As filed with the Securities and Exchange Commission on August 29, 1997
Registration Statement No. 333-27161 Page 1 of 2
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
THRUCOMM, INC.
(Exact Name of Registrant as Specified in its Charter)
FLORIDA 4899 59-3415131
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number.) Identification
Incorporation or Number)
Organization
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.
2503 W. GARDNER CT. SCHIFINO & FLEISCHER, P.A.
TAMPA, FLORIDA 33611 201 N. FRANKLIN STREET, SUITE 2700
(813) 831-9348 TAMPA, FLORIDA 33602
(813) 223-1535
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
Effective Time of the Reorganization, 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. |_|
<PAGE>
As filed with the Securities and Exchange Commission on August 29, 1997
Registration Statement No. 333-27161 Page 2 of 2
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
THRUCOMM, INC.
(Exact Name of Registrant as Specified in its Charter)
CALCULATION OF REGISTRATION FEE
______________________________________________________________________________
| | | Proposed | Proposed | Amount |
| | Amount | Maximum | Maximum | of |
|Title of Each | to | Offering | Aggregate| Registra-|
|Class of Securities | be | Price | Offering | tion |
|to be registered |Registered(1)| Per Unit | Price(3) | Fee |
|_______________________________|_____________|__________|__________|__________|
|Mandatory Convertible Preferred|1 share of | (2) |$1,284,442| $389.22 |
|Stock, Series A-P |each Series | | | |
|_______________________________|_____________|__________|__________|__________|
|Common Stock | 12,000,000 | $0.00 |$ 0.00 | $ 0.00 |
|______________________________________________________________________________|
(1) The number of shares to be registered is (1) share of each Series of
the Mandatory Convertible Preferred Stock, Series A-P, or a total of 16
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).
<PAGE>
THRUCOMM, INC.
DATALINC, LTD.
FASTCOM, LTD.
1641 COMMERCE AVENUE NORTH
ST. PETERSBURG, FL 33716
To the Limited Partners of Datalinc, Ltd. and Fastcom, Ltd.:
The attached Consent Statement/Prospectus is being furnished to the limited
partners of Datalinc, Ltd., a Florida limited partnership ("Datalinc"), in
connection with the solicitation by Integrated Communication Networks, Inc., a
Florida corporation and the General Partner of Datalinc ("ICN"), for the
execution and delivery of written consents (the "Consents") by Datalinc's
limited partners (Datalinc's "Investors") to approve a proposed consolidation of
the businesses of Datalinc and Fastcom, Ltd., a Florida limited partnership
("Fastcom"), and the reorganization of the entities into a single corporation
(the "Reorganization"). The Consent Statement/Prospectus is also being furnished
to the limited partners of Fastcom (Fastcom's "Investors") for informational
purposes only. Fastcom Investors are not being asked to execute Consents.
In order to facilitate the ability of Datalinc and Fastcom (collectively
referred to as the "Partnerships"), to obtain the additional capital needed to
develop the Partnerships' complementary businesses and, and consistent with the
business plans of the Partnerships, ICN hereby requests that Datalinc's
Investors consent as follows:
To approve and adopt the Agreement and Plan of Reorganization dated August
26, 1997 (the "Reorganization Agreement"), by and among the Partnerships
and Thrucomm, Inc., a newly organized Florida corporation ("Thrucomm"),
providing for 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 to 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-G, and Fastcom will receive
shares of Thrucomm's Mandatory Convertible Preferred Stock, Series H-P (the
Mandatory Convertible Preferred Stock, Series A-P 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
(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.
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A copy of the Reorganization Agreement is attached as Appendix A to the
accompanying Consent Statement/Prospectus. Datalinc and Fastcom Investors are
urged to read the Reorganization Agreement in its entirety.
APPROVAL AND ADOPTION OF THE REORGANIZATION AGREEMENT AND REORGANIZATION
WILL RESULT IN A LOSS OF CERTAIN RIGHTS OF DATALINC'S AND FASTCOM'S INVESTORS.
SEE "RISK FACTORS AT PAGE 16 OF THE CONSENT STATEMENT/PROSPECTUS."
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. Assuming the sale of all of Fastcom's
Series 300 Units, Datalinc will continue to own approximately 73% of Fastcom's
Units. 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 written 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, LTD.
_______________________________
John F. Kolenda
CHAIRMAN OF THE BOARD
September , 1997
ii
<PAGE>
CONSENT STATEMENT
OF
DATALINC, LTD.
--------------------------
PROSPECTUS OF THRUCOMM, INC.
1 SHARE, EACH SERIES OF MANDATORY CONVERTIBLE PREFERRED STOCK, SERIES A-P
--------------------------
INTRODUCTION
This Consent Statement/Prospectus is being furnished to the limited
partners (Datalinc's "Investors") in Datalinc, Ltd., a Florida limited
partnership ("Datalinc"), 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 to Thrucomm, Inc., a
newly organized Florida corporation ("Thrucomm" or the "Company"), in exchange
for shares of Thrucomm's Mandatory Convertible Preferred Stock, Series A-G, 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 also being furnished, for informational purposes only,
to the limited partners (Fastcom's "Investors") in Fastcom, Ltd., a Florida
limited partnership ("Fastcom"), 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, Series H-P. In
effect, the businesses of Datalinc and Fastcom (collectively, 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 one (1) share of
each series of its Mandatory Convertible Preferred Stock, Series A-G, in
exchange for all of the assets and liabilities of Datalinc, and one (1) share of
each series of its Mandatory Convertible Preferred Stock, Series H-P, 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 the occurrence of a Mandatory Conversion Event ("Mandatory Conversion").
The Preferred Stock shall be mandatorily convertible into shares of Thrucomm's
Common Stock (the "Underlying Shares") and distributed to the Fastcom and
Datalinc Investors upon the earliest to occur of one of the following events:
(i) the completion of an initial public offering of Thrucomm's Common Stock (an
"IPO"), (ii) the sale of all or substantially all of the assets of Thrucomm (a
"Sale"), (iii) the merger of Thrucomm into a non-affiliated entity, whereby
Thrucomm is not the surviving entity (a "Merger"), or (iv) the sale of one-third
or more of the equity interests in Thrucomm, in a single transaction, to one or
more investors (an "Investment"), (collectively, the "Mandatory Conversion
Events"). The Conversion Value of Thrucomm shall not be less than $20 million
in any Mandatory Conversion Event.
THIS OFFER INVOLVES VARIOUS RISKS THAT SHOULD BE CONSIDERED BY THE
INVESTORS. SEE "RISK FACTORS AND MATERIAL CONSIDERATIONS," BEGINNING ON PAGE 16
OF THIS CONSENT STATEMENT/PROSPECTUS. IN PARTICULAR, PARTNERS SHOULD CONSIDER
THE FOLLOWING FACTORS:
Datalinc cannot predict when, if ever, a Mandatory Conversion will occur.
There is no outside date by which a Mandatory Conversion Event might occur
iii
<PAGE>
(i.e. it could be years down the road or it might never occur).
Accordingly, there is no guarantee that the Partnerships' Investors or
Other Equity Owners will receive any Underlying Shares. If Mandatory
Conversion does not occur in the future, 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 does not occur, the
purpose of the Reorganization will not have been accomplished, Investors
may not receive any return on their investment, and they would not have the
right to initiate a liquidation of Thrucomm.
If the Mandatory Conversion Event is a Sale or Merger, (i) the Preferred
Stock will be mandatorily converted into Underlying Shares before the Sale
or Merger based on the terms of the proposed Sale or Merger; (ii) the
holders of the Underlying Shares will then have the opportunity to vote on
the proposed Sale or Merger; and (iii) if the proposed Sale or Merger is
not approved by the holders of the Underlying Shares, then the Sale or
Merger will not be consummated, but the Preferred Stock will have already
been converted into Underlying Shares based on the proposed transaction
that was never approved or consummated, and there will be no further right
to convert into Underlying Shares of Thrucomm.
The actual number and the value of the Underlying Shares that Investors and
Other Equity Owners may ultimately receive upon Mandatory Conversion is not
presently ascertainable, and will depend upon the terms of the Mandatory
Conversion Event, and the amount of proceeds or other consideration
Thrucomm receives in any such Event. 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.
Thrucomm anticipates that it will need interim financing after the
Reorganization from an institutional investor or a venture capital firm.
Investors should expect a sale of equity by Thrucomm to such an investor
shortly after the Reorganization which will result in the dilution of the
ownership interest of the Datalinc and Fastcom Investors.
The General Partners of Datalinc and Fastcom did not engage an independent
representative for their Investors to determine the relative values of the
Partnerships in the Reorganization. Although the General Partners believe
the Reorganization is fair to all Investors, it is possible that the
Formula and other terms of the Reorganization may not be as favorable to
the 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 Datalinc's
lines 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. ASSUMING THE SALE OF ALL OF FASTCOM'S SERIES 300
UNITS, DATALINC'S OWNERSHIP IN FASTCOM WILL BE REDUCED TO 69%. DATALINC
PRESENTLY OWNS APPROXIMATELY 80% OF THE OUTSTANDING UNITS OF FASTCOM. THROUGH
iv
<PAGE>
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 OCTOBER __, 1997, IF THE REORGANIZATION AGREEMENT HAS NOT BEEN
APPROVED BY THE DATALINC INVESTORS.
