter," "hereof," "hereto," "hereby" and "hereunder," when used with
reference to this Agreement, refer to this Agreement as a whole, unless the
context otherwise requires.
"Book Value" means, with respect to any asset, such asset's adjusted
basis for federal income tax purposes, except as follows:
a. The initial Book Value of any asset contributed by a Partner to the
Partnership shall be the fair market value of such asset, as determined by the
contributing Partner and the Partnership;
b. The Book Values of all Partnership assets shall be adjusted to
equal their respective fair market values, as determined by the General Partner,
in its sole and absolute discretion, as of the following times:
(1) The acquisition from the Partnership, in exchange for
more than a de minimus capital contribution, of (i) a Partnership Interest by an
additional Partner, or (ii) an additional Partnership Interest by an existing
Partner;
(2) The distribution by the Partnership to a Partner of more
than a de minimus amount of Partnership property other than money;
2
<PAGE>
(3) The termination of the Partnership for federal income tax
purposes pursuant to Code Section 708(b)(1)(B) on account of the sale or
exchange of fifty percent (50%) or more of the interests in capital and profits
of the Partnership within a twelve month period; and
(4) The Partnership's ceasing to be a going concern (even though it
may continue in existence for the purposes of winding up its affairs,
paying its debts, and distributing any proceeds of the collection of its
receivables to the Partners).
c. If the Book Value of an asset has been determined or adjusted pursuant
to this section, such Book Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset.
"Capital Account" shall mean the Capital Account that shall be
established, maintained and adjusted for each Partner in accordance with the
rules of Section 1.704-1(b)(2)(iv) of the Regulations. To that end, each
Partner's Capital Account shall be credited with: (a) the amount of cash
contributed to the Partnership by the Partner; (b) additional money contributed
to the Partnership by the Partner; (c) the distributive share of Partnership
Taxable Profit allocated to the Partner pursuant to Article IX; (d) the
distributive share of Partnership Gross Income allocated to him pursuant to
Article IX; and (e) the basis adjustment under Section 48(q)(2) of the Code
allocated to him pursuant to Article IX hereof. Each Capital Account shall be
debited by: (i) Distributions made to the Partner pursuant to Article IX; (ii)
the distributive share of Partnership Tax Loss allocated to the Partner pursuant
to Article IX; (iii) the distributive share of Partnership Non-recourse
Deductions allocated to the Partner pursuant to Article IX; (iv) the
distributive share of any Partnership expenditures described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) expenses pursuant to
Section 1.704- 1(b)(2)(iv)(i) f the Regulations and not otherwise taken into
account in computing Taxable Profit and Tax Loss, allocated to the Partner
pursuant to Article IX; and (v) the basis adjustment under Section 48(q)(1) and
(3) of the Code allocated to the Partner pursuant to Article IX hereof.
Increases or decreases in the Capital Accounts of the Partners to reflect a
revaluation of Partnership property shall be made at the sole and absolute
discretion of the General Partner and in accordance with Section
1.704-1(b)(2)(iv)(f) of the Regulations. A transferee of Units shall succeed to
the Capital Account relating to the Units transferred except to the extent
provided in applicable Regulations. The foregoing provisions and any other
provisions of this Partnership agreement relating to the maintenance of Capital
Accounts are intended to comply with Section 1.704-1(b)(2)(iv) of the
Regulations, and shall be interpreted and applied in a manner consistent with
such Regulations. To the extent that any provision of this Partnership Agreement
is inconsistent with such Regulation, such Regulation (as the same may be
3
<PAGE>
amended or revised hereafter) shall control. If the General Partner shall
determine that it is prudent to modify the manner in which Capital Accounts, or
any debits or credits thereto, are computed or maintained in order to comply
with such regulations, the General Partner is authorized to make such
modifications pursuant to Article IX. Any references in this Partnership
Agreement to the Capital Account of a Partner shall be deemed to refer to such
Capital Account as the same may be credited or debited from time to time as set
forth above.
"Capital Contribution" of a Partner shall mean the amount of cash
contributed by such Partner to the Limited Partnership pursuant to Articles III
and XV hereof.
"Cash Flow" in any fiscal year shall mean the net income in such period
from operations of the Limited Partnership determined in accordance with Federal
income tax principles consistently applied (not including Sale Proceeds or
Refinancing Proceeds) plus:
a. depreciation;
b. amortization of capitalized costs;
c. other non-cash charges deducted in determining such net income, and
d. the net reduction in the amount of any reserves or escrows described in
"f" below; minus the following:
e. principal payments on all secured and unsecured borrowings of the
Limited Partnership;
f. the amount of cash set aside for working capital, property replacement
reserves and any other reserves reasonably deemed necessary by the General
Partner; and
g. any other cash expenditures or escrows (except distributions or payments
to Partners) which have not been deducted in determining the net income of the
Limited Partnership and which were not funded by borrowings.
"Closing Date" shall mean such time as the General Partner shall have
accepted subscriptions for 300 Series 200 Units but not later than June 30,
1996, unless the General Partner shall extend the offering period for
subscriptions, but not later than September 30, 1996.
"Code" shall mean the United States Internal, Revenue Code of 1986, the
Regulations promulgated thereunder and any corresponding provisions of
subsequent law.
4
<PAGE>
"Depreciation" means, for each fiscal year or other period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization, or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis.
"Datalinc" means Datalinc, Ltd., a Florida limited partnership.
"Datalinc Units" means the Units owned by Datalinc as described in the
Memorandum. Holders of such Units are referred to herein as "Datalinc Limited
Partners."
"Distribution" shall mean any funds distributed to the Partners pursuant to
this Agreement.
"DOL" shall mean the United States Department of Labor.
"EA Units" means the Early Investor Units as described in the Memorandum.
Holders of such Units are referred to herein as "EA Limited Partners."
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"General Partner" shall mean Fastcom, Inc., a Florida corporation, or any
Person or Persons who or which, at the time of reference thereto, have been
admitted as a successor to the interest of the General Partner or as an
additional General Partner.
"Gross Asset Value" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such asset,
as determined by the contributing Partner and the Partnership;
(ii) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined by
the General Partner, as of the following times: (a) the acquisition of an
additional interest in the Partnership (other than pursuant to Article IV
hereof) by any new or existing Partner in exchange for more than a de minimus
5
<PAGE>
Capital Contribution; (b) the distribution by the Partnership to a Partner of
more than a de minimus amount of Partnership Network as consideration for an
interest in the Partnership if the General Partner reasonably determines that
such adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership; and (c) the liquidation of the
Partnership within the meaning of Regulations
(iii) The Gross Asset Value of any Partnership asset distributed
to any Partner shall be the gross fair market value of such asset on the date of
distribution; and
3
<PAGE>
(iv) The Gross Asset Value of any Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to IRC 734(b) or 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Regulation 1.704-1(b)(2)(iv)(m) and this Section hereof; provided, however,
that Gross Asset Values shall not be adjusted pursuant to this Section to the
extent the General Partner determines that an adjustment pursuant to this
Section 1.20(iv) is necessary or appropriate in connection with a transaction
that would otherwise result in an adjustment pursuant to this Section.
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to this Section, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
"Gross Income" shall mean items of gross income which are included
within the definition of gross income for the purposes of Section
1.704-1(b)(2)(iv) of the Regulations.
"Limited Partner" shall mean any Person who is a Limited Partner at the
time of reference thereto, including a Substituted Limited Partner. "Limited
Partners" shall refer to all Limited Partners at the time of reference thereto.
"Limited Partnership" shall mean the limited partnership formed
pursuant to the Certificate of Limited Partnership filed on March 31,1994, as
said limited partnership may from time to time be constituted.
"Majority Vote" shall mean the affirmative vote or written consent of
Limited Partners then owning of record outstanding Units of any type within the
aggregate more than a fifty percent (50%) interest in the Distributions of Cash
Flow of the Partnership.
6
<PAGE>
"Memorandum" shall mean the Confidential Private Placement Memorandum
dated May 1, 1996 for the sale of Series 200 Units of Limited Partnership
interests to Persons who will be admitted as Series 200 Limited Partners,
respectively.
"Minimum Gain" shall mean the aggregate gain (of whatever character),
if any, that would be realized by the Partnership with respect to each
Partnership asset if each Partnership asset was disposed of by the Partnership
in a taxable transaction in full satisfaction of any Non-recourse Debt of the
Partnership secured by such asset, and by then aggregating the amounts so
computed. Such gain shall be determined by reference to the Book Value of each
such property or asset (notwithstanding that the adjusted tax basis of such
property or asset differs from its Book Value) and in accordance with Section
1.704-1(b)(4)(c) of the Treasury Regulations. A Partner's share of Partnership
minimum gain shall equal the excess of (A) the sum of the non-recourse
deductions allocated to such Partner and the aggregate distributions to such
Partner of the proceeds of a non-recourse liability that are allocable to an
increase in partnership minimum gain over (B) the sum of such Partner's
aggregate share of net decreases in partnership minimum gain and such Partner's
aggregate share of decreases in partnership minimum gain resulting from
adjustments to the Book Value of property. A Partner's share of a net decrease
in partnership minimum gain for a fiscal year shall equal an amount that bears
the same relation to the net decrease in partnership minimum gain during such
year as the Partner's share of partnership minimum gain at the end of the
preceding fiscal year bears to the partnership minimum gain at the end of such
preceding year. A Partner's share of any decrease in partnership minimum gain
resulting from any adjustment in the Book Value of property described in
subparagraph (ii) of the definition of "Book Value" shall equal the amount of
the increase in such Partner's Capital Account attributable to such adjustment
to the extent of the reduction in partnership minimum gain caused by such
adjustment as determined under Section 1.704-1T(b)(4)(iv)(f) of the Treasury
Regulations.
"Negative Cash Flow" shall mean the net loss from operations of the
Limited Partnership determined in accordance with Federal income tax principles
consistently applied (not including Sale Proceeds or Refinancing Proceeds),
reduced by
a. depreciation;
b. amortization of capitalized costs;
c. other non-cash charges deducted in determining such net loss; and
d. the net reduction in the amount of any reserves or escrows described in
"f" below; increased by the following:
7
<PAGE>
e. principal payments on all loans, including but not limited to the
Construction Loan, Permanent Loan and optional Loans and any other indebtedness
of the Limited Partnership;
f. the amount of cash set aside for working capital, property replacement
reserves and any other reserves; and
g. any other cash expenditures or escrows (except distributions or payments
to Partners, and escrows of Limited Partnership funds for property taxes taken
into account in computing net loss), which have not been included in determining
the net loss of the Limited Partnership and which were not funded by borrowings.
"Network" means the THRUCOMM Network as described in the Memorandum,
including all tangible and intangible assets related thereto.
"Network Management Agreement" shall mean the Management Agreement for the
development of the Network Management Agreement shall be entered into between
Fastcom, Inc., and the Limited Partnership, as more fully described in the
Memorandum.
"Network Management Fee" shall mean the fee payable to the General Partner
as managing agent as set forth in Section 5.2 hereof and more fully described in
the Memorandum.
"Non-deductible Expenditures" shall mean all items of Limited Partnership
expenditure described in Code Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to the Regulations promulgated under Section
704(b) of the Code, including but not limited to any syndication expenses.
"Non-recourse Debt" or "Non-recourse Liability" shall mean indebtedness
secured by Partnership property for which neither the Partnership nor any
Partner has any personal liability and for which no Partner nor any other person
related to a Partner (within the meaning of Section 1.752-1T(h) and
1.704-1T(b)(4)(iv)(h) of the Regulations) has the economic risk of loss.
"Non-recourse Deductions" shall mean the excess, if any, of the net
increase in the amount of Minimum Gain during a partnership's taxable year, over
the aggregate amount of any distributions during such year of proceeds of
non-recourse liability that are allocable to an increase in Minimum Gain.
Section 1.704-1T(b)(4)(iv)(b) of the Regulations. The Non-recourse Deductions of
the Partnership for a taxable year shall consist first of depreciation or cost
recovery deductions with respect to items of Partnership property or other
assets to the extent of the increase in Minimum Gain attributable to any
Non-recourse Debt of the Partnership secured by such Partnership property or
8
<PAGE>
assets and, to the extent necessary, a pro rata portion of the Partnership's
other items of loss, deduction and non-deductible expenditures under Section
705(a)(2)(B) of the Code (to the extent such non-deductible expenditures reduce
Capital Accounts). Non-recourse Deductions shall be determined in accordance
with the rules in Section 1.704-1T(b)(4)(iv) of the Regulations, and any
subsequent rule or regulation governing the determination of Non-recourse
Deductions.
"Offering" shall mean the offer by the Limited Partnership to sell the
Series 200 Units subject to the terms and conditions set forth herein.
"Optional Loans" shall mean the optional loans referred to in Section 5.10
hereof.
"Partner" shall mean the General Partner or any Limited Partner and
"Partners" collectively refers to the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
Non-recourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Non-recourse Debt were treated as Non-recourse Liability,
determined in accordance with Section 1.704-1T(b)(4)(iv)(h) of the Treasury
Regulations.
5
<PAGE>
"Partner Non-recourse Debt" has the meaning set forth in Section
1.704-1T(b)(4)(17v)(k)(4) of the Treasury Regulations.
"Partner Non-recourse Deductions" has the meaning set forth in Section
1.704-(b)(4)(iv)(h)(3) to the Treasury Regulations. The amount of Partner
Non-recourse Deductions with respect to a Partner Non-recourse Debt for a
Partnership fiscal year equals the excess, if any, of the net increase, if any,
in the amount of Partner Minimum Gain attributable to such Partner Non-Recourse
Debt during that fiscal year over the aggregate amount of any distributions
during that fiscal year to the Partner that bears the economic risk of loss for
such Partner Non-recourse Debt to the extent such distributions are from the
proceeds of such Partner Non-recourse Debt and are allocable to an increase in
Partner Minimum Gain attributable to such Partner Non-recourse Debt, determined
in accordance with Section 1.704-1T(b)(4)(iv)(h)(3) of the Treasury Regulations.
"Person" shall mean any individual, general partnership, limited
partnership, corporation, joint venture, trust, business trust, cooperative or
association and the heirs, executors, administrators, successors and assigns
thereof, where the context so admits.
"Preferred Return" shall mean a 15% per annum cumulative, non-compounded
Preferred Return on their Adjusted Capital Investment, commencing the date of
closing of the Series 100 Unit offering. However, the Preferred Return is only
payable if within three years from the Closing Date of the Series 100 Unit
9
<PAGE>
offering the Partnership (or a successor entity thereto with essentially the
same business) has not done either of the following (a "Cut-Off Event"): a. Made
aggregate Distributions of any kind to such Partners in an amount equal to their
Adjusted Capital Investment, or b. Has not completed a successful public
offering. If a Cut-Off Event has occurred, the Partnership's obligation to make
a Preferred Return to the Series 100 Limited Partners will terminate. If the
Partnership has made a successful public offering by such date, but the market
value of securities owned by the Series 100 Limited Partners is less than their
Adjusted Capital Investment based upon the public offering price of such
securities (the "Difference"), the Series 100 Limited Partners will be issued
securities with a first priority dividend and other payment right over all other
securities holders equal to the Difference.
"Qualified Income Offset Items" shall mean unexpected adjustments,
allocations, or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5),
and (6) of the Regulations.
"Refinancing" shall mean the replacement, increase, consolidation,
modification or extension, etc. of any indebtedness on the Network.
"Regulations" shall mean regulations promulgated under the Code, as such
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).
"Refinancing Proceeds" shall mean the proceeds from a Refinancing after
deducting the expenses incurred in connection with the receipt or collection
thereof, the amounts thereof which are applied in reduction of Limited
Partnership liabilities and the amounts thereof which, in the sole discretion of
the General Partner, are set aside for working capital, property replacement
reserves and any other reserves reasonably deemed necessary by the General
Partner.
"Sale" shall mean a sale, condemnation, voluntary or involuntary
conversion, insured casualty or other disposition of the Network or any portion
thereof.
"Sale Proceeds" shall mean the proceeds from any Sale after deducting (a)
expenses incurred in connection with the receipt or collection thereof,
including, but not limited to, any brokerage commissions due to the General
Partner as more fully described in the Memorandum, (b) in the case of a
condemnation, voluntary or involuntary conversion and insured casualty, such
portion thereof as is required to repair, restore or replace the Network or any
portion thereof, (c) all amounts which are applied in reduction of Limited
Partnership liabilities and (d) all amounts which, in the sole discretion of the
General Partner, set aside for working capital, replacement reserves and any
other reserves reasonably deemed necessary by the General Partner. Such reserves
and any other reserves when the Partnership is liquidated shall be deemed Sale
Proceeds.
10
<PAGE>
"Series 100 Units" means the Series 100 Units as described in the
Memorandum. Holders of such Units are referred to herein as "Series 100 Limited
Partners."
"Series 200 Units" means the Series 200 Units as described in the
Memorandum. Holders of such Units are referred to herein as "Series 200 Limited
Partners."
"Sharing Ratio" of any Limited Partner shall mean such Partner's pro rata
share of the Capital Contributions of all of the same class of Limited Partners.
"Substituted Limited Partner" shall mean any person admitted to the Limited
Partnership as a Limited Partner pursuant to the provisions of Section 8.7
hereof.
"Syndication Expenses" means all expenditures classified as syndication
expenses pursuant to Treasury Regulation Section 1.709-2(b). Syndication
Expenses shall be taken into account under this Agreement at the time they would
be taken into account under the Partnership's method of accounting if they were
deductible expenses.
"Taxable Profits" or "Tax Losses" shall be synonymous with "Net Profit" or
"Net Losses" and shall mean for each fiscal year or other period, an amount
equal to the Partnership's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Taxable Profits or
Tax Losses pursuant to this section shall be added to such taxable income or
loss;
(ii) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulation Section 1.704-1(b) (2)(iv)(i), and not otherwise taken into
account in computing Taxable Profits or Tax Losses pursuant to this section,
shall be subtracted from such taxable income or loss;
(iii) Gain or loss resulting from any disposition of Partnership
Property with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis for such property
differs from its Gross Asset Value;
11
<PAGE>
(iv) In lieu of the depreciation, amortization, and other cost
recovery deduction taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year or other
period, computed in accordance herewith; and
(v) Notwithstanding any other provision of this section, any items
which are specially allocated pursuant to Article IX hereof shall not be taken
into account in computing Taxable Profits or Tax Losses.
"Tax-exempt Investor" shall mean: (a) pension plans (as that term is
defined in Section 3(2)(A) of ERISA), including qualified pension,
profit-sharing and other employer retirement benefits plans (including Keogh
[H.R. 10] Plans) and trusts, bank commingled trust funds for such plans and
Individual Retirement Accounts, and (b) permitted transferees and permitted
assigns of Units from a Person described in (a) above.
"Treasury Regulations" means the Income Tax Regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Unit" shall mean a limited partnership interest in the Limited
Partnership.
ARTICLE II
CONTINUATION; PURPOSES; AND TERM
2.1 Continuation of Limited Partnership.
The Partners, by execution of this Agreement, agree to continue the limited
partnership previously formed under and subject to the Act and amend and restate
the original Agreement of Limited Partnership in its entirety as set forth
herein.
2.2 Name and Principal Place of Business.
The Limited Partnership shall conduct its business and promote its purposes
under the firm name and style Fastcom, Ltd., or such other name or names as the
General Partner hereinafter from time to time may select. The Limited
Partnership's principal office for the transaction of business shall be
maintained at the address set forth above or such other place or places within
or outside the State of Florida as the General Partner hereinafter may select.
2.3 Purposes.
Except as otherwise expressly provided herein, the purposes of the Limited
Partnership shall be to acquire, own, develop, construct, improve, lease,
12
<PAGE>
manage, operate, and otherwise deal with the Network, to own or lease such other
realty, personalty, fixtures or other tangible assets and any intangible assets
as reasonably may be related to the ownership or operation of the Network, and
to conduct such other business activities and operations as are consistent with
and reasonably related to the foregoing purposes, and in connection therewith,
to enter into contracts and leases, to borrow money necessary for the Limited
Partnership's business, to pledge, mortgage or otherwise encumber all or any
part of the Limited Partnership's assets.
2.4 Term.
The term of the Limited Partnership shall commence as of the date hereof,
and shall continue and extend to and including December 31, 2039 verify, or
until such earlier date as the Limited Partnership shall be dissolved and
terminated pursuant to the provisions of Article XII hereof.
ARTICLE III
PARTNERS AND CAPITAL
3.1 General Partner's and Datalinc's Capital Contributions.
The General Partner has contributed $100 in cash to the capital of the
Limited Partnership. Datalinc has contributed all rights, title and interest to
all tangible and intangible assets associated with THRUCOMM.
3.2 Limited Partners' Capital Contributions.
The Limited Partnership intends to sell and issue up to 300 Series 200
Units, and to admit as Limited Partners the Persons who pay for such Units in
accordance with the Memorandum. The General Partner is hereby authorized to
raise capital for the Limited Partnership by offering and selling such Units to
qualified offerees. The General Partner, in its sole discretion, may sell
fractional Units.
3.4 Terms of Offering.
Except as otherwise provided in the Agreement, the General Partner shall
determine the terms and conditions of the Offering and is authorized and
directed to do all things which it deems to be necessary, convenient,
appropriate or advisable in connection therewith, including but not limited to,
the execution and performance of agreements with such persons concerning the
marketing of the Units on such basis and upon such terms as the General Partner
shall determine.
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3.5 Interest and Right to Property.
No Partner shall be paid interest on any Capital Contribution, nor shall
any Partner have the right to take and receive property other than cash in
return for his or its Capital Contribution.
3.6 No Withdrawal from Capital Accounts.
Except as otherwise expressly provided herein, no Partner shall be
permitted to make any withdrawals from his or its Capital Account.
3.7 No Interest on Capital Contributions.
No Partner shall receive any interest, salary, or draw with respect to his
Capital Contributions or his Capital Account or for services rendered on behalf
of the Partnership or otherwise in his capacity as a Partner, except as
otherwise provided in this Agreement.
ARTICLE IV
SPECIAL POWER OF ATTORNEY
4.1 Each Limited Partner and any affiliate thereof executing this Agreement
irrevocably constitutes all the General Partner's), present or future, his true
and lawful attorney-in-fact in his name, place and stead to make, execute, swear
to,, acknowledge, deliver and file:
Any Agreement or Amended Certificate of Limited Partnership, as well as
amendments thereto, under the laws of the State of Florida, and under the laws
of any other state in which such Certificate or Agreement is required to be
filed;
Any other instrument which may be required to be filed by the Partnership
under the laws of any state or by any governmental agency, or which the General
Partner deems advisable to file;
Any documents which may be required to effect the continuation of the
Partnership, the admission of a Substitute Limited Partner, the election of a
Substitute General Partner or the dissolution and termination of the
Partnership, provided such continuation, admission, election, or dissolution and
termination are in accordance with the terms of the Partnership Agreement;
All documents, certificates or other instruments, if any, which may be
required for the organization of any new limited partnership occasioned by the
death, dissolution, withdrawal or cessation of existence, removal, adjudication
of incompetency, insanity, bankruptcy, or insolvency of the General Partner; and
All documents, certificates or other instruments which may be required to
reflect amendments authorized or required under the Partnership Agreement.
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4.2 The above power of attorney:
Is a special power of attorney coupled with an interest, is irrevocable,
and shall survive the death of any Limited Partner;
May be exercised by the General Partner for each Limited Partner by an
actual facsimile signature of the General Partner or by listing all of the
Limited Partners and executing any instrument with a single actual or facsimile
signature of the General Partner acting as attorney-in-fact for all of them (the
General Partner may act through any of its corporate officers);
Shall survive the delivery of an assignment by a Limited Partner of the
whole or any portion of his interest; except that where the assignee thereof has
been approved by the General Partner for admission to the Partnership as a
Substitute Limited Partner, the power of attorney shall survive the delivery of
such assignment for the sole purpose of enabling the General Partner to execute,
swear to or acknowledge and file any instrument necessary to effect such
substitution; and
Shall not constitute a waiver of, or be utilized to avoid the rights of the
Limited Partners, or in any manner inconsistent with the status of the
Partnership.
Upon request by the General Partner, the Limited Partners shall from time
to time execute any separate power of attorney that may be necessary or proper
to permit the above-listed powers to be exercised.
4.3 Separate Form.
Each Limited Partner hereby agrees to execute, acknowledge and deliver to
the General Partner, promptly upon request therefor by the General Partner, a
power of attorney in recordable form satisfactory to the General Partner
evidencing the foregoing appointment.
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ARTICLE V
MANAGEMENT; RIGHTS OF GENERAL AND
LIMITED PARTNERS; FEES AND EXPENSES
5.1 Management.
Except as otherwise expressly provided herein and subject to the
restrictions contained in Section 5.4 hereof, the General Partner shall have the
exclusive right and power to manager operate and control the Limited
Partnership, to do all things necessary or appropriate to carry on its business
and purposes,, including, but not limited to,, the right to incur and satisfy
obligations relating to the formation and operation of the Limited Partnership,
and to exercise all rights and powers conferred upon the General Partner by law,
including, but not limited to, the right:
a. To plan, design, finance, lease and cause the Network to be developed
and completed;
b. To develop, construct, hold and dispose of the Network as well as
tangible and intangible property connected therewith in furtherance of the
development of the Network and the business of the Limited Partnership,
including but not limited to defending and/or settling litigation regarding the
Limited Partnership, the Network or any aspect thereof.
c. To adjust, compromise, settle or refer to arbitration any claim in favor
of or against the Limited Partnership and to institute, prosecute and defend any
legal action or proceeding or any arbitration proceeding;
d. To enter into, make and perform any and all contracts and other
agreements in connection with the business and purposes of the limited
Partnership which the General Partner shall deem necessary or desirable and in
the best interests of the Limited Partnership, whether or not such agreements
shall be with persons affiliated with any Partner, including without limitation,
each and every such agreement referred to in or contemplated by the Memorandum;
e. To obtain loans for the Limited Partnership's purposes and to issue,
accept, endorse and execute promissory notes, bonds or other evidences of
indebtedness and, as security therefor, to mortgage, pledge, grant security
interests in, or otherwise encumber its assets, including, but not limited to,
the Network; to obtain replacements of any debts and to prepay, in whole or in
part, refinance, recast, increase, modify, consolidate or extend any obligation
affecting the Limited Partnership;
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f. To acquire and enter into any contract of insurance necessary or proper
for the protection of the Limited Partnership, the conservation of the Network
or any other purpose proper and beneficial to the Limited Partnership;
g. To retain or employ and coordinate the services of all employees,
supervisors, accountants, attorneys, contractors and other persons or entities
necessary or appropriate to carry out the business and purposes of the Limited
Partnership, whether or not affiliated with the General Partner;
h. To perform other obligations provided elsewhere in this Agreement to be
performed by the General Partner;
i. To open accounts and deposit and maintain funds in the name of the
Limited Partnership in banks, savings and loan associations or trust companies;
provided, however, that the Limited Partnership funds shall not be commingled
with the funds of any other person;
j. To exercise all rights and powers conferred upon the General Partner by
law;
k. To amend this Agreement to reflect the addition or substitution of
Limited Partners or the reduction of Capital Accounts upon the return of capital
to the Partners; and
l. To execute, acknowledge and deliver any and all instruments necessary or
desirable in effectuating the foregoing.
5.2 Fees.
The General Partner and its Affiliates shall be entitled to all fees and
compensation for services as described in the Memorandum. The General Partner
and its Affiliates may also enter into other contracts, commitments or
agreements with the Partnership, provided that the fees and prices charged in
such transactions are at least as favorable as the fees and charges being
offered by non-affiliated comparable entities performing similar functions.
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5.3 Reimbursement for Limited Partnership Expenses.
The Partnership shall bear all expenditures incident to its formation. The
Partnership shall reimburse the General Partner and/or Datalinc, except as
otherwise provided in the Memorandum, for (or pay directly) all actual and
direct expenditures incident to its formation, including the fees of the
attorneys and accountants who represent the General Partner in connection with
the review, negotiation and preparation of this Agreement, as well as any costs
incurred by the General Partner in connection with the creation and development
of the Partnership prior to execution hereof, all as further specified herein.
Subject to the restrictions concerning indemnification of the General
Partner as set forth herein, the General Partner shall be entitled to
reimbursement by the Limited Partnership for all out-of-pocket expenses
reasonably paid or incurred by it in connection with the discharge of its
obligations under this Agreement or otherwise reasonably paid or incurred by it
on behalf of the Limited Partnership.