NEITHER THE REORGANIZATION CONTEMPLATED HEREIN NOR THE PREFERRED SHARES OF
THRUCOMM TO BE ISSUED UPON MANDATORY CONVERSION 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 DATE OF THIS CONSENT STATEMENT/PROSPECTUS IS SEPTEMBER ____, 1997,
WHICH IS THE APPROXIMATE DATE ON WHICH THIS CONSENT STATEMENT/PROSPECTUS WILL
FIRST BE MAILED TO THE INVESTORS OF THE PARTNERSHIPS.
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.
v
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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.
vi
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION...............................................................iii
AVAILABLE INFORMATION........................................................v
SUMMARY......................................................................1
Risk Factors and Material Considerations...............................1
The Parties............................................................4
The General Partners...................................................5
Background and Alternatives to the Reorganization......................6
The Reorganization Agreement...........................................6
The Preferred Stock....................................................6
Recommendation of the General Partner..................................8
Opinion of the General Partners' Financial Advisor.....................8
Interests of Certain Persons in the Reorganization.....................8
Certain Comparative Information.......................................10
Conditions, Termination, and Amendment of the Reorganization
Agreement.......................................................11
Summary of Tax Consequences..........................................11
Accounting Treatment..................................................12
Consent Procedures and Required Approvals.............................12
Appraisal Rights......................................................12
Investor List.........................................................13
Effective Time........................................................13
SELECTED FINANCIAL INFORMATION..............................................15
RISK FACTORS................................................................17
THE REORGANIZATION..........................................................24
Background of the Reorganization......................................24
The Reorganization Agreement..........................................24
Operations After the Reorganization...................................26
Interests of Certain Persons in the Reorganization....................27
EQUITY OWNERSHIP OF THE PARTNERSHIPS........................................29
The Datalinc Investors................................................30
Datalinc's Other Equity Owners........................................32
The Fastcom Investors.................................................32
Fastcom's Other Equity Owners.........................................34
THE FORMULA.................................................................37
Determining the Values of Thrucomm, Datalinc and Fastcom..............37
Distribution of the Datalinc Value and the Fastcom Value to
Investors and Other Equity Owners...............................39
Material Assumptions and Variances....................................40
THRUCOMM OWNERSHIP TABLES...................................................41
Notes to the Ownership Tables.........................................48
RECOMMENDATION OF THE GENERAL PARTNERS......................................49
Reasons for Proposing and Recommending the Reorganization.............49
Opinion of the General Partners' Financial Advisor....................51
Lack of Independent Representative....................................53
Fiduciary Duties of the General Partners..............................53
Access to Investor List and Partnership Records.......................54
vii
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FAILURE TO APPROVE THE REORGANIZATION.......................................54
CONSENT PROCEDURES..........................................................54
General...............................................................54
Requisite Consents....................................................55
Effective Time and Expiration Date....................................56
Revocation of Consents................................................56
Conditions of the Solicitation........................................56
Estimated Expenses....................................................57
CERTAIN TAX CONSEQUENCES OF THE REORGANIZATION..............................57
COMPARATIVE RIGHTS OF INVESTORS.............................................57
Distributions and Dividends...........................................58
Tax Matters...........................................................58
Voting Rights.........................................................58
Restrictions on Transfers.............................................59
Right to Call Meetings................................................59
Right to Investor List................................................60
Assessments and Limited Liability.....................................60
Allocations and Dilution..............................................60
Liquidity.............................................................61
Redemption and Conversion.............................................61
Financial Reporting...................................................61
Management and Compensation...........................................61
Fiduciary Duties......................................................62
Limits on Management's Liability......................................62
Continuation of Existence.............................................63
Anti-takeover Provisions..............................................63
Liquidation Rights....................................................63
Right to Compel Dissolution...........................................63
PRO FORMA CONDENSED FINANCIAL INFORMATION (Unaudited).......................65
Thrucomm Pro Forma Combined Balance Sheet.............................66
Thrucomm Pro Forma Combined Statement of Operations...................68
Thrucomm Pro Forma Combined Statement of Cash Flows...................72
Thrucomm Pro Forma Adjustments........................................74
DATALINC, LTD. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS........................75
FASTCOM, LTD. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF DEVELOPMENT........................81
BUSINESS....................................................................84
FASTCOM.....................................................................84
The Electronics Fund Transfer ("EFT") Industry........................85
ATMs - Synchronous & Asynchronous.....................................85
Point of Sale ("POS") - Synchronous & Asynchronous....................86
Overview of the Network...............................................86
Remote Transceivers - DP1000 and DP100................................86
Cell Sites............................................................87
The Network Control Center ("NCC")....................................87
Regulation............................................................88
Interference Rejection - Licensed Compared to License Free............88
viii
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Competition...........................................................88
Multi-Drop Networks...................................................88
Network Advantages Compared to Multi-Drop Networks....................88
Integrated Services Digital Packet Networks...........................89
Advantages of the Network Compared to Integrated Services Packet
Networks........................................................90
Development of the Network............................................90
Research and Development..............................................90
Operations............................................................91
Manufacturing.........................................................91
Cell Site Leasing.....................................................92
Site Layout...........................................................92
Installation..........................................................92
Field Maintenance.....................................................92
Sale of Equipment.....................................................93
Company Facilities....................................................93
DATALINC....................................................................93
Industry Background...................................................94
Market................................................................94
Market Growth.........................................................94
Sales ................................................................95
Competition...........................................................95
Governmental Regulation...............................................95
Properties............................................................95
THRUCOMM....................................................................96
MANAGEMENT..................................................................96
Thrucomm's Executive Officers and Directors...........................96
Compensation of Directors.............................................98
Stock Option Plans....................................................99
Comparative Compensation Information..................................99
Certain Transactions with Management.................................101
PRINCIPAL STOCKHOLDERS OF THRUCOMM.........................................102
DESCRIPTION OF THRUCOMM'S SECURITIES.......................................104
Common Stock.........................................................104
Preferred Stock......................................................104
The Mandatory Convertible Preferred Stock............................104
Transfer Agent.......................................................110
LEGAL MATTERS..............................................................110
EXPERTS....................................................................111
GLOSSARY...................................................................112
INDEX TO FINANCIAL STATEMENTS..............................................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. 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 Appendices Hereto. Investors Are Urged To Read Carefully The
Entire Consent Statement/prospectus, Including The Appendices.
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, that Investors
and Other Equity Owners may ultimately receive upon 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, Mandatory Conversion 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 in the
future, the purpose of the Reorganization will not be accomplished, Investors
may not receive any return on their investment, and they would not have the
right to initiate a liquidation of Thrucomm.
RISKS ASSOCIATED WITH A SALE OR MERGER
In order to provide Investors with an opportunity to vote for or against a
Sale or Merger, the Preferred Stock will be mandatorily convertible into
Underlying Shares, prior to the Sale or Merger, upon (i) the approval by
Thrucomm's Board of Directors of a PROPOSED Sale or Merger, and (ii) the
execution of a Sale or Merger agreement that sets forth the consideration to be
received by Thrucomm's shareholders, and is conditioned upon such shareholders'
approval. The number of Underlying Shares to be distributed in such an event
will be based upon the aggregate consideration to be received as a result of the
proposed Sale or Merger. However, in the event the Sale or Merger is not
approved by the stockholders, the Preferred Stock will have already been
converted into Underlying Shares based upon a proposed transaction that was
never approved or consummated, and there shall be no further right to convert
into Underlying Shares of Thrucomm.
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ISSUANCE OF ADDITIONAL STOCK; DILUTION
Thrucomm anticipates that it will need interim financing after the
Reorganization from an institutional investor or a venture capital firm.
Investors should expect a sale of equity by Thrucomm to such an investor shortly
after the Reorganization which will result in the dilution of the ownership
interests of the Datalinc and Fastcom Investors.
LACK OF INDEPENDENT REPRESENTATIVES FOR INVESTORS; FAIRNESS OPINION
The General Partners did not engage an independent representative for the
Datalinc or Fastcom Investors. However, the General Partners believe the
Reorganization is fair to all Investors. The General Partners have obtained a
fairness opinion from Michael T. Davis & Company, P.A. ("Michael Davis & Co."),
an independent certified public accountant, as to the fairness of the Formula
and the roll-up transaction as a whole, from a financial point of view to
Datalinc's Investors (the "Fairness Opinion"). It is still possible that the
valuations and other terms of the Reorganization may not be as favorable to
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.