5.4 Restrictions and Rights.
Notwithstanding the grant of authority to the General Partner under Section
5.1 hereof, without the following specified vote of Limited Partners, the
General Partner shall not:
a. Refinance, sell or contract to sell substantially all of the assets of
the Limited Partnership, including, but not limited to, the Network (Vote of
Limited Partners owning at least 2/3 of outstanding Units);
b. Do any act in contravention of this Agreement (unanimous);
c. Employ, or permit the Limited Partnership to employ, the funds or assets
of the Limited Partnership in any manner except for the exclusive benefit of the
Limited Partnership (unanimous); or
d. Receive any rebates or give-ups, directly or indirectly, or participate
in any reciprocal business arrangements which would circumvent such prohibitions
and any other prohibitions or restrictions contained herein with respect to the
Partnership's dealings with the General Partner or its Affiliates (unanimous).
e. Materially alter the use of Proceeds set forth in the Memorandum
(Majority Vote).
5.5 Limitation of Time.
The General Partner shall not be required to devote all of its time or
business efforts to the affairs of the Partnership, but shall devote so much of
its time and attention to the Partnership as is reasonably necessary and
advisable to manage the affairs of the Partnership to the best advantage of the
Partnership.
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5.6 Non-Exclusivity.
Any Partner, whether General or Limited, may engage in or possess an
interest in other business ventures of every nature and description,
independently or with others, including, but not limited to, the ownership,
financing, operation, management, syndication, brokerage and development of
other similar business to that of the Partnership, and neither the Limited
Partnership nor any Partners thereof shall have any right by virtue of this
Agreement in such independent ventures or to the income, profits or losses
derived therefrom. The fact that a Partner, whether General or Limited, or any
member of his family or any Affiliate thereof, as the case may be, is employed
by, or is directly or indirectly interested in or connected with, any Person
with which the Limited Partnership transacts business shall not prohibit the
General Partner from dealing with such Person, and neither the Limited
Partnership nor any Partners thereof, as such, shall have any rights in such
Person, or to any income, profits or losses derived therefrom. The General
Partner shall not be obligated to present any particular investment opportunity
to the Limited Partnership even if such opportunity is of a character which, if
presented to the Limited Partnership could be taken by the Limited Partnership
and the General Partner shall have the right to take for its own account
(individually or as trustee), or to recommend to others any such particular
investment opportunity.
5.7 No Liability and Indemnity.
The General Partner or its Affiliates shall not be liable, responsible or
accountable to the Limited Partnership or any Partner for any act or omission
performed or omitted pursuant to the authority granted to it hereunder or by
law, or for a loss resulting from any mistake or error in judgment on its part
or from the negligence, dishonesty, fraud or bad faith of any employee, broker
or other agent of the Limited Partnership, provided that such act or omission,
such mistake or error in judgment or the selection of such employee, broker or
other agent as the case may be was made in good faith and did not result from
fraud, the misconduct or negligence of the General Partner or its Affiliates.
The General Partner may consult with legal counsel and any action taken or
omitted in good faith in reliance upon and in accordance with the opinion or
advice of such counsel shall be full protection and justification of the General
Partner with respect to the action so taken or omitted. The Limited Partnership
shall indemnify and save harmless the General Partner or its Affiliates from any
loss, damage, liability or expense incurred or sustained by them by reason of
any act performed by any omission by them for or on behalf of the Limited
Partnership and in furtherance of their interest, but this indemnity shall not
be applicable to loss, damage, liability or expense resulting from the fraud,
misconduct or negligence of the General Partner or its Affiliates, nor shall the
Limited Partners be required to make any Capital Contribution therefor to the
Limited Partnership.
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Neither the General Partner or its Affiliates nor the Partnership shall
indemnify any Limited Partner for any reason.
5.8 Reliance by Third Parties.
Third parties dealing with the Limited Partnership may rely conclusively
upon the power and authority of the General Partner to act as set forth herein
and shall not be required to inquire into or ascertain the authority of the
General Partner so to act.
5.9 General Authority.
Except as otherwise provided in this Agreement and by the Act, the General
Partner shall have all the rights and powers and shall be subject to all the
restrictions and liabilities of a partner in a partnership without limited
partners under the laws of the State of Florida.
5.10 Optional Loans.
Any Partner may, but is not obligated to, from time to time, make voluntary
loans to the Limited Partnership. Such loans shall bear interest at the prime
rate in effect from time to time plus 1% per annum and shall be repayable from
Cash Flow or Sale or Refinancing Proceeds when available.
5.11 Removal of General Partner.
a. Limited Partners holding at least 66-2/3% of the Units shall have the
right, exercisable by written notice to all Partners, to remove a General
Partner for good cause stated; provided, however, that the Limited Partners may
not remove a General Partner if such removal would cause or result in a default
by the Partnership under any loan agreement, promissory note, mortgage, security
agreement or other instrument evidencing Partnership indebtedness. For purposes
of this provision, "good cause" shall be limited to any action taken with
respect to the intentional misconduct or gross negligence of the General Partner
and which results in (i) a material violation of this Agreement; or (ii) a
material financial loss to the Partnership, provided any such matter is not
timely remedied by the General Partner.
b. In the event the General Partner shall be compelled to withdraw from the
Partnership pursuant to paragraph (a) of this Section 5.11, the Partnership
shall be dissolved. Notwithstanding the preceding sentence and the provisions of
Section 12.1, the Limited Partners may elect to continue the business of the
Partnership pursuant to the provisions of Article XII and subject to the rights
of the Limited Partners to appoint a successor General Partner under Section
12.2.
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c. The General Partner removed from the Partnership pursuant to paragraph
(a) of this Section 5.11 shall retain its interest, if any, in the Partnership's
Profits and Losses, Cash Flow, Sale Proceeds, Refinancing Proceeds, and any
other allocations, payments or distributions hereunder to which it was entitled
as the General Partner, and from and after the effective date of the removal,
shall be a Limited Partner of the Partnership without voting rights. For all
purposes of this Agreement, the General Partner so removed shall be deemed to
have involuntarily withdrawn from the Partnership as the General Partner
effective as of the date of such removal, shall become a Limited Partner of the
Partnership, and such withdrawal shall not be deemed to have occurred in
violation of this Agreement.
5.12 No Assessment.
No Limited Partner shall be subject to an assessment.
Except as provided in Section 9.6, no Partner with a deficit balance in its
Capital Account shall have any obligation to the Partnership or any other
Partner to restore said deficit balance. In addition, no venturer or partner of
any Partner shall have any liability to the Partnership or to any Partner for
any deficit balance in such venturer's or partner's Capital Account in the
Partner in which it is a partner or venturer. Furthermore, a deficit Capital
Account of a Partner (or of a partner or venturer of a Partner) shall not be
deemed to be a liability of such Partner (or of such venturer or partner) or an
asset or property of the Partnership (or any Partner).
5.13 Limited Liability.
Performance of one or more of the acts described in this Article V hereof
or elsewhere in this Partnership Agreement, including acting on any matter which
this Agreement provides is subject to the approval or disapproval of Limited
Partners, shall not in any way cause any Limited Partner to be deemed a General
Partner or impose any personal liability on any Limited Partner. No Limited
Partner or, in appropriate cases, former Limited Partner shall be liable for any
debts or obligations of the Partnership in excess of his Capital Contribution,
including any portion of such capital plus interest or any other amount which
has been returned to him and with respect to which, by the terms of the Florida
Revised Uniform Limited Partnership Act, he shall remain liable. All
undistributed Cash Flow or Sale Proceeds or Refinancing Proceeds which would
otherwise be distributed to the Limited Partners shall be available to creditors
to satisfy the debts and obligations of the Partnership until the time of actual
distribution.
All repayments of returns of capital made pursuant to this Article by
Limited Partners shall be made within ten (10) days after the General Partner
shall have repaid the share apportioned to the General Partner. Failure of any
Partner or former Partner to make repayment required under this Article shall
subject the defaulting person to payment of interest on the amount due from him
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from the date of the General Partner's notice requiring such payment, at the
highest lawful rate allowed by law plus the costs and expenses,, including
reasonable attorney's fees, of collections.
The Capital Contributions of the Limited Partners shall be available for
the debts, liabilities or other obligations of the Partnership.
5.14 Meetings of, or Actions by, the Limited Partners.
a. Meetings of the Limited Partners to vote upon any matters as to which
the Limited Partners are authorized to take action under this Agreement may be
called at any time by the General Partner or by one or more Limited Partners
holding ten percent (10%) or more of the outstanding Units at a time and place
convenient by delivering written notice, either in person or by registered mail,
to the Limited Partners entitled to vote at such meeting to the effect that a
meeting will be held at a designated time and place, fixed by the General
Partner, convenient to the Limited Partners. However, upon receipt of a written
request either in person or by certified mail stating the purpose(s) of the
meeting the General Partner shall provide all Limited Partners within ten days
after receipt of said request, written notice (either in person or by certified
mail) of a meeting and the purpose of such meeting to be held on a date not less
than fifteen nor more than sixty days after receipt of said request and place
convenient to Limited Partners. All expenses of the meeting and notification
shall be borne by the Partnership. b. Limited Partners shall be entitled to one
(1) vote for each Unit held. Limited Partners present in person or by proxy,
holding in excess of fifty percent (50%) of the Units, shall constitute a quorum
at any meeting. Attendance by a Limited Partner at any meeting and his voting in
person shall revoke any written proxy submitted with respect to any action
proposed to be taken at such meeting. Any matters as to which the Limited
Partners are authorized to take action under this Agreement or under the law may
be acted upon by the Limited Partners without a meeting; and any such action
shall be valid and effective as action taken by the Limited Partners at a
meeting assembled, provided that if written consents to such action by the
Limited Partners are signed by Limited Partners who hold the number of Units
required to authorize such action and that they are delivered to the General
Partner. In the event that there shall be no General Partner, the Limited
Partners may take action without a meeting by the written consent of Limited
Partners having a majority of the voting power of the Limited Partners entitled
to vote. All Partners shall be bound by actions taken in accordance with the
provisions of this Agreement at such meetings.
c. The General Partner shall be responsible for enacting all needed rules
of order for conducting all meetings and shall keep, or cause to be kept, at the
expense of the Partnership, an accurate record of all matters discussed and
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action taken at all meetings or by written consent. The records of all said
meetings and written consent shall be maintained at the principal place of
business of the Partnership and shall be available for inspection by any Partner
at reasonable times.
5.15 Amendments.
a. This Agreement may be amended by the General Partner without any
additional consent of the Limited Partners whenever:
(i) There is a change in the name of the Partnership or the amount or
character of the contribution of any Partner (including withdrawal or reduction)
pursuant to this Agreement;
(ii) A Person is admitted as a Substitute Limited Partner;
(iii) There is an ambiguous, false, or erroneous statement in the
Agreement, as determined by the General Partner in its sole and absolute
discretion.
(iv) An amendment is required because of a judicial decision;
(v) In the opinion of the Auditor or counsel to the Partnership, it is
necessary or appropriate to add, correct, modify or supplement any provision
hereof to satisfy a requirement of the Code under Section 704 and amendment does
not reduce the obligations of the General Partner;
(vi) An amendment is required to correct obvious errors;
(vii) The amendment adds to the representations, duties or obligations of
the General Partner or surrenders any right or power granted to the General
Partner herein for the benefit of the Limited Partners; or
(viii) The amendment changes any provision required to be changed by the
staff of the Securities and Exchange Commission or other federal agency, or by a
state securities commissioner or similar "Blue Sky" official, which change is
deemed by such commissioner, agency, or official to be for the benefit or
protection of Limited Partners.
The General Partner will be fully authorized to act pursuant to the powers
of attorney in carrying out their rights and duties under this Section 5.15.
b. Except as provided in Section 5.15(a), amendments will only be made with
the approval of the General Partner and Majority Vote of Limited Partners. No
amendment will be made under this Section 5.15 which would adversely affect the
Federal income tax treatment described to the Limited Partners in the Tax
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opinion to be delivered to the Partnership or in effect convert a Limited
Partner into a General Partner or otherwise increase or extend the financial
obligations or liability of the Limited Partners or change the aggregate
percentage to the General Partner and the Limited Partners as a group of the
allocation of Taxable Income or Tax Loss and Distribution of Cash Flow, Sale
Proceeds or Refinancing Proceedings, from that disclosed to the Limited Partners
in the Memorandum (except to the extent additional Limited Partners are admitted
to the Partnership in accordance with this Agreement) without full disclosure to
the Partners and unless all of the Partners consent thereto.
5.16 No Third Party Rights.
The right of the Partnership to require any additional contributions or
loans under the terms of this Agreement including, but not limited to, the terms
of this Article V, shall not be construed as conferring any rights or benefits
to or upon any party not a party to this Agreement, including, but not limited
to, any holder of any obligations secured by a mortgage, deed of trust, security
interest or other lien or encumbrance upon or affecting the Partnership or any
interest of a Limited Partner therein or the Network or improvements on the
Network, or any part thereof or interest therein; and such provisions may be
amended at any time and from time to time without the approval or consent of
such other person.
ARTICLE VI
DEVELOPMENT, MARKETING AND FINANCING
6.1 Development and Marketing.
The General Partner hereby is specifically authorized to enter into a
Management Agreement which shall incorporate such terms and conditions as are
more fully set forth in the Memorandum.
6.2 Funds for Development.
The funds for the development of the Network shall be provided by the
Limited Partnership from the proceeds of the Offering.
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ARTICLE VII
RIGHTS OF LIMITED PARTNERS
7.1 No Right to Participate in Management.
Limited Partners shall have no right to, nor shall they take any part
in or interfere in any manner with the conduct, control or management of the
Limited Partnership's business and shall have no right or authority to act for
or bind the Limited Partnership, said powers being vested solely and exclusively
in the General Partner. Except as otherwise expressly provided herein, the
Limited Partners shall have only those rights granted to limited partners
pursuant to the Act.
7.2 Restrictions on Limited Partners.
No Limited Partner shall have the right or power to:
a. Withdraw or reduce his or its Capital Contribution to the Limited
Partnership;
b. Cause the termination and dissolution of the Limited Partnership by
court decree or otherwise;
c. Have priority over any other Limited Partner either as to the return of
Capital Contributions or as to distributions. Other than upon the termination
and dissolution of the Limited Partnership as provided by this Agreement, there
has been no time agreed upon when the Capital Contribution of each Limited
Partner may be returned; or
d. Bring an action for partition against the Limited Partnership.
ARTICLE VIII
TRANSFER OF PARTNERSHIP INTERESTS
8.1 Withdrawal of Partners.
Except as otherwise provided herein or by the laws of the State of
Florida, no Partner may resign, withdraw or retire voluntarily from the Limited
Partnership or sell, transfer, assign or otherwise dispose of his or its
interest in the Limited Partnership.
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8.2 Additional Limited Partners.
Except as otherwise provided herein, after the completion of the
Offering and the closing thereunder, the General Partner shall not have the
right to admit additional Limited Partners to the Limited Partnership.
8.3 Transfers, Resignation or Withdrawal by General Partner.
Except as otherwise provided herein, the General Partner shall not have
the right to sell, assign, pledge, transfer, hypothecate or otherwise dispose of
all or any part of its interests in and to the Limited Partnership, its capital,
profits and losses, or to resign or withdraw as General Partner without a
Majority Vote. If during such period the General Partner attempts to make such a
sale, assignment, transfer or other disposition of its interest in the Limited
Partnership or any part thereof in violation of the provisions of this
Agreement, the other Partners, or any one of them, shall, in addition to all
rights and remedies which they may have in law or in equity, be entitled to a
decree or order restraining and enjoining such attempted sale, assignment,
transfer, or other disposition and the General Partner shall not plead in
defense thereto that there would be an adequate remedy at law, it being
recognized and agreed that the injury and damage resulting from such a breach
would be impossible to measure monetarily.
8.4 Transfers by Limited Partners.
Each Limited Partner shall not, sell, assign, transfer, pledge,
hypothecate, grant a security interest in, encumber or in any other manner
dispose of all or any part of his or its interest in and to the Limited
Partnership, its capital, profits and losses, without (a) the prior written
consent of the General Partner which can be withheld in its sole and absolute
discretion; (b) statement from the transferee of such Limited Partner's interest
that the transferee intends to hold such interest for investment purposes, and
(c) an opinion of his or it's counsel, in form and substance reasonably
acceptable to the General Partner, to the effect that such transfer shall not
(1) violate or cause the Limited Partnership or the General Partner to violate
any applicable Federal, state or local securities law, regulation or
interpretive ruling, and (2) shall not cause a termination of the Limited
Partnership for the purposes of any applicable Federal, state or local tax law,
regulation or interpretive ruling. In the event that any Limited Partner at any
time attempts to make a sale, assignment, transfer, pledge, hypothecation,
mortgage, encumbrance or other disposition of his or its interest in and to the
Limited Partnership, its capital, profits and losses, or any part thereof, in
violation of the provisions of this Agreement, the other Partners or any one of
them, shall in addition to all other rights and remedies which they may have in
law, in equity or under the provisions of this Agreement, be entitled to a
decree or order restraining and enjoining such attempted sale, assignment,
transfer, pledge, hypothecation, mortgage, encumbrance or other disposition, and
the offending Partner shall not plead in defense thereto that there would be an
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adequate remedy at law, it being recognized and agreed that the injury and
damage resulting from such a breach would be impossible to measure monetarily.
Any transfer made in violation of the provisions of this Agreement shall be void
ab initio. Further, no Limited Partner may sell, assign, transfer, pledge,
hypothecate, grant a security interest in, encumber or in any other manner
dispose of all or any part of his or its interest in the Partnership, its
capital, profits or losses except by delivery of the Unit Certificate
representing his interest in the Partnership as specified in Section 14.22.
8.5 Withdrawal, Dissolution or Bankruptcy of the General Partner.
The withdrawal, dissolution or Bankruptcy of the General Partner shall
cause a dissolution of the Limited Partnership unless the remaining Partners
exercise the right set forth in Section 12.2 hereof. Except as provided in
Section 5.11, the entire interest of the withdrawn, dissolved or Bankrupt
General Partner in and to the Limited Partnership, its capital profits and
losses shall be reconstituted into an equivalent Limited Partner interest and
the legal representatives or successors-in-interest, as the case may be, of the
former General Partner shall be admitted to the Limited Partnership as a
Substituted Limited Partner upon compliance with Section 8.7 hereof; provided,
however, that in the event of the Bankruptcy of the General Partner, if such
representative or successor-in-interest shall not comply with Section 8.7
hereof, then the interest of the Bankrupt General Partner shall be dealt with in
accordance with applicable law at the earliest practicable time. Anything herein
contained to the contrary notwithstanding, such reconstituted interest shall not
affect the rights of the Limited Partners as to distributions or return of their
Capital Contributions or otherwise. Further, for a period of six months
following the withdrawal, dissolution or bankruptcy of the General Partner,
assuming the Limited Partners exercise their rights to continue the business of
the Partnership, the Partnership shall have the option to purchase the
reconstituted interest of the General Partner at fair market value based upon a
mutually agreeable M.A.I. appraisal of the Partnership's assets, including the
Network assuming the Network were sold at such price, thereby giving due effect
to the General Partner's residual 1% interest in proceeds of sale or
refinancing. The purchase price must be paid entirely in cash. Except as
otherwise provided in this Agreement, or by the Act, an additional General
Partner shall be admitted to the Limited Partnership by Majority Vote of the
Limited Partners.
8.6 Death, Adjudication of Insanity, Dissolution or Bankruptcy of a Limited
Partner.
The death, adjudication of insanity, dissolution or bankruptcy of a
Limited Partner shall not cause a dissolution of the Limited Partnership.
8.7 Substituted Limited Partners.
Anything herein contained to the contrary notwithstanding,
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a. No successor-in-interest of a Limited Partner and no assignee
or transferee of all or any part of a Limited Partner's interest in and to the
Limited Partnership, its capital, profits and losses, shall be admitted to the
Limited Partnership as a limited partner except upon
(i) submitting to the General Partner a duly executed and acknowledged
counterpart of the instrument or instruments making such transfer, together with
such other instrument or instruments, including, but not limited to, a
counterpart of this Agreement as it then may have been amended, signifying such
transferee's agreement to be bound by all of the provisions of the Limited
Partnership, including, but not limited to Sections 3.9 and 3.10 and, the
restrictions upon transfers of interests therein and thereto, all of the
foregoing in such form and substance as shall be reasonably satisfactory to the
General Partner;
(ii) obtaining the General Partner's consent thereto which may be withheld
in its sole and absolute discretion; and
(iii) agreeing to bear all costs and expenses, including legal fees of the
Limited Partnership, incurred in effecting such substitution.
Upon such transferee's compliance with the foregoing provisions, each of
the Partners shall take all actions reasonably required to effectuate the
recognition of the effectiveness of such transfer and the admission of such
transferee to the Limited Partnership as a Substituted Limited Partner
including, but not limited to, transferring such interest in and to the Limited
Partnership, its capital, profits and losses upon the books thereof and
executing, acknowledging and causing to be filed any necessary or desirable
amendment to this Agreement and the Certificate of Limited Partnership.
b. The General Partner shall not consent to the assignment and transfer of
any Unit or the admission of any such assignee or transferee as a substituted
partner if such assignment, transfer or admission:
(i) would jeopardize the status of the Limited Partnership as a partnership
for Federal income tax purposes;
(ii) would cause a termination of the Limited Partnership within the
meaning of Section 708(b) of the Code;
(iii) would violate, or cause the Limited Partnership to violate, any
applicable law or governmental rule or regulation; or
(iv) in the sole discretion of the General Partner would not be in the best
interest of the Partnership.
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c. No assignment to a non-resident alien, minor or incompetent shall be
effective in any respect.
8.8 Non-Complying Assignments.
Any assignment, sale, exchange or other transfer in contravention of
any of the provisions of this Article VIII shall be void and ineffectual, and
shall not bind or be recognized by the Limited Partnership.
8.9 Consent to Admission.
By executing or adopting this Agreement, each Limited Partner hereby
consents to the admission of Substituted Limited Partners by the General Partner
and to any assignee of his or its Unit becoming a Substituted Limited Partner.
8.10 Obligations of Successors.
Any person who acquires an interest in the Limited Partnership by
assignment or is admitted to the Limited Partnership as a Substituted Limited
Partner shall be subject to and bound by all the provisions of this Agreement as
if originally a party to this Agreement.
8.11 Admission of Successor or Additional General Partners.
With the consent of the Limited Partners holding at least a majority
of the then outstanding Units, the General Partner may withdraw and designate
one or more persons to be its successor General Partner or at any time to be an
additional General Partner, in each case with such participation in such General
Partner's interest as the General Partner and such successor or additional
General Partner may agree upon, provided that the interests of the Limited
Partners in the Limited Partnership shall not be affected thereby. In the event
of the addition or substitution of the General Partner in accordance with the
provisions of this Section 8.11, the General Partner shall execute, file and
record with the appropriate governmental agencies such documents (including
amendments to this Agreement) as are required to reflect the substitution or
admission of such substituted or additional General Partner. Except as
hereinabove expressly provided, no additional General Partners shall be admitted
to the Limited Partnership.
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8.12 No Public Trading of Units.
No Units may be traded on an established securities market or readily
tradable on a secondary market (or the equivalent thereof) as such terms are
utilized in Code 7704(b), or any Regulations promulgated thereto or
legislative history in connection therewith. Any such trade will be deemed void
ab initio and will not be recognized by the General Partner, the Partnership or
the depository or any other agent of the Partnership or the General Partner.
ARTICLE IX
ALLOCATION OF INCOME, LOSS AND DISTRIBUTIONS
9.1 General Apportionment Provisions.
a. Except as provided in Section 9.1e or as may otherwise be
provided in this Article IX, during any month before the Closing Date (including
the month in which the Closing Date occurs), and thereafter, that portion of
Taxable Profits, Tax Loss and Non-recourse Deductions, tax preference items and
tax credits, if any ("other Partnership tax items"), allocable to the Limited
Partners as a group with respect to any month shall be allocated among them as
of the last day of each month of the Partnership's fiscal year in the ratio that
the number of Partnership Units owned by each Limited Partner bears to the total
number of Partnership Units owned by all Limited Partners as of that date.
During any calendar month prior to the Closing Date and including the month in
which the Closing Date occurs, a Limited Partner who is admitted to the
Partnership on any day in such month shall be deemed to have been admitted as of
the last day of such calendar month.
b. Any such allocations made to a particular class of Limited
Partners shall be made on the same basis in accordance with the ratio that the
number of Limited Partnership Units owned by each Limited Partner in such class
bears to the total number of Partnership Units owned by all Limited Partners in
such class.
c. That portion of the Partnership Taxable Profits, Tax Loss and
other Partnership tax items allocated among the Partners during any taxable year
in which there is a change in the percentage of such items allocated among the
Partners or any class of Partners shall be allocated so as to take into account
the varying interests of the Partners in such items during such taxable year;
that is, by taking the amount of such items for the entire taxable year and
prorating such items on a monthly basis among the Partners in accordance with
their varying percentages during such year. No interim closing of the
Partnership's books shall be required.
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d. In the case of a transfer of Partnership Units:
(i) a substitute Limited Partner will be recognized as owning transferred
Partnership Units; and
(ii) an Assignee will be recognized as being entitled to receive
Distributions and allocations of Tax Profits, Tax Loss and other Partnership tax
items attributable to the assigned Partnership Units in the same manner as a
substitute Limited Partner would be so entitled with respect to transferred
Partnership Units, at the time determined in accordance with the following:
Taxable Profits or Tax Losses from current operations for any year will
be allocated between a transferor and a transferee based upon the number of days
during the calendar year that each was recognized as the holder of a Unit,
without regard to whether Partnership operation during particular periods of
such year produced profit or loss. Cash distribution of Sale Proceeds and
Refinancing Proceeds, if any, arising from the sale or refinancing of a Network
will be distributed, and all related Taxable Profits or Tax Losses will be
allocated, to the persons recognized as holder of the Unit on the date on which
the sale or refinancing occurred. For this purpose, transfers will be recognized
as of the date specified by the transferor and the transferee in the instrument
of assignment or, if no date is specified, the date of the last acknowledgment
of such instrument. The date of transfer and related matters shall be as set
forth in the Memorandum.
Neither the Partnership nor any General Partner shall incur any
liability for making allocation and distribution in accordance with the
provisions of this Article V, notwithstanding any General Partner or the
Partnership has knowledge of any transfer of ownership of any Unit.
e. Notwithstanding anything to the contrary herein, the General Partner,
after 60 days prior notice to the Limited Partners, but without the vote or
consent of any of the Limited Partners, may:
(i) adopt a convention other than a "record date" convention for
determining the recognition of the Limited Partners entitled to Distributions
that the General Partner, in its sole discretion, determine is reasonable; and
(ii) allocate Taxable Profits, Tax Loss and other Partnership tax items
among the Limited Partners during the fiscal year of the Partnership in a manner
other than that set forth in this Section 9.1 that the General Partner, in its
sole discretion, determines (a) satisfies the requirements of Section 706 of the
Code and any Regulations promulgated thereunder, and (b) is consistent with the
Units owned by them.
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f. With respect to Taxable Profits which results from discharge,
cancellation or forgiveness of indebtedness owed by the Partnership or secured
by Partnership assets, to the extent such Profits result from deductions taken
by the Partnership for depreciation or amortization it shall be allocated to the
Partners to whom such depreciation or amortization was allocated and among the
Partners in the same proportion in which such depreciation or amortization was
allocated among the Partners.
9.2 Distributions.
a. All Distributions are subject to the payment of the operating
expenses of the Partnership and to the maintenance of the reserves in amounts
determined appropriate by the General Partner in its sole discretion. Such
determinations shall be binding upon the Partnership. Distributions prior to the
Closing Date shall be made 99% to Datalinc and 1% to the General Partner.