NO DISSENTERS RIGHTS
Datalinc and Fastcom Investors are not entitled to appraisal or similar
rights under Florida law or the Partnership Agreements in connection with the
Reorganization. Neither have the Parties voluntarily accorded rights of
appraisal to the Investors under the Reorganization Agreement or otherwise.
Accordingly, the approval of the Reorganization by a Majority Vote of the
Datalinc Investors will be binding on all Datalinc Investors. The approval of
the Reorganization by Datalinc on behalf of Fastcom is binding on all Fastcom
Investors. After the Reorganization however, Investors will have appraisal
rights under Florida law in the event of a Sale or Merger.
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."
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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 FASTCOM'S and DATALINC'S OPERATIONS; NEED FOR ADDITIONAL
CAPITAL
Fastcom has experienced continual operating losses since its inception,
including a loss of $981,220 for the four months ended April 30, 1997. Datalinc
has also experienced continual operating losses since its inception, including a
loss of $917,188 for the four months ended April 30, 1997, which includes
$849,220 of Fastcom's 1997 losses. 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.
Additionally, there are only limited alternative sources of financing available
to Thrucomm including funds generated from the Partnerships' operations, and
debt obtained from the Partnerships' lender. Fastcom is undertaking a Series 300
offering in order to raise $2 million which will be used to provide working
capital. 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.
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.
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.
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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 seven 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 two groups of equity ownership
interests are 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.
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 nine groups of equity owners. The ownership structure of
Fastcom includes four series of limited partnership units: Series 100, 100 EA,
200 and 300 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 five groups of equity owners are Fastcom's Management
Incentive Plan Special Limited Partners, FMI, Certified Financial Group, Inc.,
Datalinc, and Information Leasing Corporation (collectively, Fastcom's "Other
Equity Owners"). Presently, Datalinc owns approximately 80% of all of the
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outstanding Units of Fastcom. Assuming the sale of all of Fastcom's Series 300
Units, Datalinc's ownership will be reduced to approximately 73%. 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 December 1996. 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 general responsibility for the management of, and ultimate
authority affecting the business of, Datalinc. The Common Stock of ICN is owned
50% by John Kolenda and 50% by Mark Gianinni.
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 general responsibility for the management of, and 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.
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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-G, and
Fastcom will receive one (1) share of each series of Thrucomm's Mandatory
Convertible Preferred Stock, Series H-P.
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
and Fastcom shall distribute the Underlying Shares to the Datalinc and Fastcom
Investors and Other Equity Owners and the Partnerships will dissolve. Investors
of the Partnerships will become shareholders of Thrucomm, which will be 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 ("Underlying Shares") upon the earliest to occur of one
of the following events: (i) the completion of an initial public offering of
Thrucomm's Common Stock (an "IPO"), (ii) the sale of all or substantially all of
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the assets of Thrucomm (a "Sale"), (iii) the merger of Thrucomm into a
non-affiliated entity, whereby Thrucomm is not the surviving entity (a
"Merger"), or (iv) the sale of one-third or more of the equity interests in
Thrucomm, in a single transaction, to one or more investors (an "Investment"),
(collectively, the "Mandatory Conversion Events"). The "sale of all or
substantially all" of the assets of Thrucomm is defined in the Reorganization
Agreement as the sale of at least 80% of Thrucomm's assets. In order to provide
Investors with an opportunity to vote for or against a Sale or Merger, the
Preferred Stock will be mandatorily convertible into Underlying Shares PRIOR to
the Sale or Merger upon (i) the approval of a proposed Sale or Merger by
Thrucomm's Board of Directors, and (ii) the execution of a Sale or Merger
agreement that sets forth the consideration to be received by Thrucomm's
shareholders, and is conditioned upon such shareholders' approval. The number of
Underlying Shares to be distributed in such an event will be based upon the
aggregate consideration to be received as a result of the proposed Sale or
Merger. However, in the event the Sale or Merger is not approved by the
stockholders, the Preferred Stock will have already been converted into
Underlying Shares based upon a proposed transaction that was never approved or
consummated, 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 Conversion Value of Thrucomm in the
Mandatory Conversion Event. The Directors have developed a formula for
allocating the Conversion Value of Thrucomm to Fastcom and Datalinc in a
Mandatory Conversion Event (the "Formula"). The number of Underlying Shares that
Investors and Other Equity Owners will receive upon the occurrence of a
Mandatory Conversion Event is determined by application of the Formula and the
rights and preferences of the Preferred Stock. The terms of the Preferred Stock
are designed to allocate Underlying Shares 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. See "Equity Ownership of
the Partnerships."
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 determined by the gross proceeds of the offering and the amount of equity
that is sold in the offering. In a Sale, Merger or Investment, the Conversion
Value of Thrucomm is based upon the consideration that is received, or the
investment that is made, in any of such transactions. In any Mandatory
Conversion Event, the minimum Conversion Value of Thrucomm shall be not less
than $20 million and it will be allocated to Datalinc and Fastcom in the manner
prescribed by the Formula. 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 CONVERSION VALUE 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."
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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
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 and the roll-up transaction
taken as a whole, as provided in the Reorganization Agreement, is fair from a
financial point of view to Datalinc's Investors. A copy of such opinion, dated
August 26, 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.
CFG Securities Corp. ("CFG Securities"), a member of the National
Association of Securities Dealers, Inc. 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
Securities 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, Certified Financial Group, Inc.
("CFG") received options to acquire an aggregate 4% limited partnership interest
in Datalinc, from ICN's general partnership interest in Datalinc, for $1 (the
"Datalinc Option"), and an aggregate 2.171% limited partnership interest in
Fastcom, from Datalinc's limited partnership interest in Fastcom, for $240,000
(the "Fastcom Option" and collectively, "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. CFG has indicated that it will consent to
the Reorganization.
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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,
and in exchange therefore, 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 (the "Blue Chip Agreements"). To
distinguish certain of the Series 300 Units purchased by Blue Chip from other
Series 300 Units purchased by other Investors, 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." The agreements
with Blue Chip have been amended as of August, 1997 to add Thrucomm as a party
thereto (the "Amended Blue Chip Agreements"). Also in August, 1997, Blue Chip
agreed to guarantee a $500,000 Datalinc loan with the Partnerships' bank. See
"The Reorganization - Interests of Certain Persons in the Reorganization," and
"Datalinc, Ltd., Management's Discussion and Analysis - Liquidity and Capital
Resources."
Blue Chip's residual Distribution interest in Datalinc, is approximately
14%, and Blue Chip controls approximately 29% of the voting power of Datalinc.
Z. David Patterson, Blue Chip's President, serves on the Board of Directors of
ICN, FMI and Thrucomm. Blue Chip has indicated that it will consent to the
Reorganization.
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
and Datalinc certain Network equipment, including radio equipment and personal
earth stations, and Fastcom and Datalinc sublease such equipment to their
customers through integrated service agreements between Fastcom and/or Datalinc
and the customers. Fastcom and Datalinc guarantees the integrated service
agreements to ILC and ILC in turn uses such integrated service agreements as
collateral for the leases and equipment.
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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, from
Datalinc's limited partnership interest in Fastcom, equal to .905% of the total
equity of Fastcom for the first $1 million of equipment financed under ILC
leases. ILC transferred such .905% 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 .4525% for each $3 million of equipment financed
thereafter, up to a total of 4.525% of the equity of Fastcom or its successors.
As of December 31, 1996, ILC had no equity interests in Fastcom, but as of April
30, 1997, ILC had acquired the .905% 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."
COMPENSATION AGREEMENTS AND OTHER EMPLOYMENT BENEFITS
Upon approval of the Reorganization, 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. The Board of Directors of Thrucomm
have approved base annual salaries of $150,000 for Mr. Kolenda and $160,000 for
Mr. 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. The Partnerships
will be shareholders of Thrucomm and the Investors and Other Equity Owners will
be the beneficial owners of the Underlying Shares.
After Mandatory Conversion, the Partnerships will be liquidated and the
Underlying Shares will be distributed to the Investors and Other Equity Owners
in accordance with the rights and preferences of the Preferred Stock.
Thereafter, the Investors shall be shareholders of Thrucomm, and as such, their
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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 October __, 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.
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; (ii) other than recapture of negative capital accounts, no gain or
loss will be recognized by the Investors upon the receipt of the Preferred Stock
by the Partnerships and the eventual distribution of the Underlying Shares to
the partners in liquidation of the Partnerships; and (iii) the basis of the
Underlying Shares to be eventually received by the Investors in liquidation of
the Partnerships will be equal to the adjusted basis of the Investors in their
respective interests in Datalinc and Fastcom. 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
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which this Consent Statement/Prospectus forms a part. If a Mandatory Conversion
is the result of a Sale or Merger, since any Sale or Merger is conditioned upon
shareholder approval, a new tax opinion would be required regarding the tax
treatment of the consideration to be received by Investors for the Underlying
Shares. 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, 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 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
Datalinc's Investors, 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 (2/3) of the
outstanding Units of Fastcom is necessary to approve and adopt the
Reorganization Agreement. Datalinc currently 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. Assuming the sale of
all of Fastcom's Series 300 Units, Datalinc will continue to own over 73% of
Fastcom. Datalinc's consent alone is sufficient to give Fastcom's approval to
the Reorganization. The Board of Directors of FMI, Fastcom's General Partner,
believes that the proposed transaction is fair to, and in the best interests of
Fastcom's Investors, and they approved the Reorganization without dissent or
abstention. See "Consent Procedures and Required Approvals" and "Recommendation
of the General Partners."
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THRUCOMM
The Board of Directors of Thrucomm approved the Reorganization Agreement
without dissent or abstention.
APPRAISAL RIGHTS
Datalinc and Fastcom Investors are not entitled to appraisal or similar
rights under Florida law or under the Partnership Agreements in connection with
the Reorganization. Neither have the Parties voluntarily accorded rights of
appraisal to Investors under the Reorganization Agreement or otherwise.
Accordingly, the approval of the Reorganization by a Majority Vote of the
Datalinc Investors will be binding on all Datalinc Investors. The approval of
the Reorganization by Datalinc on behalf of Fastcom is binding on all Fastcom
Investors. After the Reorganization however, Investors will have appraisal
rights under Florida law in the event of a Sale or Merger. See "The
Reorganization - 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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ORGANIZATIONAL CHART (Ownership Percentage)
__________ ____________________
| Blue Chip| |Kolenda and Gianinni|
|__________| |____________________|
| _________ |
| | CFG & | 100% | 100%
| | Datalinc| |
| |Investors| _____________|_____________
| |_________| | |
| | | |
| | ________|________ ________|_______
| | | Integrated | | Fastcom |
| | | Communications | | Management |
| | | Network, Inc. | | Inc. | __________
| | | | | | | MIP, ILC,|
| | | General Partner | | General Partner| | CFG & |
| | |_________________| |________________| | Fastcom |
| | | | |Investors |
| | | 46% | |__________|
| | | | |
| | _________|_________ | |
| 14% |40% | Datalinc, Ltd. | | |
|_______|____| | | |
|___________________| | |
| | |
| 73% | |
|____________ | |
| ______|______ 1% | 26% |
| |Fastcom, Ltd.|______|_________________|
| |_____________|
|
100%* |
________|________
| Thrucomm, Inc. |
|_________________|
* After mandatory conversion, the former Fastcom Investors and Other Equity
Owners will own approximately 31% of Thrucomm, and the former Datalinc Investors
and Other Equity Owners will own approximately 69% of Thrucomm, assuming a
Conversion Value of $20 million and no further sale of equity.
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SELECTED FINANCIAL INFORMATION
The following tables set forth certain selected financial inform ation 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)
FOUR MONTHS
ENDED
YEAR ENDED DECEMBER 31, APRIL 30,
----------------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
----- ----- ----- ----- ----- ----- -----
STATEMENT OF OPERATIONS DATA:
Net access $ 508 $ 895 $1,516 $ 1,702 $ 2,094 $ 633 $ 713
fees
Net equipment sales and
installation fees
1,420 1,254 2,728 467 3,738 377 116
------- ------ ------ ------- ------- ------- ------
Total 1,928 2,149 4,244 2,169 5,832 1,010 829
revenue
OPERATING EXPENSES:
Cost of hub access services
703 847 1,101 1,171 1,349 402 470
Cost of equipment sales and installation fees
1,104 1,033 2,386 285 3,315 219 42
Selling, general & administrative
700 834 825 563 711 207 214
Research and development, net of refund
0 223 (80) 0 0 0 0
Depreciation and amortization
560 469 397 327 473 158 127
(Income) loss from affiliate
0 0 567 (147) 482 463 849
Interest expense
33 31 8 97 159 56 44
------- ------- ------ ------ ------- ------ ------
Net loss $(1,172) $(1,288) $ (960) $ (127) $ (657) $ (495) $ (917)
======= ======= ====== ====== ======= ====== ======
Earnings per share (a)
- - - - - - -
BALANCE SHEET DATA:
Cash and cash equivalents
$ 109 $ 524 $ 11 $ 78 $ 25 $ 18 $ 42
Working capital (deficit)
(255) 815 54 (538) (1,022) (884) (1,740)
Total assets 2,308 2,645 1,882 3,132 3,042 2,407 2,195
Total debt obligations, less current portion
114 33 208 424 730 304 222
Total partners' equity (deficit)
1,301 2,090 1,130 1,004 347 (108) (570)
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 YEAR ENDED FOUR MONTHS
DECEMBER 31, DECEMBER 31, ENDED APRIL 30,
1994 1995 1996 1996 1997
------------- -------- -------- -------- --------
STATEMENT OF OPERATIONS DATA:
Revenues - - $ 69 $ 5 $ 91
Expenses:
Operating, general
& administrative $ 253 $ 654 1,306 263 795
Research and development 309 278 365 26 138
Depreciation & amortization 2 27 107 33 116
Interest expense 2 11 7 0 23
------------- -------- -------- -------- --------
Net loss $ (566) $ (970) $(1,716) $ (317) $ (981)
============= ======== ======== ======== ========
Earnings per shares (a) - - - - -
BALANCE SHEET DATA:
Cash and cash equivalents
$ 1 $ 0 $ 12 $ 5 $ 17
Working capital(deficit)
(563) (1,334) (1,632) (1,945) (2,840)
Total assets 125 205 1,028 569 1,865
Total debt obligations, less current portion
0 0 142 0 604
Total partners' deficit (492) (1,129) (827)(b) (1,384) (1,676)(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 SUBSEQ UENT
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.
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 (the "IPO"); (ii) the sale of all or substantially all of the assets of
Thrucomm (the "Sale"); (iii) the merger of Thrucomm into a non-affiliated
entity, whereby Thrucomm is not the surviving entity (a "Merger") or (iv) the
sale of one-third or more of the equity interest in Thrucomm, in a single
transaction, to one or more investors (an "Investment"). In any Mandatory
Conversion Event, the minimum Conversion Value of Thrucomm shall be not less
than $20 million. 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, Investors may not receive any return on their investment, and
they will not have the right to initiate a liquidation of Thrucomm. If however a
liquidation occurs and it involves a Sale, Investors will have the right to vote
on the Sale.
RISK ASSOCIATED WITH A SALE OR MERGER EVENT
In order to provide Investors with an opportunity to vote for or against a
Sale or Merger, the Preferred Stock will be mandatorily convertible into
Underlying Shares PRIOR to the Sale or Merger upon (i) the approval of a
proposed Sale or Merger by the Board of Directors, and (ii) the execution of a
Sale or Merger agreement that is conditioned upon shareholder approval. The
number of Underlying Shares to be distributed in such an event will be based
upon the aggregate consideration to be received as a result of the proposed Sale
or Merger. However, in the event the Sale or Merger is not approved by the
stockholders, the Preferred Stock will have already been converted into
Underlying Shares based upon a proposed transaction that was never approved or
consummated, and there shall be no further right to convert into Underlying
Shares of Thrucomm.
The Investors have received an opinion of Schifino & Fleischer, P.A.,
special counsel to Thrucomm, to the effect that, other than recapture of
negative capital accounts, no gain or loss will be recognized by the Investors
upon the receipt of the Preferred Stock and the eventual distribution of the
Underlying Shares. However, depending upon the terms and conditions of the
proposed Sale or Merger and the kind and nature of the consideration to be
received in either transaction, some or all of the consideration to be received
by the Investors for such Underlying Shares may be taxable. Since any Sale or
Merger is conditioned upon shareholder approval, a new tax opinion would be
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<PAGE>
required regarding the tax treatment of the kind and nature of the consideration
to be received by Investors for the Underlying Shares.
NUMBER OF UNDERLYING SHARES OR OTHER CONSIDERATION NOT PRESENTLY ASCERTAINABLE
The number of Underlying Shares 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
Conversion Value 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 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 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 that Invest-
ors 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 INDEPENDENT REPRESENTATIVE FOR THE DATALINC INVESTORS
ICN, FMI and Thrucomm have established the relative allocation of the Co
nversion Value of Thrucomm to Datalinc and Fastcom upon Mandatory Conversion 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 in excess of $60
million. In addition there are equations for establishing the Datalinc Value and
the Fastcom Value at other Conversion Values of Thrucomm. In any event, the
minimum Conversion Value shall be $20 million and the minimum Datalinc Value
will be $9 million. 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, 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 th e
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 Formula is fair, from a financial point of view, to all
Investors and that the distributions to Investors, pursuant to the terms of the
Preferred Stock, are consistent with the terms of the Partnership Agreements;
(ii) Datalinc owns a significant percentage of Fastcom and will receive
18
<PAGE>
approximately 73% 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 Formula and other terms of the
Reorganization may not be as favorable to the Investors as the terms that an
independent representative might have obtained for them.