Distributions after that date shall be made as provided hereinafter.
b. Distributions from Operations. Distributions of Cash Flow from
operations or from other sources, as, when and to the extent available with
respect to each fiscal year of the Partnership or any portion thereof, shall be
distributed 100% to the Series 100 Limited Partners until such Limited Partners
have received Distributions of any type in an amount equal to their total cash
Capital Contributions plus the aggregate Preferred Return, if and when such
Preferred Return is payable; next, 100% to the Series EA Limited Partners until
such Limited Partners have received Distributions of any type in an amount equal
to 25% of the amount distrubuted pursuant to the preceding clause; next, 100% to
the Series 200 Limited Partners until such Limited Partners have received
Distributions of any type in an amount equal to their total cash Capital
Contributions; next, 100% to the Datalinc Limited Partner until such Limited
Partner has received Distributions of any type in an amount equal to the
following amount: the aggregate total cash Capital Contributions of Series 100
and Series 200 Limited Partners divided by the aggregate percentage interests of
the Series 100, EA and 200 Limited Partners in the Final Clause multiplied by
77.152%, subject to increase with any unpurchased Series 200 Units or Managing
Dealer Units percentage interest reallocated to Datalinc Limited Partner as
specified below; next, 100% to the Managing Dealer Limited Partner until such
Limited Partner has received Distributions of any type in an amount equal to the
following amount: the aggregate total cash Capital Contributions of Series 100
and Series 200 Limited Partners divided by the aggregate percentage interests of
the Series 100, EA and 200 Limited Partners in the Final Clause multiplied by
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2.4%, or such lesser percentage as is actually owned by the Managing Dealer
Limited Partners; next, 100% to the General Partner until such General Partner
has received Distributions of any type in an amount equal to the following
amount: the aggregate total cash Capital Contributions of Series 100 and Series
200 Limited Partners divided by the aggregate percentage interests of the Series
100, EA and 200 Limited Partners in the Final Clause multiplied by 1%; and
thereafter (the following being the "Final Clause"), assuming the sale of all
Series 200 Limited Partnership Units, 2.225% to the Series 100 Limited Partners,
.556% to the EA Limited Partners, 16 2/3% to the Series 200 Limited Partners, a
maximum of 2.4% to the Managing Dealer Limited Partners, 1% to the General
Partner and 77.152% to Datalinc as Limited Partner. If any Series 200 Units have
not been acquired, all Allocations or Distributions otherwise to be made or paid
to such Limited Partners shall be made or paid to Datalinc. If the Managing
Dealer Units have not been acquired, all Allocations or Distributions otherwise
to be made or paid to the Managing Dealer Limited Partner shall be made or paid
to Datalinc.
Series 100 Limited Partners will receive a 15% per annum cumulative,
non-compounded Preferred Return on their Adjusted Capital Investment, commencing
the date of closing of the Series 100 Unit offering. However, the Preferred
Return is only payable if within three years from the Closing Date of the Series
100 Unit offering the Partnership (or a successor entity thereto with
essentially the same business) has not done either of the following (a "Cut-Off
Event"): a. Made aggregate Distributions of any kind to such Partners in an
amount equal to their Adjusted Capital Investment, or b. Has not completed a
successful public offering. If a Cut-Off Event has occurred, the Partnership's
obligation to make a Preferred Return to the Series 100 Limited Partners will
terminate. If the Partnership has made a successful public offering by such
date, but the market value of securities owned by the Series 100 Limited
Partners if less than their Adjusted Capital Investment based upon the public
offering price of such securities (the "Difference"), the Series 100 Limited
Partners will be issued securities with a first priority dividend and other
payment right over all other securities holders equal to the Difference. The
term "Adjusted Capital Investment" means total cash Contributions of a Limited
Partner to the Partnership less Distributions of any kind from the Partnership.
c. Distributions of Sale Proceeds and Refinancing Proceeds.
Subject to 9.2d below, Sale Proceeds and Refinancing Proceeds shall be
distributed on a cumulative basis within 60 days after the Record Date for such
Distributions, shall be distributed 100% to the Series 100 Limited Partners
until such Limited Partners have received Distributions of any type in an amount
equal to their total cash Capital Contributions plus the aggregate Preferred
Return, if and when such Preferred Return is payable; next, 100% to the Series
EA Limited Partners until such Limited Partners have received Distributions of
any type in an amount equal to 25% of the amount distrubuted pursuant to the
preceding clause; next, 100% to the Series 200 Limited Partners until such
Limited Partners have received Distributions of any type in an amount equal to
their total cash Capital Contributions; next, 100% to the Datalinc Limited
Partner until such Limited Partner has received Distributions of any type in an
amount equal to the following amount: the aggregate total cash Capital
Contributions of Series 100 and Series 200 Limited Partners divided by the
aggregate percentage interests of the Series 100, EA and 200 Limited Partners in
the Final Clause multiplied by 77.152%, subject to increase with any unpurchased
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Series 200 Units or Managing Dealer Units percentage interest reallocated to
Datalinc Limited Partner as specified below; next, 100% to the Managing Dealer
Limited Partner until such Limited Partner has received Distributions of any
type in an amount equal to the following amount: the aggregate total cash
Capital Contributions of Series 100 and Series 200 Limited Partners divided by
the aggregate percentage interests of the Series 100, EA and 200 Limited
Partners in the Final Clause multiplied by 2.4%, or such lesser percentage as is
actually owned by the Managing Dealer Limited Partners; next, 100% to the
General Partner until such General Partner has received Distributions of any
type in an amount equal to the following amount: the aggregate total cash
Capital Contributions of Series 100 and Series 200 Limited Partners divided by
the aggregate percentage interests of the Series 100, EA and 200 Limited
Partners in the Final Clause multiplied by 1%; and thereafter (the following
being the "Final Clause"), assuming the sale of all Series 200 Limited
Partnership Units, 2.225% to the Series 100 Limited Partners, .556% to the EA
Limited Partners, 16 2/3% to the Series 200 Limited Partners, a maximum of 2.4%
to the Managing Dealer Limited Partners, 1% to the General Partner and 77.152%
to Datalinc as Limited Partner. If any Series 200 Units have not been acquired,
all Allocations or Distributions otherwise to be made or paid to such Limited
Partners shall be made or paid to Datalinc. If the Managing Dealer Units have
not been acquired, all Allocations or Distributions otherwise to be made or paid
to the Managing Dealer Limited Partner shall be made or paid to Datalinc.
Series 100 Limited Partners will receive a 15% per annum cumulative,
non-compounded Preferred Return on their Adjusted Capital Investment, commencing
the date of closing of the Series 100 Unit offering. However, the Preferred
Return is only payable if within three years from the Closing Date of the Series
100 Unit offering the Partnership (or a successor entity thereto with
essentially the same business) has not done either of the following (a "Cut-Off
Event"): a. Made aggregate Distributions of any kind to such Partners in an
amount equal to their Adjusted Capital Investment, or b. Has not completed a
successful public offering. If a Cut-Off Event has occurred, the Partnership's
obligation to make a Preferred Return to the Series 100 Limited Partners will
terminate. If the Partnership has made a successful public offering by such
date, but the market value of securities owned by the Series 100 Limited
Partners if less than their Adjusted Capital Investment based upon the public
offering price of such securities (the "Difference"), the Series 100 Limited
Partners will be issued securities with a first priority dividend and other
payment right over all other securities holders equal to the Difference. The
term "Adjusted Capital Investment" means total cash Contributions of a Limited
Partner to the Partnership less Distributions of any kind from the Partnership.
For purposes of determining the Cash Flow and Net Proceeds of Sales and
Refinancings to which the Partners are entitled, all prior Distributions of Cash
Available from operations and other sources and Net Proceeds of Sales and
Refinancings shall be considered as of the date of the proposed Distribution.
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d. Repurchase of Series 200 Units. Series 200 Limited Partners
have the option to require the Partnership and/or Datalinc to repurchase any or
all of their Series 200 Units on December 31, 2000, if they have not received
Distributions of any type in an amount equal to their total cash Capital
Contributions on or before such date, in an amount equal to their Adjusted
Capital Investment on such date.
e. Zeroing Out the Capital Accounts. Notwithstanding the preceding
provisions of this Section 9.2, when the Partnership is wound up and dissolved
pursuant to Article XII and all of its remaining assets are to be distributed,
all items of income, gain, loss and deduction shall first be allocated to the
Partners' Capital Accounts under Sections 9.3 and 9.4, and other credits and
deductions to the Partners' Capital Accounts shall be taken before the final
Distribution is made. The final Distribution, when made, shall be made to the
Partners in accordance with and in an amount equal to their positive Capital
Account balances pursuant to Sections 9.4 and 12.3, thereby adjusting each
Partner's Capital Account to zero.
f. General and Limited Partner Priorities. Distributions to the General
Partner provided for in this Article IX shall be made at the same time as
Distributions are made to the Limited Partners.
g. Compensation Not to be Deemed Distributions. Any compensation paid to
the General Partner as set forth in the Memorandum shall not be deemed to be
Distributions for purposes of Article IX of this Partnership Agreement,
regardless of how such Distributions are characterized for federal income tax
purposes. As used in this subsection, the term "Compensation" shall mean any
monies paid to the General Partner and its Affiliates which are deductible for
federal income tax purposes.
9.3 Allocation of Net Income, Gross Income, Net Loss, Non-recourse
Deductions, and Other Partnership Tax Items.
a. Taxable Profits, Tax Loss, and other Partnership tax items
shall be determined as of the end of each taxable year of the Partnership and
allocated as set forth in this Section 9.3.
b. Prior to the Closing Date, and except as otherwise specifically
allocated pursuant to Section 9.3f hereof, all Taxable Profits, Tax Loss and
Non-recourse Deductions and other Partnership tax items shall be allocated 1% to
the General Partner and 99% to Datalinc as Limited Partner as required by the
Code. After the Closing Date, Taxable Profits, Tax Loss, Non-recourse Deductions
and other Partnership tax items shall be allocated as set forth below.
c. Taxable Profits of the Partnership not arising from a sale or
refinancing of Partnership Network shall be allocated to the Partners in
proportion to the Distributions of Cash Flow with respect to which such Taxable
Profits relate.
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d. (i) Taxable Profits arising from a sale or refinancing of Partnership
Network which does not result in a "liquidation" within the meaning of Treasury
Regulation Section 1.704-1(b)(2)(ii)(g) shall be allocated to the Partners in
proportion to the distributions of Net Proceeds of Sales and Refinancing to
which such Taxable Profits relate.
(ii) Taxable Profits arising from a sale or refinancing of Partnership
Network which results in a liquidation as set forth in Section 9.3(d)(i) above
shall be allocated as follows:
(a) First, to those Partners who have negative Capital Accounts pro rata to
the extent of such Partners' negative Capital Accounts;
(b) Then, to the Partners in amounts such that the positive balance of each
Partner's Capital Account is equal to the amount of the Distributions of Net
Proceeds of Sales and Refinancings to be made to such Partner pursuant to
Article 9.2(c); and
(c) 100% to the Series 100 Limited Partners until such Limited Partners
have received Distributions of any type in an amount equal to their total cash
Capital Contributions plus the aggregate Preferred Return, if and when such
Preferred Return is payable; next, 100% to the Series EA Limited Partners until
such Limited Partners have received Distributions of any type in an amount equal
to 25% of the amount distrubuted pursuant to the preceding clause; next, 100% to
the Series 200 Limited Partners until such Limited Partners have received
Distributions of any type in an amount equal to their total cash Capital
Contributions; next, 100% to the Datalinc Limited Partner until such Limited
Partner has received Distributions of any type in an amount equal to the
following amount: the aggregate total cash Capital Contributions of Series 100
and Series 200 Limited Partners divided by the aggregate percentage interests of
the Series 100, EA and 200 Limited Partners in the Final Clause multiplied by
77.152%, subject to increase with any unpurchased Series 200 Units or Managing
Dealer Units percentage interest reallocated to Datalinc Limited Partner as
specified below; next, 100% to the Managing Dealer Limited Partner until such
Limited Partner has received Distributions of any type in an amount equal to the
following amount: the aggregate total cash Capital Contributions of Series 100
and Series 200 Limited Partners divided by the aggregate percentage interests of
the Series 100, EA and 200 Limited Partners in the Final Clause multiplied by
2.4%, or such lesser percentage as is actually owned by the Managing Dealer
Limited Partners; next, 100% to the General Partner until such General Partner
has received Distributions of any type in an amount equal to the following
amount: the aggregate total cash Capital Contributions of Series 100 and Series
200 Limited Partners divided by the aggregate percentage interests of the Series
100, EA and 200 Limited Partners in the Final Clause multiplied by 1%; and
thereafter (the following being the "Final Clause"), assuming the sale of all
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Series 200 Limited Partnership Units, 2.225% to the Series 100 Limited Partners,
.556% to the EA Limited Partners, 16 2/3% to the Series 200 Limited Partners, a
maximum of 2.4% to the Managing Dealer Limited Partners, 1% to the General
Partner and 77.152% to Datalinc as Limited Partner. If any Series 200 Units have
not been acquired, all Allocations or Distributions otherwise to be made or paid
to such Limited Partners shall be made or paid to Datalinc. If the Managing
Dealer Units have not been acquired, all Allocations or Distributions otherwise
to be made or paid to the Managing Dealer Limited Partner shall be made or paid
to Datalinc.
Series 100 Limited Partners will receive a 15% per annum cumulative,
non-compounded Preferred Return on their Adjusted Capital Investment, commencing
the date of closing of the Series 100 Unit offering. However, the Preferred
Return is only payable if within three years from the Closing Date of the Series
100 Unit offering the Partnership (or a successor entity thereto with
essentially the same business) has not done either of the following (a "Cut-Off
Event"): a. Made aggregate Distributions of any kind to such Partners in an
amount equal to their Adjusted Capital Investment, or b. Has not completed a
successful public offering. If a Cut-Off Event has occurred, the Partnership's
obligation to make a Preferred Return to the Series 100 Limited Partners will
terminate. If the Partnership has made a successful public offering by such
date, but the market value of securities owned by the Series 100 Limited
Partners if less than their Adjusted Capital Investment based upon the public
offering price of such securities (the "Difference"), the Series 100 Limited
Partners will be issued securities with a first priority dividend and other
payment right over all other securities holders equal to the Difference. The
term "Adjusted Capital Investment" means total cash Contributions of a Limited
Partner to the Partnership less Distributions of any kind from the Partnership.
If the total gain to be allocated under this Section 9.3(d) includes
any item of ordinary income arising under Code Sections 1245 or 1250, as
amended, or any similar recapture provision, such items shall be allocated among
the Partners in the same amount (or ratable proportion thereof if less) as the
tax benefit which created such recapture. If such total gain includes interest
income on any deferred sales proceeds, such interest income shall be allocated
among the Partners in the same proportion as the total gain is allocated under
this Section 9.3(d).
For purposes of determining Capital Account balances, all Distributions
previously made as well as all other adjustments to Capital Account balances
pursuant to the definition thereof in Article II and the other provisions of
this Section 9.3 shall be taken into account [other than an adjustment for the
allocation of Taxable Profits under this Section 9.3(d)].