OPERATING LOSSES OF FASTCOM AND DATALINC; NEED FOR ADDITIONAL FUNDS AFTER
REORGANIZATION; LIMITED ALTERNATIVE SOURCES OF FINANCING
Fastcom has experienced continual operating losses since its incept ion,
including a loss of $981,220 for the four months ended April 30, 1997. Datalinc
has also experienced continual operating losses since its inception, including a
loss of $917,188 for the four months ended April 30, 1997, which includes
$849,220 of Fastcom's 1997 losses. 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 Reorga nization.
Thrucomm anticipates that it will incur significant negative cash flow from its
operations subsequent to the Reorganization. Additionally, there are only
limited alternative sources of financing available to Thrucomm including funds
generated from the Partnerships' operations, and debt obtained from the
Partnerships' lender. Fastcom is undertaking a Series 300 offering to raise $2
million which will be used for working capital purposes. 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."
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.
Thrucomm anticipates that it will need interim financing after the Reorg-
anization and before a potential investmentby an institutional investor, venture
capital firm or a public offering by an investment banking firm. Investors
should expect a sale of equity by Thrucomm in exchange for bridge financing
which will result in dilution to the Datalinc and Fastcom Investors.
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<PAGE>
Fastcom has commenced an offering of its Series 300 Limited Partne rship
Units to raise additional interim funds for working capital purposes. Thrucomm
will issue in the Reorganization a share of its Preferred Stock, Series M, to
Fastcom, which will result in dilution to all of the Fastcom Investors and
Fastcom's Other Equity Owners except for Fastcom's General Partner, FMI, whose
ownership is fixed by the Partnership Agreement at 1%. The effects of the Series
300 Units on a fully diluted basis are presented in the "Thrucomm Ownership
Tables."
NO DIVIDENDS FROM THRUCOMM
Thrucomm has never paid cash dividends on its Common Stock or Prefer red
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."
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, will 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 Amended 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.
Upon approval of the Reorganization Agreement by the Datalinc Investors,
the current Management Agreements between Datalinc and ICN and between FMI and
Fastcom will be terminated and replaced by employment agreements between
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 Direct ors in
connection with the Reorganization and the continuation of the business of the
Partnerships through Thrucomm after the Reorganization.
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CHANGE IN ORGANIZATIONAL AND RELATED TAX STATUS
Since their respective inceptions, the businesses of Datalinc and Fastco m
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.
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 regist
ration 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.
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 develo p
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.
CERTAIN PROVISIONS OF THRUCOMM'S ARTICLES OF INCORPORATION
Thrucomm's Articles of Incorporation provide, among other things, that o
fficers 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
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<PAGE>
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."
RELIANCE ON KEY PERSONNEL
Thrucomm is substantially dependent upon the continued services and ma
nagement 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."
CONTROL BY CERTAIN STOCKHOLDERS
Presently and after the Effective Time of the Reorganization, all out-
standing 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.
CERTAIN RISKS RELATED TO THE BUSINESS OF THRUCOMM AFTER THE REORGANIZATION
The business operated by Thrucomm after the Reorganization will be subjec t
to the same risks as the businesses currently operated by Datalinc and Fastcom
prior to the Reorganization, including those set forth below.
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.
COMPETITION
Thrucomm will compete with many providers of data communicatio n
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.
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GOVERNMENTAL REGULATION
Thrucomm's operations will be subject to regulation by the Federal
Comm unications 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.
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THE REORGANIZATION
BACKGROUND OF THE REORGANIZATION
The current business strategy of Fastcom is to finish the develo pment 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 indust ry, 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 Reorganizati on
Agreement that provides for the consolidation of the businesses of Datalinc and
Fastcom, and the reorganization of the Partnerships (as set forth below) into a
single corporate entity, for 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-G, and Fastcom
will receive one (1) share of each series of Thrucomm's Preferred Stock, Series
H-P. 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-G. Fastcom's
sole asset will be the Preferred Stock, Series H-P. Datalinc and Fastcom will
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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 o f
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 Underlying Shares shall be distributed to the Investors and
Other Equity Owners. Upon dissolution of the Partnerships and the distribution
of the Underlying Shares, Datalinc's and Fastcom's Investors will become
shareholders of Thrucomm.
CONDITIONS PRECEDENT TO THE REORGANIZATION
The respective obligations of Datalinc, Fastcom and Thrucomm to effect th e
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 Formula or the terms of the Preferred Stock
without the further approval of Investors entitled to vote thereon.
APPRAISAL RIGHTS
Datalinc and Fastcom Investors are not entitled to appraisal or similar r
ights under Florida law or the Partnership Agreements in connection with the
Reorganization. Neither have the Parties voluntarily accorded rights of
appraisal to Investors under the Reorganization Agreement or otherwise.
Accordingly, the approval of the Reorganization by a Majority Vote of the
Datalinc Investors will be binding on all Datalinc Investors. The approval of
the Reorganization by Datalinc on behalf of Fastcom is binding on all Fastcom
Investors. After the Reorganization however, Investors will have appraisal
rights under Florida law in the event of a Sale or Merger. See "The
Reorganization - of Appraisal Rights."
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ACCOUNTING TREATMENT
It is intended that the Reorganization will be accounted for as transacti
on among parties considered to be under common control treated similar to a
pooling of interest except for Fastcom's Series 100EA Units, 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 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.
EXPENSES
The Reorganization Agreement provides that, whether or not the Reorgani
zation 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 opera
ting or investment strategies, including those with respect to borrowings, of
Datalinc or Fastcom before the Reorganization and Thrucomm after the
Reorganization. Fastcom has experienced continual operating losses since its
inception, including a loss of $981,220 for the four months ended April 30,
1997. Datalinc has also experienced continual operating losses since its
inception, including a loss of $917,188 for the four months ended April 30,
1997, which includes $849,220 of Fastcom's 1997 losses. 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 t o
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
from outside lenders, Thrucomm's sources of financing are presently limited and
the Reorganization has been proposed to enhance the Partnerships' abilities to
secure additional financing. It is anticipated that at least $5.5 million must
be raised from alternative financing sources in order to continue operations at
Thrucomm through December 1997. This estimate of additional funds is based on
the $4.6 million working capital deficit at April 30, 1997 and the debt that is
due from September 1997 to December 1997. With the potential funds to be
received from the Partnership's lender, Blue Chip and the projected Series 300
offering, the latest time that these additional funds could be received is
December 1997. If these funds are not received, the Partnerships must find
alternative or additional sources of funds or liquidate the Partnerships or
Thrucomm.
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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 Thru
comm, 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 Conve
rsion Value of Thrucomm into the Datalinc Value and the Fastcom Value, and the
terms of the Preferred Stock were 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 duties to the Partnerships and the
Investors. While the General Partners believe that they have fulfilled these
obligations in their determination of the Formula and the terms of the Preferred
Stock, which are 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 Dir
ectors 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) management fees shall be replaced
with employment agreements; (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 c
orporation 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.
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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. As of August, 1997 the Blue Chip Agreements have
been amended to add Thrucomm as a party. In effect, the Blue Chip Agreements are
binding on Thrucomm, including Blue Chip's right to elect one director to
Thrucomm's Board of Directors.
In August 1997, Datalinc negotiated with its bank for an additional $
500,000 line of credit which will be guaranteed by Blue Chip, with related
parties of Datalinc and Fastcom. As part of this transaction, Blue Chip is
entitled to an $8,000 consulting fee, which fee is payable in October 1997. In
the event Blue Chip's guarantee is not fully discharged by October 31, 1997,
Blue Chip will be entitled to monthly consulting fees of $3,000 per month
beginning in November, 1997. Also if the guarantee is not fully discharged, Blue
Chip is entitled to receive warrants to purchase a .5% interest in Thrucomm for
a nominal exercise price within three years. Under the terms of the guarantee,
Datalinc can borrow, without prior Blue Chip approval, up to $300,000 on its
line of credit, which funds can only be used for monthly operating expenses. Due
to delays in completing the guarantee, Datalinc has borrowed $250,000 from Blue
Chip which shall be repaid when the line of credit is in place.
Blue Chip's combined interests in Datalinc, after preferred distribution ,
represents approximately 14% of the ownership interests and 29% of the voting
power of Datalinc. Blue Chip intends to consent to the Reorganization. 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
Partnership Units. In consideration of such services to Datalinc and Fastcom,
CFG received options to acquire an aggregate 4% limited partnership interest in
Datalinc from ICN for $1 (the "Datalinc Option"), and an aggregate 2.171%
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
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Datalinc. The Datalinc Option is not dilutive of the limited partnership
interests of Datalinc's Investors and the Fastcom Option is not dilutive of the
limited partnership interests of Fastcom's 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. CFG has indicated
that it will consent to the Reorganization. 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 and Datalinc certain Network equipment, including radio
equipment and personal earth stations. Fastcom and Datalinc enter into
integrated service agreements with their customers pursuant to which they
sublease 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 .905% of the total equity of Fastcom for the first $1 million of
equipment financed under ILC leases, and an additional .4525% for each $3
million of equipment financed thereafter, up to a total of 4.525% 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 .4525% rate
for each $3 million. As of April 30, 1997, ILC had acquired a .905% equity
interest in Fastcom. ILC's interest is dilutive of Fastcom's Investors and
Datalinc's interest in Fastcom.
ILC was acquired in a stock-for-stock acquisition by Provident Ba ncorp,
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, 200 and 300 Limited Partnership
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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 Fastcom, Ltd. Management
Incentive 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 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 o f 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 18.921% 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 8.642% 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").
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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 5.429% 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 o f 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 9.137% 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 o f its
Series 300 Limited PartnershipUnits (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
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Capital Contributions plus their aggregate Preferred Return (approximately
$1,345,067 as of May 1, 1997). Thereafter, they will be entitled to 7.871% 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
CFG'S OPTION
Assuming CFG exercises the Datalinc Option, CFG will entitled to receive 4%
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. 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 8% 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 F (the "Series F
Preferred Stock").
ICN
ICN, the General Partner of Datalinc, is entitled to receive 46% of any D
istribution from Cash Flow, Sale Proceeds and Refinancing Proceeds of Datalinc,
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 General Partner
shall be entitled to receive 92% 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 G (the "Series G Preferred Stock").
THE FASTCOM INVESTORS
SERIES 100 UNITS
On March 31, 1996, Fastcom completed an offering of $445,000 of its Serie s
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
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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").
Fastcom's Series 100 Investors are entitled to 100% of any Distribution s
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 2.013% 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 ("Minimum Guaranteed
Return"), which is measured as a 30% discount on the value of Fastcom in the
event of an IPO. 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 H (the "Series H Preferred Stock").
SERIES 100EA UNITS
Fastcom issued its Series 100EA Limited Partnership Units (11.125 unit s)
(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 cash Capital Contributions of 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 .503% 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 I (the "Series I
Preferred Stock").
SERIES 200 UNITS
On September 30, 1996, Fastcom completed an offering of $2,155,000 o f 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
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<PAGE>
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 amount
equal to 25% of the cash Capital Contributions of the Series 100 Units as a
return on their 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 all of the Initial
Distributions, as defined below, to its Other Equity Owners, the Series 200
Investors shall be entitled to receive 10.832% of any subsequent Distributions
of Cash Flow, Sale Proceeds and Refinancing Proceeds of Fastcom.
Similarly to the Series 100 Investors, the Series 200 Investors ar e
entitled to a Minimum Guaranteed Return on their investment, which is measured
as a 30% discount on the value of Fastcom in the event of an IPO. 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 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. The Series 200 Investors will receive,
upon Mandatory Conversion, the Underlying Shares of Thrucomm's Mandatory
Convertible Preferred Stock, Series J (the "Series J Preferred Stock").
SERIES 300 UNITS
In July 1997, Fastcom commenced an offering of $2,000,000 of its Series 3
00 Limited PartnershipUnits, (200 units), (Fastcom's "Series 300 Units") for
working capital purposes including payables and retiring bank debt (Fastcom's
"Series 300 Offering"). After the Fastcom Investors, including the Series 300
Investors, have received the return of their respective Capital Contributions,
Preferred Returns and payments as described above, and after Fastcom has paid
all of the Initial Distributions, as defined below, to its Other Equity Owners,
assuming the sale of all Series 300 Units, the Series 300 Investors shall be
entitled to receive 9.524% of any subsequent Distributions of Cash Flow, Sale
Proceeds and Refinancing Proceeds of Fastcom. The Series 300 Units will be
converted, upon Mandatory Conversion, into Underlying Shares of Thrucomm's
Mandatory Convertible Preferred Stock, Series K (the "Series K Preferred
Stock").
FASTCOM'S OTHER EQUITY OWNERS
DATALINC
Datalinc shall be entitled to any Distributions of Fastcom after Invest ors
in the Series 100, Series 200 and Series 300 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
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<PAGE>
Distribution"), an amount equal to: (i) the aggregate cash Capital Contributions
of the Fastcom Investors, $4,600,000; (ii) divided by 22.872%, 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 73.052%, which is Datalinc's equity
interest in Fastcom, assuming CFG exercises its Option, and assuming ILC's
equity interest in Fastcom is .905%. Following payment of all of the Initial
Distributions, Datalinc shall be entitled to 73.052% 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").
MIP SPECIAL LIMITED PARTNER UNITS
On August 1, 1997, Fastcom approved and established a Management I ncentive
Plan (Fastcom's "Plan"). See "Management - Fastcom's Management Incentive Plan."
At present, 430 MIP Units have been granted to key employees under the Plan.
Pursuant to Fastcom's Partnership Agreement, the MIP Units shall be entitled to
receive in the aggregate an amount equal to .01% of any funds set aside for
Distribution from Sales and Refinancing Proceeds, or upon liquidation, but not
before the Fastcom Investors have received their respective Capital
Contributions and Preferred Returns, if applicable, and after any required
payment on the Series 100EA Units and the payment of Datalinc's, CFG's and FMI's
Initial Distributions (as defined below). MIP Units will receive, upon Mandatory
Conversion, the Underlying Shares of Thrucomm's Mandatory Convertible Preferred
Stock, Series M (the "Series M Preferred Stock").
CFG'S OPTION
CFG has an option to acquire a 2.171% 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
$436,630 (CFG's "Initial Distribution"). CFG's Initial Distribution is
determined as follows: (i) the aggregate cash Capital Contributions of the
Fastcom Investors, $4,600,000; (ii) divided by 22.872%, 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 2.171%, which is CFG's equity interest
in Fastcom. Following payment of all of the Initial Distributions, CFG shall be
entitled to 2.171% 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 N (the "Series N Preferred Stock").
INFORMATION LEASING CORPORATION
Pursuant to the ILC Agreement, ILC is entitled to receive a .905% equity
interest in Fastcom for the first $1 million of Network equipment financed under
ILC leases, and an additional .4525% equity interest in Fastcom for each $3
million of equipment financed thereafter, up to a total of 4.525% of the equity
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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 .4525% rate
for each $3 million.
ILC shall be entitled to receive Distributions from Fastcom, only after F
astcom 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 $182,013 (ILC's
"Initial Distribution"). ILC's Initial Distribution is determined as follows:
(i) the aggregate cash Capital Contributions of the Fastcom Investors,
$4,600,000; (ii) divided by 22.872%, 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 .905%, which is ILC's equity interest in Fastcom. Following
payment of all of the Initial Distributions, ILC shall be entitled to .905% 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").
FMI
FMI, the General Partner of Fastcom, shall be entitled to receive Dist
ributions 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 $201,119, (FMI's "Initial Distribution"). FMI's Initial Distribution is
determined as follows: (i) the aggregate cash Capital Contributions of the
Fastcom Investors, $4,600,000; (ii) divided by 22.872%, 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% 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 P (the "Series P Preferred Stock").
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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"). In its simplest terms, the Formula can be stated as follows: the
Conversion Value of Thrucomm minus the Datalinc Value equals the Fastcom Value.
Set forth below is a description of how the Formula would work upon a Mandatory
Conversion Event, including explanations of how the Conversion Value, Datalinc
Value and Fastcom Value are determined, the material assumptions upon which the
Formula is based, and a discussion of any material differences between and
Investor's rights, interests and preferences under the terms of the Preferred
Stock from those he or she currently has under the Partnership Agreements.
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.
DETERMINING THE CONVERSION VALUE
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. In this example, the
Conversion Value of Thrucomm, would be an aggregate of $30 million ($45,000,000
- - $15,000,000 = $30,000,000). Thrucomm cannot presently ascertain the amount of
equity that it may sell in an IPO. Such amount will be determined by Thrucomm at
the time of any such offering with the advice of its underwriters. The one-third
assumption used in the examples herein is for illustration purposes and is not
intended to be a ceiling for the amount of equity that could be sold in an IPO.
However, pursuant to the Reorganization Agreement, Thrucomm will not sell more
than forty percent (40%) of its equity in an IPO, and the Conversion Value shall
not be less than $20 million in any Mandatory Conversion Event. The $20 million
minimum Conversion Value was chosen by the General Partners and the Board of
Directors of Thrucomm to ensure that the Datalinc and Fastcom Investors would at
least receive Underlying Shares with a value that approximates their accumulated
Preferred Returns as of October 1, 1997 pursuant to the terms of their
respective Partnership Agreements, and to provide Thrucomm with sufficient
capital to settle outstanding debts and leasing commitments.
If Mandatory Conversion should occur as a result of a Sale, Merger, or
Investment, the Conversion Value would be equal to the aggregate consideration
proposed to be received in the Sale or Merger, or the aggregate value received
in the Investment. A Mandatory Conversion occurs, in the event of a Sale or
Merger when (i) the Board of Directors of Thrucomm approve a proposed Sale or
Merger, and (ii) the parties to the proposed Sale or Merger have executed an
agreement of sale or merger that sets forth the consideration to be received by
Thrucomm's shareholders, and is conditioned on such shareholder's approval. See
"Risk Factors - Risks Associated with a Sale or Merger." For illustration
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purposes only, ICN, FMI and the Company have provided examples of the operation
of the Formula at Conversion Values of $20 million, $30 million and $60 million.