If, prior to the allocation in Section 9.3(d)(ii)(b) above, a Partner
has a positive Capital Account balance ("Excess Capital Account Balance")
greater than the amount of Sales Proceeds or Refinancing Proceeds to be
distributed to such Partner resulting from the transaction to which the
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allocation of such Taxable Profits relates, then there shall be no additional
allocation of Taxable Profits to such Partner and the remaining Taxable Profits
shall be allocated to the other Partners such that their positive Capital
Account balances equals as closely as possible the amount of Sales Proceeds or
Refinancing Proceeds which would have been distributed to such Partners if there
were no Excess Capital Account Balance.
e. (i) Non-recourse Deductions and Tax Loss from a transaction not
constituting a dissolution of the Partnership as defined in Article 9.3(d)(i)
shall be allocated 100% to the Series 100 Limited Partners until such Limited
Partners have received Distributions of any type in an amount equal to their
total cash Capital Contributions plus the aggregate Preferred Return, if and
when such Preferred Return is payable; next, 100% to the Series 100 Limited
Partners until such Limited Partners have received Distributions of any type in
an amount equal to their total cash Capital Contributions plus the aggregate
Preferred Return, if and when such Preferred Return is payable; next, 100% to
the Series EA Limited Partners until such Limited Partners have received
Distributions of any type in an amount equal to 25% of the amount distrubuted
pursuant to the preceding clause; next, 100% to the Series 200 Limited Partners
until such Limited Partners have received Distributions of any type in an amount
equal to their total cash Capital Contributions; next, 100% to the Datalinc
Limited Partner until such Limited Partner has received Distributions of any
type in an amount equal to the following amount: the aggregate total cash
Capital Contributions of Series 100 and Series 200 Limited Partners divided by
the aggregate percentage interests of the Series 100, EA and 200 Limited
Partners in the Final Clause multiplied by 77.152%, subject to increase with any
unpurchased Series 200 Units or Managing Dealer Units percentage interest
reallocated to Datalinc Limited Partner as specified below; next, 100% to the
Managing Dealer Limited Partner until such Limited Partner has received
Distributions of any type in an amount equal to the following amount: the
aggregate total cash Capital Contributions of Series 100 and Series 200 Limited
Partners divided by the aggregate percentage interests of the Series 100, EA and
200 Limited Partners in the Final Clause multiplied by 2.4%, or such lesser
percentage as is actually owned by the Managing Dealer Limited Partners; next,
100% to the General Partner until such General Partner has received
Distributions of any type in an amount equal to the following amount: the
aggregate total cash Capital Contributions of Series 100 and Series 200 Limited
Partners divided by the aggregate percentage interests of the Series 100, EA and
200 Limited Partners in the Final Clause multiplied by 1%; and thereafter (the
following being the "Final Clause"), assuming the sale of all Series 200 Limited
Partnership Units, 2.225% to the Series 100 Limited Partners, .556% to the EA
Limited Partners, 16 2/3% to the Series 200 Limited Partners, a maximum of 2.4%
to the Managing Dealer Limited Partners, 1% to the General Partner and 77.152%
to Datalinc as Limited Partner. If any Series 200 Units have not been acquired,
all Allocations or Distributions otherwise to be made or paid to such Limited
Partners shall be made or paid to Datalinc. If the Managing Dealer Units have
not been acquired, all Allocations or Distributions otherwise to be made or paid
to the Managing Dealer Limited Partner shall be made or paid to Datalinc.
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(ii) After giving effect to the allocations set forth in Section 9.3(f)
hereof, Tax Loss from the sale or other disposition of all or substantially all
of the Network which results in a liquidation of the Partnership (as such term
is defined in Section 9.3d(i)) shall be allocated as follows:
(a) first, among those Partners having positive Capital Accounts, so as to
bring, as nearly as possible, their Capital Accounts into, and maintain their
Capital Accounts in, the same ratios as the Distributions that they would
receive if an amount equal to the aggregate amount of their Capital Accounts
(determined prior to the allocation of such loss), reduced (but not below zero)
by such loss, were distributed among them in the manner and order of priority
prescribed for a Distribution of Net Proceeds of Sales or Refinancings under
Section 9.2(c) hereof until no Partner has a positive Capital Account; and
(b) 100% to the Series 100 Limited Partners until such Limited Partners
have received Distributions of any type in an amount equal to their total cash
Capital Contributions plus the aggregate Preferred Return, if and when such
Preferred Return is payable; next, 100% to the Series EA Limited Partners until
such Limited Partners have received Distributions of any type in an amount equal
to 25% of the amount distrubuted pursuant to the preceding clause; next, 100% to
the Series 200 Limited Partners until such Limited Partners have received
Distributions of any type in an amount equal to their total cash Capital
Contributions; next, 100% to the Datalinc Limited Partner until such Limited
Partner has received Distributions of any type in an amount equal to the
following amount: the aggregate total cash Capital Contributions of Series 100
and Series 200 Limited Partners divided by the aggregate percentage interests of
the Series 100, EA and 200 Limited Partners in the Final Clause multiplied by
77.152%, subject to increase with any unpurchased Series 200 Units or Managing
Dealer Units percentage interest reallocated to Datalinc Limited Partner as
specified below; next, 100% to the Managing Dealer Limited Partner until such
Limited Partner has received Distributions of any type in an amount equal to the
following amount: the aggregate total cash Capital Contributions of Series 100
and Series 200 Limited Partners divided by the aggregate percentage interests of
the Series 100, EA and 200 Limited Partners in the Final Clause multiplied by
2.4%, or such lesser percentage as is actually owned by the Managing Dealer
Limited Partners; next, 100% to the General Partner until such General Partner
has received Distributions of any type in an amount equal to the following
amount: the aggregate total cash Capital Contributions of Series 100 and Series
200 Limited Partners divided by the aggregate percentage interests of the Series
100, EA and 200 Limited Partners in the Final Clause multiplied by 1%; and
thereafter (the following being the "Final Clause"), assuming the sale of all
Series 200 Limited Partnership Units, 2.225% to the Series 100 Limited Partners,
.556% to the EA Limited Partners, 16 2/3% to the Series 200 Limited Partners, a
maximum of 2.4% to the Managing Dealer Limited Partners, 1% to the General
Partner and 77.152% to Datalinc as Limited Partner. If any Series 200 Units have
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not been acquired, all Allocations or Distributions otherwise to be made or paid
to such Limited Partners shall be made or paid to Datalinc. If the Managing
Dealer Units have not been acquired, all Allocations or Distributions otherwise
to be made or paid to the Managing Dealer Limited Partner shall be made or paid
to Datalinc.
f. the following special allocation rules shall apply notwithstanding
anything to the contrary in this Section 9.3:
(i) Organization and Offering Expenses. The Capital Account of each Limited
Partner shall be charged with the sales commissions which are part of
Organization and offering Expenses incurred with respect to his Partnership
Units. Syndication Expenses for any Partnership fiscal year or other period
shall be specifically allocated to the Limited Partners in proportion to the
Partnership Units purchased by them in the offering. In the event the General
Partner determine that such result is not likely to be achieved through future
allocations of Syndication Expenses, the General Partner may specially allocate
Taxable Profits or Tax Loss so as to achieve the same effect on the Capital
Accounts of the Limited Partners;
(ii) Non-recourse Deductions Attributable to Partner Loans. The loans, if
any, made by the Partners to the Partnership pursuant to the provisions of this
Partnership Agreement, will be non-recourse loans ("Partner Non-recourse Debt").
Non-recourse Deductions attributable to any such Partner Non-recourse Debt must
be allocated to the Partner who has made the loan because such Partner bears the
economic risk of loss for such loan. The amount of Non-recourse Deductions so
allocated will equal the excess, if any, of the amount of Minimum Gain
attributable to such Partner Non-recourse Debt, over the aggregate amount of any
distributions during such year to the Partner who bears the risk of loss for
such debt of proceeds of such debt that are allocable to an increase in the
Minimum Gain attributable to such debt.
(iii) Excess Loss Reallocation. if any allocation of Tax Loss or
Non-recourse Deductions allocable to a Limited Partner (a) would reduce such
Limited Partner's Capital Account balance then below zero or (b) would increase
the negative balance in such Limited Partner's Capital Account at a time when
another Limited Partner has a positive Capital Account balance, then to the
extent such allocation would cause the negative Capital Account balance of such
Limited Partner (determined after taking into account all prior Distributions
and all prior allocations of Taxable Profits, Tax Loss and Non-recourse
Deductions), to exceed such Limited Partner's share of the Partnership's Minimum
Gain, at the close of the fiscal period in respect of which the Tax Loss or
Non-recourse Deductions, as the case may be, is to be allocated, such excess
shall be reallocated as follows: (x) first, in the case of Tax Loss, pro rata to
all Limited Partners having positive Capital Account balances to the extent of
and in proportion to their respective Capital Account balances until such
Capital Account balances are reduced to zero and (y) second, in the case of
Non-recourse Deductions, pro rata to all Limited Partners having positive
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Capital Account balances to the extent of and in proportion to their respective
Capital Account balances until such Capital Account balances are reduced to
zero. However, in no event shall there be a reallocation of any item of income,
gain, loss or deduction allocated among the Limited partners pursuant to this
Partnership Agreement for prior years.
In the event that there are no Limited partners with positive balances
in their Capital Accounts, such Tax Loss and/or Non-recourse Deductions shall
instead be allocated to the General Partner, to the extent permitted by the
Regulations under Section 704(b) of the Code, or if not so permitted, then such
Tax Loss and/or Non-recourse Deductions shall be allocated as otherwise required
by such Regulations. In computing a Partner's Capital Account balance for the
purposes of this subsection f(iii), the adjustment set out in subsection f(viii)
shall apply;
(iv) General Partner Gross Income Allocations. To the extent
that Tax Loss or Non-recourse Deductions are allocated to the General Partner
under Section 9.3f(iii), then items of Partnership gross income shall be
specifically allocated to such General Partner in the amount of such Tax Loss or
Non-recourse Deductions as quickly as possible;
(v) Qualified Income Offset. Except as otherwise provided in
(vi) of this Section 9.3f, in the event any Partner receives or is allocated, as
the case may be, any Qualified Income Offset Items which cause or increase a
deficit balance in the Capital Account of such Partner in excess of such
Partner's share of the Partnership's Minimum Gain and following the allocations
in (vi) of this Section 9.3f, then items of Partnership Gross Income shall be
specifically allocated to such Partner in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the deficit balance in
such Partner's Capital Account created by such Qualified Income Offset Items as
quickly as possible. Gross Income shall be allocated among such partners in the
proportion that the deficit balances attributable to the Qualified Income Offset
Items of each of them bears to the deficit balance so attributable to all of
them. This Section 9.3f(v) is intended to constitute a "qualified income offset"
within the meaning of Section 1.704l(b)(2)(ii)(d) of the Regulations and shall
be interpreted consistently therewith;
(vi) Minimum Gain Chargeback. Notwithstanding any other
provisions of this Section 9.3f, if there is a net decrease in Minimum Gain
during any Partnership fiscal year, each partner must be allocated items of
income and gain for such year in proportion to, and to the extent of, an amount
equal to the greater of (i) the portion of such partner's share of the net
decrease in partnership Minimum Gain during such year that is allocable to the
disposition of the Partnership Property subject to non-recourse liabilities of
the Partnership; or (ii) the deficit balance in such partner's capital account
at the end of such year determined without regard to any allocation of
partnership items that would otherwise be allocated for such year and excluding
the portion of such deficit balances that must be restored to the Partnership
upon liquidation.
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Allocations and the items to be allocated under this Section 9.3f(vi)
shall be made and determined in accordance with Section 1.704-1T(b)(4)(iv) of
the Regulations. This Section 9.3f(vi) is intended to constitute a "minimum gain
chargeback" within the meaning of Section 1.704-1T(b)(4)(iv)(e) of the
Regulations and shall be interpreted consistently therewith;
(vii) Subject only to Section 9.3f (i) through (vi) in no
event shall the General Partner be allocated less than 1% of Taxable Profits and
Tax Loss of the Partnership (and each item of Partnership income, gain, loss and
deduction included therein) under this Section 9.3;
(viii) For purposes of determining the balances in the
Partners' Capital Accounts with respect to items (iii), (v) and (vi) in this
Section 9.3f, such Capital Accounts shall be: (a) reduced by Distributions made
prior to and contemporaneous with any allocation; (b) reduced at the end of each
Partnership fiscal year by such Partner's Qualified Income Offset Items in
accordance with the requirements for the alternate test of economic effect under
Section 1.704-1(b)(2)(ii)(d) of the Regulations (or any corresponding provisions
of succeeding regulations); (c) increased to the extent that such partner is
treated as obligated to restore a deficit balance in his Capital Account upon
liquidation as provided under Section 1.704-1(b)(2)(ii)(c) of the Regulations;
and (d) increased to the extent of his distributive share of the Partnership's
Minimum Gain which such Partner is treated as obligated to restore pursuant to
the penultimate sentence of Section 1.7041T(b)(4)(iv)(f) of the Regulations.
g. If the taxing authorities ignore the characterization of the
amounts paid to the General Partner as compensation pursuant to Article IX
hereof, and refuse to treat such payments as either guaranteed payments within
the meaning of Section 707(c) of the Code, or payments made to the General
Partner other than in its capacity as partner within the meaning of Section
707(a) of the Code, and, as a result such payments are charged to its Capital
Account, then the General Partner shall be allocated the first available Taxable
Profits of the Partnership in an amount equal to the amount so charged, and the
General Partner's Capital Account shall be adjusted to reflect the payment of
such amount.
h. Any allocation of Taxable Profit or Tax Loss which is required
to be allocated among the Partners to take into account the disparity between
the fair market value of a Partnership asset and its adjusted basis (e.g.,
allocations under Section 704(c) of the Code), shall be allocated among the
Partners in accordance with the requirements of the Code and the Regulations
promulgated thereunder.
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i. No Tax Loss shall be allocated to the Limited Partners to the
extent such Tax Loss results from (i) a casualty loss which is uninsured or
which exceeds the amount of applicable insurance, (ii) liability to the
Partnership which results from negligence or intentional action or inaction on
the part of any entity, or (iii) loss which causes the Partnership to become
insolvent or which accrues after the Partnership has become insolvent. All such
Tax Loss shall be allocated to the General Partner.
9.4 Miscellaneous Allocation and Distribution Matters.
It is intended that the allocation rules set forth in Section 9.3,
together with Article XII hereof, shall result in the Capital Accounts of the
Partners equaling zero following the complete winding up of the Partnership and
the Distributions provided for in Section 9.2. The allocation provisions of this
Partnership Agreement in Section 9.3 shall be construed in such a way by the
General Partner in order to validate the Distributions provided for in Section
9.2.(c) upon liquidation of the Partnership.