See "Thrucomm Ownership Tables."
DETERMINING THE DATALINC VALUE AND THE FASTCOM VALUE
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 in excess of $60
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
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
If however the Conversion Value of Thrucomm is less than $30 million, the
Datalinc Value would be established at $9 million (the "Minimum Datalinc
Value"). For example, if the Conversion Value is $20 million the Datalinc Value
would be $9 million and the Fastcom Value would be $11 million ($20,000,000 -
$9,000,000 = $11,000,000). The Minimum Datalinc Value is roughly equivalent to
the accumulated Preferred Returns of Datalinc's Investors, as of May 1, 1997.
Although the Minimum Datalinc Value is set at $9 million, the Earned Preferred
Returns of the Series A - E Preferred Stock will continue to grow in the same
manner as the Datalinc Series 100 - 300E2 Units to which they relate. If such
Earned Preferred Returns exceed the Datalinc Value, the excess will be allocated
from Datalinc's share of the Fastcom Value.
The 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.
DISTRIBUTION OF THE DATALINC VALUE AND THE FASTCOM VALUE TO INVESTORS AND
OTHER EQUITY OWNERS
After the Datalinc Value and the Fastcom Value have been established, the
second step is to distribute the Datalinc Value and the Fastcom Value to their
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respective Investors and Other Equity Owners, in accordance with the rights and
preferences of the Preferred Stock, which terms preserve as closely as possible
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 and the subsequent distribution of the Datalinc and Fastcom
Values to certain Investors or Other Equity Owners. See also "Thrucomm Ownership
Tables."
DISTRIBUTION OF THE DATALINC VALUE TO THE SERIES 100 INVESTORS
The following is a description of the manner in which the Formula and the
terms of the Preferred Stock would distribute Underlying Shares to Datalinc's
Series 100 Units. Assuming, for illustration purposes only, a $30 million
Conversion Value, the Datalinc Value would be $9 million, and the Fastcom Value
would be $21 million. A Datalinc Series 100 Investor would receive Underlying
Shares upon Mandatory Conversion worth $301,625 for each Series 100 Unit he or
she owns (Column K 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
Earned Preferred Return on the Series A Stock (Column C); (ii) plus $154,834
(Column G), which is an amount equal to (a) the Datalinc Value, (b) minus the
sum of the Earned Preferred Returns of the Series A-E Preferred Stock, (c)
multiplied by 18.921%, which is the equity interest of Datalinc's Series 100
Investors (Column A); (iii) plus $2,470,385, which is the 18.921% of Datalinc's
share of the Fastcom Value (Column H); (iv) divided by 17, the number of
outstanding Series 100 Units. See "Thrucomm's Ownership Tables." Earned
Preferred Returns on the Series A-E Preferred Stock (Column C) 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 - Earned Preferred
Returns."
DISTRIBUTION OF THE FASTCOM VALUE TO THE SERIES 100 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 million. A Fastcom Series 100 Investor would receive
Underlying Shares of Series H Preferred Stock worth $11,911 for each Series 100
Unit he or she owns (See Column K of Thrucomm's Ownership Tables). The value of
a Series 100 Unit was calculated as follows: (i) $21 million, the Fastcom Value;
(ii) multiplied by 2.013%, which is the ownership interest of the Series H
Preferred Stock (Column A); (iii) plus the Series H Earned Preferred Return, if
any (Column C); (iv) divided by 44.5, which is the number of outstanding Fastcom
Series 100 Units. The ownership interest of the Series H Preferred Stock is
adjusted in the event of an IPO to ensure that the Series H Preferred Stock
receives the benefit of the Fastcom's Series 100 Investors' minimum Guaranteed
Return. See "Equity Ownership of the Partnerships - The Fastcom Investors -
Series 100 Investors," and "Description of the Securities - Mandatory
Convertible Preferred Stock - Earned Preferred Returns."
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DISTRIBUTION OF THE FASTCOM VALUE TO THE MIP UNITS
If the Conversion Value is $30 million, the Fastcom Value would be $21
million and the distribution of the Fastcom Value to the MIP Units would be
equal to: (i) $21 million, multiplied by 0.01% (Column A); plus (ii) any Earned
Preferred Return on the Series M Preferred Stock (Column C); divided by (iii)
430, the number of outstanding MIP Units. See "Thrucomm Ownership Tables," and
"Description of Thrucomm's Securities - Preferred Stock - Earned Preferred
Return Series M").
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.
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 H Preferred Stock
have Earned Preferred Returns, in an IPO Mandatory Conversion Event, only if
necessary to achieve the Minimum Guaranteed Return. See "Description of the
Securities - The Preferred Stock - Earned Preferred Returns," "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."
FASTCOM'S MIP UNITS
The MIP Units are entitled, under Fastcom's amended Partnership Agreement,
to a residual Distribution interest in an amount equal to .01% of Distributions
from Sales and Refinancing Proceeds. The Series M Preferred Stock will be
entitled, in a Mandatory Conversion Event, to receive Underlying Shares equal to
.01% of the Fastcom Value. In addition, the Series M Preferred Stock will be
entitled to an Earned Preferred Return in certain circumstances. Any Earned
Preferred Return on the Series M Preferred Stock is payable from Datalinc's
aggregate share of the Fastcom Value. See "Description of Thrucomm's Securities
- - Preferred Stock Earned Preferred Return - Series M."
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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 terms of the
Series D and E Preferred Stock, however, use June 1, 1993 and September 1, 1993,
respectively, to calculate the Earned Preferred Returns on such 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."
CFG UNITS
The Formula assumes the exercise of the CFG Options to acquire a 4%
ownership interest in Datalinc and a 2.171% 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."
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: $20
million, $30 million, and $60 million. If Mandatory Conversion occurs on a date
other than May 1, 1997, there would be changes to the Earned Preferred Returns
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.
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THRUCOMM INC. Page 1 of 2
MANDATORY CONVERSION EVENT
ILLUSTRATION
CONVERSION VALUE - $20M
A B C D E
CAPITAL UNITS PRE- PARTNER- CONVER- EARNED INVESTOR UN-
CONTRIB- PURCH- FERRED SHIP SION PRE- & OTHER ALLOCATED
UTED HASED STOCK OWNER- VALUE FERRED ALLOCA- PREFERRED
SERIES SHIP % ALLOCA- RETURN(6) TION RETURN
TION
FASTCOM LTD. $11,000,000
SERIES 100(1)
$ 445,000 44.500 H 2.013 $ 358,931 $ 580,361
SERIES 100EA(2)
0 11.125 I 0.503 0 55,330
SERIES 200(1)
2,155,000 215.500 J 10.832 1,887,080 3,078,600
SERIES 300(1)
2,000,000 200.000 K 9.524 952 360 2,000,000
DATALINC L 73.042 ($3,198,371) 4,836,249
MIP (3) M 0.010 0 1,100
CFG(4) 240,000 N 2.171 0 238,810
ILC O 0.905 0 99,550
FMI P 1.000 0 110,000
------- ----------
100.000 11,000,000
DATALINC, LTD $ 9,000,000
SERIES 100
1,632,000 17.000 A 18.921 2,502,400 2,502,400
SERIES 200
1,142,500 228.500 B 8.642 1,765,423 1,765,423
SERIES 300
717,500 143.500 C 5.429 982,942 982,942
SERIES 300E1
1,207,500 241.500 D 9.137 1,585,850 1,585,850
SERIES 300E2
1,040,000 208.000 E 7.871 1,345,067 1,345,067
CFG(5) F 4.000 0 0
ICN G 46.000 0 0
-------- ----------- -----------
100.000 $8,181,682 $8,181,682
ASSUMPTIONS:
(1) AT $20 MILLION THE SERIES H, J AND K UNITS RECEIVE EARNED PREFERRED
RETURNS TO ACHIEVE THE MINIUM GUARANTEED RETURN IN AN IPO(COLUMN C).
(2) SERIES 100 FASTCOM INVESTORS RECEIVED AT NO ADDITIONAL COST 1/4 UNIT OF
SERIES 100EA FOR EACH UNIT OF SERIES 100 PURCHASED.
(3) THE MIP RECEIVES AN OWNERSHIP INTEREST IN THRUCOMM EQUIVALENT TO 0.06% AT
$20M VALUATION UNDER THE TERMS OF PREFERRED STOCK SERIES M.
(4) CFG EXERCISES OPTION TO PURCHASE 2.171% OF FASTCOM FOR $240,000.
(5) CFG EXERCISES OPTION TO PURCHASE 4.0% OF DATALINC FOR $1.