The percentage interest of the Series 200 Limited Partners set forth in
this Article 9 is subject to adjustment immediately prior to the commencement of
a successful public offering for the Partnership and/or its business as follows:
First, determine the Market Capitalization of the entity offering the securities
post-IPO as follows: If 1/3 of the Issuer is sold to the public for $15,000,000,
then the Market Cap would be $45,000,000. Subtract the amount of money raised in
the IPO from the Market Cap to get the Pre-IPO Valuation. (This example:
$45,000,000 - $15,000,000 = $30,000,000). Then subtract from the Pre-IPO
Valuation the value of any other businesses included in the Issuer, including
but not limited to, the business of Datalinc, Ltd., as determined by the lead
underwriter in the IPO in its sole and absolute discretion (which determination
shall be binding on all parties hereto) to get the Pre-IPO Valuation of the
Business of the Partnership. (This example: assume valuation of other businesses
is $8,000,000). Multiply the Pre-IPO Valuation of the Business of the
Partnership (This example: $30,000,000 - $8,000,000 = $22,000,000) by 70% to get
the Discounted Pre-IPO Valuation of the Business of the Partnership. (This
example: $22,000,000 x 70% = $15,400,000). If less than $18,000,000, multiply 16
2/3% (assuming sale of all Series 200 Units) by [$18,000,000 divided by the
Discounted Pre-IPO Valuation of the Business of the Partnership] to determine
the Adjusted Ownership Percentage of Series 200 Units. (This example:
$18,000,000 divided by $15,400,000 = 1.17 x 16 2/3% = 19.48%). This provision
only applies if the Discounted Pre-IPO Valuation of the Business of the
Partnership is less than $18,000,000. Any increase in the Adjusted Ownership
Percentage of Series 200 Units above 16 2/3% shall result in a corresponding
decrease in the relevant percentage ownership of the Business of the Partnership
of the Datalinc Limited Partner. This adjustment shall only be used to determine
the percentage ownership of the Series 200 Limited Partners in the entity
issuing securities in the IPO.
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9.5 Optional Revaluation of Partnership Property.
Upon the occurrence of (i) a contribution of money or property to the
Partnership (after the initial admittance of the Limited Partner) by a new or
existing partner as consideration for an interest in the Partnership, (ii) a
distribution of money or property by the Partnership to a retiring or continuing
Partner as consideration for an interest in the Partnership, or (iii) in
connection with the liquidation of the Partnership, the General Partner may
elect to increase or decrease the respective Capital Accounts of all Partners to
reflect a revaluation of Partnership property on the books of the Partnership;
provided:
a. Such adjustments must be based on the fair market value of the property
on the date of adjustment;
b. The adjustments reflect the manner in which the unrealized income, gain,
loss or reduction inherent in such property (that has not been reflected in the
Capital Accounts of the Partners previously) would be allocated among the
Partners under this Section 9.4 if there were a taxable disposition of such
property for such fair market value on the adjustment date;
c. Thereafter, the Capital Accounts of the Partners are adjusted in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for
allocations to them of depreciation, depletion, amortization and gain or loss,
as computed for book purposes, with respect to such property; and
d. Thereafter, the Partners' distributive shares of depreciation,
depletion, amortization and gain or loss, as computed for tax purposes, with
respect to such property shall be determined so as to take account of the
variation between the adjusted tax basis and the book value of such property in
the same manner as under Code Section 704(c) and Treasury Regulations Section
1.704-1(b)(4)(i).
9.6 General Partner's Contribution to Capital.
a. Upon a "liquidation" of the Partnership within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations and after the application of Sections
9.2 and 9.3 for all fiscal years of the Partnership, including the year in which
such "liquidation" occurs, to the extent any General Partner has a negative
Capital Account, such General Partner shall contribute cash to the Partnership
in an amount equal to the lesser of (i) its negative Capital Account or (ii) the
product of (x) a fraction, the numerator of which is that General Partner's
negative Capital Account balance and the denominator of which is the total
negative Capital Account balances of all the General Partners, and (y) 1.01% of
the Original Capital Investment of the Limited Partners, within the time period
prescribed by Section 1.704-1(b)(2)(ii)(b)(3) of the Regulations. The proceeds
of any such contribution shall be distributed to the Limited Partners with
positive Capital Accounts in proportion thereto as specified in Section 9.2(d),
9.4 and 12.3.
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b. In the event a General Partner is required to contribute to the capital
of the Partnership because of a liquidation under the Regulations that does not
result in a dissolution and winding up, the amount of such contribution may be
distributed to that General Partner after such contribution as long as that
General Partner acknowledges its obligation under Section 9.6a to make up
deficits in its Capital Account in the Partnership.
9.7 Limited Partners' Consent to Distributions and Allocation methods.
The methods hereinabove set forth in this Article IX by which Distributions
and allocations of income, gain, loss, deductions, tax credits and other tax
items are made and apportioned are hereby expressly consented to by each Limited
Partner as an express condition to becoming a Limited Partner.
9.8 Liquidation Distribution.
In the event that the Partnership is terminated, Distributions shall be
applied in the manner set forth in Articles 9.2(d), 9.4 and XI hereof.
9.9 General Partner's Opinion Final.
The opinion of the General Partner shall be final and conclusive with
respect to all disputes as to computation and determinations required to be made
under this Article and Articles X and XII.
9.10 Authority to Vary Allocations to Preserve and Protect Partners'
Intent; Other Authority.
a. It is the intent of the Partners that each Partner's distributive share
of income, gain, loss, deduction, or credit (or item thereof) shall be
determined and allocated in accordance with this Article to the fullest extent
permitted by Section 704(b) of the Code. In order to preserve and protect the
determinations and allocations provided for in this Article, the General Partner
is authorized and directed to allocate income, gain, loss, deduction, or credit
(or item thereof) arising in any year differently than otherwise provided for in
this Article to the extent that allocating income, gain, loss, deduction, or
credit (or item thereof) in the manner provided for in this Article would cause
the determinations and allocations of each Partner's distributive share of
income, gain, loss, deduction, or credit (or item thereof) not to be permitted
by Section 704(b) of the Code and Treasury Regulations promulgated thereunder.
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b. In making any allocation (the "new allocation") under the foregoing
paragraph, the General Partner is authorized to act only after having been
advised by counsel specializing in tax matters (the "Special Tax Counsel") that
under Section 704(b) of the Code and the Treasury Regulations thereunder, (i)
the new allocation is necessary, and (ii) the new allocation is an appropriate
modification of the allocations otherwise provided for in this Article in order
to assure that, either in the then current year or in any preceding year, such
Partner's distributive share of income, gain, loss, deduction, or credit (or
item thereof) is determined and allocated in accordance with this Article to the
fullest extent permitted by Section 704(b) of the Code and the Treasury
Regulations thereunder.
c. If the General Partner is required to make any new allocation
in a manner less favorable to any Partner than is otherwise provided for in this
Article, the General Partner is authorized and directed to do so, insofar as it
is advised by Special Tax Counsel that it is permitted by Section 704(b) of the
Code to allocate income, gain, loss, deduction, or credit (or item thereof)
arising in later years in a manner so as to bring the allocations of income,
gain, loss, deduction, or credit (or item thereof) to such Partners on a present
value basis as nearly as possible to the allocations thereof otherwise
contemplated by this Article.
d. New allocations made by the General Partner in reliance upon
the advice of Special Tax Counsel and allocations made by the General Partner
under the previous paragraph in reliance upon the advice of Special Tax Counsel
shall be deemed to be made in good faith pursuant to the fiduciary obligation of
the General Partner to the Partnership and the Partners, and no such allocation
shall give rise to any claim or cause of action by an Partner. Any modification
made pursuant to this Section shall be deemed to be a complete substitute for
any allocation made pursuant to the Partnership Agreement, and approval of any
such change by the Limited Partners is not required.
e. The General Partner may similarly amend this Agreement to
permit the Partnership to comply with any Department of Labor regulations
concerning Plan Assets.
ARTICLE X
AMOUNTS WITHHELD
All amounts which the Partnership is required by law to withhold
pursuant to the Code or any provision of any state or local tax law with respect
to any payment or distribution to the Partnership or the Unit Holders shall be
treated as amounts distributed to the Unit Holders pursuant to Article IX for
all purposes under this Agreement. The General Partner may allocate any such
amounts among the Units Holders in any manner that is in accordance with
applicable law.
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ARTICLE XI
RECORDS AND BOOKS OF ACCOUNT; FISCAL YEAR;
BANKING; REPORTS TO PARTNERS
11.1 Records and Books of Account.
The General Partner shall maintain or cause to be maintained, at the
Limited Partnership's principal office or at such other place or places as the
General Partner from time to time may determine, full and accurate records and
books of account of the Limited Partnership's business. Such records and books
of account shall be maintained on the method of accounting determined by the
General Partner to be most advantageous to the Limited Partnership. Each Partner
shall have the right of inspection and copying of such records and books of
account, at his or its expense.
11.2 Fiscal Year.
The fiscal year of the Limited Partnership shall be the calendar year.
11.3 Banking.
An account or accounts in the name of the Limited Partnership shall be
maintained at such financial institution(s) as the General Partner may select.
All uninvested funds of the Limited Partnership shall be deposited in an account
of the Partnership at such financial institution(s). All funds so credited to
the Limited Partnership in any such account shall be subject to withdrawal by
checks made in the name of the Limited Partnership and signed by the General
Partner or such person or persons as the General Partner may from time to time
designate.
11.4 Reports to Partners
a. As soon as reasonably practical, but in no event later than
ninety (90) days after the close of each fiscal year of the Limited Partnership,
the General Partner shall cause to be prepared and furnished to each Partner:
(i) The information necessary for the preparation by such Partner of his or
its Federal, state and other income tax returns;
(ii) The amount in the Capital Account of such Partner as of the last day
of such fiscal year;
(iii) An income statement and balance sheet of the Limited Partnership as
of the last day of such fiscal year, which shall be prepared by a certified
public accountant and
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(iv) Such other information as the General Partner deems reasonably
necessary for the Partners to be advised of the current status of the Limited
Partnership and its business.
ARTICLE XII
DISSOLUTION; LIQUIDATION; AND TERMINATION
12.1 Dissolution.
The Limited Partnership shall be dissolved upon the first to occur of any
of the following events:
a. The expiration of the term provided for in Section 2.4 hereof;
b. The withdrawal, dissolution or Bankruptcy of a or the last remaining
General Partner unless the Limited Partnership's business is continued as
provided in Section 12.2 hereof;
c. The sale of all or substantially all of its assets, including, but not
limited to, the Network, and the collection and distribution of the proceeds
thereof;
d. The unanimous consent thereto of all Partners.
12.2 Right to Continue the Limited Partnership's Business.
The withdrawal, dissolution or Bankruptcy of the last remaining General
Partner shall cause a dissolution of the Limited Partnership unless the
remaining Limited Partners acting by Majority Vote exercise the right, but not
the obligation exercisable within sixty (60) days from such withdrawal,
dissolution or Bankruptcy to admit a new General Partner to the Limited
Partnership upon such terms and conditions as they shall agree, and to elect to
continue the Limited Partnership's business, in a reconstituted form as herein
provided. If there is an event of withdrawal of a General Partner at a time when
there is at least one other General Partner, the business of the Partnership may
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be carried on by the remaining General Partner. If the remaining General Partner
or General Partners do not so elect, the business of the Partnership may
nonetheless be carried on if, within ninety (90) days after the withdrawal, all
Partners agree in writing to continue the business of the Partnership and to
appoint one or more additional General Partners if necessary or desired. If,
pursuant to the foregoing, the Limited Partnership shall not be dissolved but
shall continue, the interest therein and thereto of the withdrawn, dissolved or
Bankrupt General Partner shall be reconstituted into a Limited Partner's
interest with otherwise equivalent benefits, shall pass to such former General
Partner's successor-in-interest or legal representative, and such reconstituted
limited partnership shall have the exclusive right to use the Limited
Partnership's firm name and style.
12.3 Liquidation.
a. Upon the dissolution of the Limited Partnership, the General Partner
shall take or cause to be taken a full account of the Limited Partnership's
assets and liabilities as of the date of such dissolution and shall proceed with
reasonable promptness to liquidate the Limited Partnership's assets and to
terminate its business. The cash proceeds from the liquidation, as and when
available therefor, shall be applied and distributed in the following order:
(i) to the payment of all taxes, debts and other obligations and
liabilities of the Limited Partnership, including the necessary expenses of
liquidation, but excluding therefrom secured creditors whose obligations
continue in existence after the liquidation of the Limited Partnership assets;
provided however, that all debts and other obligations and liabilities of the
Limited Partnership as to which personal liability exists with respect to any
Partner shall be satisfied or a reserve established therefor, prior to the
satisfaction of any debt or other obligation or liability of the Limited
Partnership as to which no such personal liability exists for either the Limited
Partnership or any Partner; provided however, that where a contingent debt,
obligation or liability exists, a reserve, in such amount as the General Partner
deems reasonable, shall be established to meet such contingent debt, obligation
or liability, which reserve shall be distributed as provided in this paragraph
(a) only upon the termination of such contingency; and
(ii) all remaining proceeds in liquidation of the Limited Partnership shall
be distributable pursuant to the provisions of Section 9.2, 9.3 and 9.4 hereof.
b. The General Partner shall administer the liquidation of the Limited
Partnership and the termination of its business. The General Partner shall be
allowed a reasonable time for the orderly liquidation of the Limited
Partnership's assets and the discharge of liabilities to creditors, so as to
minimize losses resulting from the liquidation of the Limited Partnership's
assets.
c. Anything herein contained to the contrary notwithstanding, the General
Partner shall not be personally or otherwise liable for the return of the
Limited Partners' Capital Contributions, or any part thereof. Any such return
shall be made solely from the Limited Partnership's assets.
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d. Except as otherwise provided herein, no dissolution or termination of
the Limited Partnership shall relieve, release or discharge any Partner, or any
of his or its successors, assigns, heirs or legal representatives, from any
previous breach or default of, or any obligation theretofore incurred or accrued
under any provision of this Agreement, and any and all such liabilities, claims,
demands or causes of action arising from any such breaches, defaults and
obligations shall survive such dissolution and termination.
e. Each Limited Partner shall look solely to the assets of the Limited
Partnership for the return of his Capital Contributions, and if the Limited
Partnership property remaining after the payment or discharge of the debts and
liabilities of the Limited Partnership is insufficient to return the Capital
Contributions of each Limited Partner, such Limited Partner shall have no
recourse against the General Partner or any other Limited Partner. The winding
up of the affairs of the Limited Partnership and the distribution of its funds
shall be conducted exclusively by the General Partner, except as provided
herein, who are hereby authorized to do any and all acts and things authorized
by law for such purposes.
12.4 Limited Partners' Rights.
If necessary, a special liquidator may be appointed by Limited Partners
owning more than fifty percent (50%) of the Limited Partnership Units of the
Partnership. In connection with any such winding up and liquidation, an
independent certified public accountant retained by the Partnership shall, if
requested by Limited Partners owning more than fifty percent (50%) of the Units
of the Partnership, audit the Partnership as of the date of termination, and
such audited statement shall be furnished to all Partners.
12.5 Gains or Losses in Process of Liquidation.
Any gains or losses on disposition of the Network in the process of
liquidation shall be credited or charged to the Partners in the manner specified
in Article IX. No property shall be distributed in kind.
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12.6 Instruments of Termination.
Upon the termination of the Partnership, the General Partner (or special
liquidator, as the case may be) shall make such filings and do such other acts
as shall be required by the Partnership Law, and the Partners hereby agree to
execute and deliver to the General Partner (or special liquidator, as the case
may be) such certificates or documents as shall be. so required.
12.7 Time of Liquidation.
A reasonable time shall be allowed for the orderly liquidation of the
assets of the Partnership and the discharge of liabilities to creditors so as to
enable the General Partner to minimize the losses attendant upon a liquidation.
12.8 No Right of Partition.
The Partners and Assignees and their estates or representative upon
death or the receiver upon bankruptcy or dissolution shall have no rights to
receive Partnership Property in kind, nor shall such Partners or Assignees have
the right to partition, sale, or appraisal of the Partnership's Network, whether
or not upon dissolution and termination of the Partnership, notwithstanding any
provision of law to the contrary.
Notwithstanding the foregoing, if any Partner shall be indebted to the
Partnership, then until payment of such amount by him, the liquidator shall
retain such Partner's distributive share of Partnership Properties or assets and
apply the income therefrom to the liquidation of such indebtedness and the cost
of operation of such Properties or assets during the period of such liquidation;
however, if at the expiration of six (6) months after the statement for which
provision is made herein has been given to such Partner, such amount has not
been paid or otherwise liquidated, the liquidator may sell the interest of such
Partner at public or private sale at the best price immediately obtainable which
shall be determined in the sole judgment of the liquidator. So much of the
proceeds of such sale as shall be necessary shall be applied to the liquidation
of the amount then due under this Article, and the balance of such proceeds, if
any, shall be delivered to such Partner.
12.9 Termination.
Upon compliance with the foregoing plan of liquidation and
distribution, the General Partner shall file or cause to be filed a Certificate
of Cancellation of the Certificate of Limited Partnership as well as any and all
other documents required to effectuate the dissolution and termination of the
Limited Partnership and the Limited Partnership thereupon shall be terminated.
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ARTICLE XIII
PARTNERSHIP STATUS
Anything in this Agreement to the contrary notwithstanding, it is
expressly intended that the entity formed hereby be a partnership as determined
by the applicable provisions of the Code, the rules and regulations promulgated
thereunder, and other laws pertaining thereto, and that in every respect all of
the terms and provisions hereof shall at all times be so construed and
interpreted as to give effect to this intent. In the event that the Internal
Revenue Service of the United States or any governmental authority having
jurisdiction shall in any way or at any time determine that any provision or
provisions of this Agreement affects the status of this entity, the General
Partner shall amend or modify the terms and provisions of this Agreement to the
extent necessary to comply with the rules, regulations and requirements of the
Internal Revenue Service of the United States or any other government authority
having jurisdiction, in order that the entity formed hereby be treated as a
partnership, be taxable as such, and the Partners hereof taxable as partners of
a partnership; which modification or amendment shall be retroactively applied to
the date of this Agreement.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Notices.
Except as otherwise provided herein, any notice, payment, distribution
or other communication which shall be required to be given to any Limited
Partner in connection with the business of the Partnership shall be duly given
if delivered personally in writing, or if sent by mail or telegraph, to the last
address furnished by such Limited Partner. Written notice to the General Partner
or the Partnership shall be given when actually received at the principal office
of the Partnership.
14.2 Survival of Rights.
This Agreement shall be binding upon and inure to the benefit of the
Partners and their respective heirs, legatees, legal representatives, successors
and assigns.
14.3 Headings.
The headings of the Articles and subparagraphs of this Agreement are
for convenience only and shall not be deemed part of the text of this Agreement.
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14.4 Agreement in Counterparts.
This Agreement, or any amendment thereto, may be executed in multiple
counterparts, each of which shall be deemed an original agreement, and all of
which shall constitute one agreement, by each of the parties hereto on the dates
respectively indicated in the acknowledgments of said parties, notwithstanding
that all of the parties are not signatories to the original or the same
counterpart, to be effective as of the day and year first above written. For
purposes of recording a Certificate of Limited Partnership, a second signature
page and acknowledgment page may be attached to each counterpart hereof, and the
second signature page and the acknowledgment page pertaining thereto may be
detached from the counterpart, when executed, and attached to another
counterpart, which other counterpart may thereafter be filed as the Certificate
of Limited Partnership.
14.5 Governing Law.
This Agreement is enforceable in accordance with its terms and shall be
governed, construed and enforced according to the laws of the State of Florida.
All Limited Partners consent to the jurisdiction of state and federal courts in
Florida and appoint the Secretary of State of Florida as agent for service of
process.
14.6 (Reserved)
14.7 Validity.
Should any portion of this Agreement be declared invalid and
unenforceable, then such portion shall be deemed severable from this Agreement
and shall not affect the remainder hereof.
14.8 Amendment.
Except as otherwise provided in this Agreement, this Agreement may be
amended by a vote of the General Partner and a Majority Vote of Limited Partners
at a meeting called pursuant to this Agreement.
14.9 Pronouns.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
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14.10 Right to Rely Upon the Authority of the General Partner.
The General Partner shall be authorized to bind the Partnership by its
signature alone, which may be a facsimile signature, and persons dealing with
the Partnership may rely upon the representation of the General Partner that
such General Partner has the authority to make any commitment or undertaking on
behalf of the Partnership. No person dealing with the General Partner shall be
required to determine its authority to make such commitment or undertaking, nor
to determine whether the General Partner concurs in the commitment or
undertaking or any other fact or circumstance bearing upon the existence of its
authority. In addition, no purchaser of any property or interest therein owned
by the Partnership shall be required to determine the sole and exclusive
authority of the General Partner to sign and deliver on behalf of the
Partnership any instrument of transfer with respect thereto or to see to the
application or distribution of revenues or proceeds paid or credited in
connection therewith, unless such purchasers shall have received written notice
from the Partnership respecting the same.
14.11 Loan Restrictions.
A creditor who makes a non-recourse loan to the Partnership must not
have, or acquire, at any time as a result of making the loan, any direct or
indirect interest greater than 20% in the profits, capital or property of the
Partnership other than as a secured creditor.
14.12 Merger.
This Agreement contains the entire understanding among the parties and
supersedes any prior understanding and agreements between them respecting the
matters described herein.
14.13 Arbitration.
Any controversy or claim arising out of or relating to this Agreement
or any provision thereof shall be settled by binding arbitration at Tampa,
Florida, in a manner agreed upon by the General Partner and any Limited Partners
directly affected, or if not otherwise agreed upon, then in accordance with the
rules of the American Arbitration Association in effect at that time. Judgment
upon the award so rendered may be entered in any court having competent
jurisdiction thereover. The costs of the arbitration shall be borne by the
non-prevailing party, including the cost of experts, evidence and legal counsel
(and all employees and assistants) of the prevailing party.
14.14 Tax Matters Partner.
a. The General Partner is hereby designated as the Tax Matters
Partner of the Partnership, as provided in regulations pursuant to Section 6231
of the Code (the "Tax Matters Partner"). Each Partner, by the execution of this
Agreement, consents to such designation of the Tax Matters Partner and agrees to
execute, certify, acknowledge, deliver, swear to, file and record at the
appropriate public offices such documents as may be necessary or appropriate to
evidence such consent.
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b. The duties of the Tax Matters Partner may include the following:
(1) To the extent and in the manner provided by applicable
law and regulations, the Tax Matters Partner shall furnish the name, address,
profits, interest and taxpayer identification number of each Partner to the
Secretary of the Treasury or his delegate (the "Secretary").
(2) To the extent and in the manner provided by applicable
law and regulations, the Tax Matters Partner shall keep each Partner informed of
the administrative and judicial proceedings for the adjustment at the
Partnership level of any item required to be taken into account by a Partner for
income tax purposes (such administrative proceeding being referred to
hereinafter as a "Tax Audit" and such judicial proceeding being referred to
hereinafter as "Judicial Review").
(3) If the Tax Matters Partner, on behalf of the Partnership,
receives a notice with respect to the Partnership tax audit from the Secretary,
the Tax Matters Partner shall, within 30 days of receiving such notice, forward
a copy of such notice to the Partners who hold or held an interest (through
their Interests) in the profits or losses of the Partnership for the Partnership
taxable year to which the notice relates.
c. The Tax Matters Partner is hereby authorized, but not required:
(1) To enter into any settlement agreement with the Internal Revenue
Service or the Secretary with respect to any Tax Audit or Judicial Review, in
which agreement the Tax Matters Partner may expressly state that such agreement
shall bind the other Partners, except that such agreement shall not bind any
Partner who (within the time prescribed pursuant to the Code and Treasury
Regulations thereunder) files a statement with the Secretary providing that the
Tax Matters Partner shall not have the authority to enter into a settlement
agreement on behalf of such Partner;
(2) In the event that a notice of a final administrative adjustment at the
Partnership level of any item required to be taken into account by a Partner for
tax purposes (a "Final Adjustment") is mailed to the Tax Matters Partner, to
seek Judicial Review of such Final Adjustment, including the filing of a
petition for readjustment with the Tax Court, the District Court of the United
States for the district in which the Partnership's principal place of business
is located, or the Court of Claims;
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(3) To intervene in any action brought by any other Partner for Judicial
Review of a Final Adjustment;
(4) To file a request for an administrative adjustment with the Secretary
at any time and, if any part of such request is not allowed by the Secretary, to
file a petition for Judicial Review with respect to such request;
(5) To enter into an agreement with the Service to extend the period for
assessing any tax which is attributable to any item required to be taken into
account by a Partner for tax purposes, or an item affected by such item; and
(6) To take any other action on behalf of the Partners or the Partnership
in connection with any administrative or judicial tax proceeding to the extent
permitted by applicable laws or regulations.
d. The Partnership shall indemnify and reimburse the Tax Matters Partner
for all expenses, including legal and accounting fees, claims, liabilities,
losses and damages incurred in connection with any Tax Audit or Judicial Review
with respect to the tax liability of the Partners. The payment of all such
expenses shall be made before any distributions are made of Cash Available for
Distribution or any discretionary reserves are set aside by the General Partner.
Neither the General Partner, any Affiliate, nor any other person or entity shall
have any obligation to provide funds for such purpose. The taking of any action
and the incurring of any expense by the Tax Matters Partner in connection with
any such proceeding, except to the extent required by law, is a matter in the
sole discretion of the Tax Matters Partner, and the provisions on limitations of
liability of General Partner and indemnification set forth in this Agreement
shall be fully applicable to the Tax Matters Partner in its capacity as such.
14.15 Binding Effect.
Except as otherwise provided in this Agreement, every covenant, term, and
provision of this Agreement shall be binding upon and inure to the benefit of
the Partners and their respective successors and assigns.
14.16 Construction.
Every covenant, term, and provision of this Agreement shall be
construed simply according to its fair meaning and not strictly for or against
any Partner.
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14.17 Severability.
Every provision of this Agreement is intended to be severable. If any
term or provision hereof is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity or legality of the
remainder of this Agreement.
14.18 Incorporation by Reference.
Every exhibit, schedule, and other appendix attached to this Agreement
and referred to herein is hereby incorporated into this Agreement by reference.
14.19 Additional Documents.
Each Partner, upon the request of any General Partner, agrees to
perform all further acts and execute, acknowledge, and deliver any documents
that may be reasonably necessary, appropriate, or desirable to carry out the
provisions of this Agreement.
14.20 Waiver of Action for Partition.
Each of the Partners irrevocably waives any right that he may have to
maintain any action for partition with respect to any of the Partnership
Network.
14.21 Sole and Absolute Discretion.
Except as otherwise provided in this Agreement, all actions which any
General Partner may take and all determinations which any General Partner may
make pursuant to this Agreement may be taken and made at the sole and absolute
discretion of such General Partner.
14.22 Certificates Representing Units.
The Partnership shall issue Certificates representing the Units to all
Limited Partners.
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ARTICLE XV
ADDITIONAL CAPITAL CONTRIBUTIONS,
FINANCING AND ASSESSMENTS
15.1 The General Partner may permit persons (including persons who are
concurrently admitted as Limited Partners, pursuant to the provisions of this
Agreement) to make additional Capital Contributions at such times, through sale
of Units or otherwise, in such amounts and form and for such consideration as
the General Partner and the Majority Vote of the Limited Partners , and to
receive therefor, additional Units. Contributions to the Partnership's capital
may be made in any of the following forms: cash, notes or relinquishment of
legal rights or reduction of Partnership obligations pursuant to notes,
debentures, bonds and other kinds of debt obligations issued by the Partnership.
15.2 All Units offered pursuant to this Article XV shall be initially
offered pro rata to all existing Limited Partners in accordance with their
Sharing Ratio. Any Units not purchased by the existing Limited Partners within
thirty (30) days of notice of the right to purchase the Units may be offered by
the General Partner to any person or entity in its sole discretion.
15.3 The General Partner or its Affiliates, or both, may, in addition
to any of its previous Capital Contributions, make additional Contributions in
cash to the capital of the Partnership in the manner specified in this Article,
provided such additional Contributions shall be regarded as in payment of
Limited Partners' Units and not of General Partner's Units. In addition, the
General Partner may purchase those fractional interests in the Partnership
attributable to the unpaid obligations by Limited Partners by paying such
obligations and assuming said fractional interests.
15.4 Fractional Limited Partnership Units may be issued at the sole
discretion of the General Partner.
15.5 Consistent with the foregoing, after the expenditure or commitment
of the Original Invested Capital, additional Partnership activities may be
financed by any method which the General Partner believes to be appropriate
under the circumstances, by borrowing funds, utilizing Partnership revenues and
other accepted methods of financing.
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IN WITNESS WHEREOF, the Partners have hereunto set their hands and
seals the day and year first above written.
GENERAL PARTNER:
FASTCOM MANAGEMENT, INC.
By:
DATALINC, LTD.
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fastclpa.dr1
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