(6) THE EARNED PREFERRED RETURNS OF SERIES A - E PREFERRED STOCK IS EQUIVALENT
TO THE PREFERRED RETURNS OF THE DATALINC INVESTORS, AND IS SHOWN AS IF
MANDATORY CONVERSION OCCURRED ON MAY 1, 1997.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO
BE CONSTRUED AS A PROJECTION OF PARTNERSHIP VALUE.
42
<PAGE>
THRUCOMM INC. Page 2 of 2
MANDATORY CONVERSION EVENT
ILLUSTRATION
CONVERSION VALUE - $20M
F G H I J K
VALUATION REMAINDER AGGREGATE THRUCOMM PRICE $ VALUE PER
BALANCE DATALINC GRAND OWNER- PAID/ LTD PARTNER
ALLOCA- ALLOCA- TOTAL SHIP UNIT UNIT
TION TION %
FASTCOM LTD.
SERIES 100(1) $ 580,361 2.9% $ 10,000 $ 13,042
SERIES 100EA(2) 55,330 0.3% 0 4,973
SERIES 200(1) 3,078,600 15.4% 10,000 14,286
SERIES 300(1) 2,000,000 10.0% 10,000 10,000
DATALINC ($4,836,249) 0
MIP (3) 1,100 0.0%
CFG(4) 238,810 1.2%
ILC 99,550 0.5%
FMI 110,000 0.5%
DATALINC, LTD
SERIES 100
$ 154,834 915,067 3,572,301 17.9% 96,000 210,135
SERIES 200
70,719 417,949 2,254,091 11.3% 5,000 9,856
SERIES 300
44,426 262,560 1,289,928 6.4% 5,000 8,989
SERIES 300E1
74,770 441,888 2,102,508 10.5% 5,000 8,706
SERIES 300E2
64,410 308,661 1,790,138 9.0% 5,000 8,606
CFG(5) 32,733 193,450 226,183 1.1%
ICN 376,426 2,224,675 2,601,100 13.0%
---------- ---------- ---------- -----
$ 818,318 $4,836,249 $20,000.000 100.0%
ASSUMPTIONS:
(1) AT $20 MILLION THE SERIES H, J AND K UNITS RECEIVE EARNED PREFERRED
RETURNS TO ACHIEVE THE MINIUM GUARANTEED RETURN IN AN IPO(COLUMN C).
(2) SERIES 100 FASTCOM INVESTORS RECEIVED AT NO ADDITIONAL COST 1/4 UNIT OF
SERIES 100EA FOR EACH UNIT OF SERIES 100 PURCHASED.
(3) THE MIP RECEIVES AN OWNERSHIP INTEREST IN THRUCOMM EQUIVALENT TO 0.06% AT
$20M VALUATION UNDER THE TERMS OF PREFERRED STOCK SERIES M.
(4) CFG EXERCISES OPTION TO PURCHASE 2.171% OF FASTCOM FOR $240,000.
(5) CFG EXERCISES OPTION TO PURCHASE 4.0% OF DATALINC FOR $1.
(6) THE EARNED PREFERRED RETURNS OF SERIES A - E PREFERRED STOCK IS EQUIVALENT
TO THE PREFERRED RETURNS OF THE DATALINC INVESTORS, AND IS SHOWN AS IF
MANDATORY CONVERSION OCCURRED ON MAY 1, 1997.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO
BE CONSTRUED AS A PROJECTION OF PARTNERSHIP VALUE.
43
<PAGE>
THRUCOMM INC. Page 1 of 2
MANDATORY CONVERSION EVENT
ILLUSTRATION
CONVERSION VALUE - $30M
A B C D E
CAPITAL UNITS PRE- PARTNER- CONVER- EARNED INVESTOR UN-
CONTRIB- PURCH- FERRED SHIP SION PRE- & OTHER ALLOCATED
UTED HASED STOCK OWNER- VALUE FERRED ALLOCA- PREFERRED
SERIES SHIP % ALLOCA- RETURN(6) TION RETURN
TION
FASTCOM LTD. $21,000,000
SERIES 100(1)
$ 445,000 44.500 H 2,013 $ 107,310 $ 530,040
SERIES 100EA(2)
0 11.125 I 0.503 0 105,630
SERIES 200(1)
2,155,000 215.500 J 10.832 803,880 3,078,600
SERIES 300(1)
2,000,000 200.000 K 9.524 0 2,000,040
DATALINC L 73.042 ($2,282,506) 13,056,314
MIP (3) M 0.010 1,371,316 1,373,416
CFG(4) 240,000 N 2.171 455,910
ILC O 0.905 190,050
FMI P 1.000 210,000
------- ----------
100.000 21,000,000
DATALINC, LTD $ 9,000,000
SERIES 100
1,632,000 17.000 A 18.921 2,502,400 2,502,400
SERIES 200
1,142,500 228.500 B 8.642 1,765,423 1,765,423
SERIES 300
717,500 143.500 C 5.429 982,942 982,942
SERIES 300E1
1,207,500 241.500 D 9.137 1,585,850 1,585,850
SERIES 300E2
1,040,000 208.000 E 7.871 1,345,067 1,345,067
CFG(5) F 4.000 0 0
ICN G 46.000 0 0
-------- ----------- -----------
100.000 $8,181,682 $8,181,682
ASSUMPTIONS:
(1) AT $30 MILLION THE SERIES H AND J PREFERRED STOCK RECEIVE EARNED PREFERRED
RETURNS TO ACHIEVE THE MINIUM GUARANTEED RETURN IN AN IPO(COLUMN C).
(2) SERIES 100 FASTCOM INVESTORS RECEIVED AT NO ADDITIONAL COST 1/4 UNIT OF
SERIES 100EA FOR EACH UNIT OF SERIES 100 PURCHASED.
(3) THE MIP RECEIVES AN OWNERSHIP INTEREST IN THRUCOMM EQUIVALENT TO 4.578% AT
$30M VALUATION UNDER THE TERMS OF PREFERRED STOCK SERIES M.
(4) CFG EXERCISES OPTION TO PURCHASE 2.171% OF FASTCOM FOR $240,000.
(5) CFG EXERCISES OPTION TO PURCHASE 4.0% OF DATALINC FOR $1.
(6) THE EARNED PREFERRED RETURNS OF SERIES A - E PREFERRED STOCK IS EQUIVALENT
TO THE PREFERRED RETURNS OF THE DATALINC INVESTORS, AND IS SHOWN AS IF
MANDATORY CONVERSION OCCURRED ON MAY 1, 1997.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO
BE CONSTRUED AS A PROJECTION OF PARTNERSHIP VALUE.
44
<PAGE>
THRUCOMM INC. Page 2 of 2
MANDATORY CONVERSION EVENT
ILLUSTRATION
CONVERSION VALUE - $30M
F G H I J K
VALUATION REMAINDER AGGREGATE THRUCOMM PRICE $ VALUE PER
BALANCE DATALINC GRAND OWNER- PAID/ LTD PARTNER
ALLOCA- ALLOCA- TOTAL SHIP UNIT UNIT
TION TION %
FASTCOM LTD.
SERIES 100(1) $ 530,040 1.8% $ 10,000 $ 11,911
SERIES 100EA(2) 105,630 0.4% 0 9,495
SERIES 200(1) 3,078,600 10.3% 10,000 14,286
SERIES 300(1) 2,000,040 6.7% 10,000 10,000
DATALINC ($13,056,314) 0
MIP (3) 1,373,416 4.6%
CFG(4) 455,910 1.5%
ILC 190,050 0.6%
FMI 210,000 0.7%
DATALINC, LTD
SERIES 100
$ 154,834 2,470,385 5,127,619 17.1% 96,000 301,625
SERIES 200
70,719 1,128,327 2,964,469 9.9% 5,000 12,974
SERIES 300
44,426 708,827 1,736,196 5.8% 5,000 12,099
SERIES 300E1
74,770 1,192,955 2,853,575 9.5% 5,000 11,816
SERIES 300E2
64,410 1,027,662 2,437,140 8.1% 5,000 11,717
CFG(5) 32,733 522,253 554,985 1.8%
ICN 376,426 6,005,904 6,382,330 21.3%
---------- ---------- ---------- -----
$ 818,318 $13,056,314 $30,000.000 100.0%
ASSUMPTIONS:
(1) AT $30 MILLION THE SERIES H, J AND K PREFERRED STOCK RECEIVE EARNED PRE-
FERRED RETURNS TO ACHIEVE THE MINIUM GUARANTEED RETURN IN AN IPO(COLUMN C).
(2) SERIES 100 FASTCOM INVESTORS RECEIVED AT NO ADDITIONAL COST 1/4 UNIT OF
SERIES 100EA FOR EACH UNIT OF SERIES 100 PURCHASED.
(3) THE MIP RECEIVES AN OWNERSHIP INTEREST IN THRUCOMM EQUIVALENT TO 4.578% AT
$30M VALUATION UNDER THE TERMS OF PREFERRED STOCK SERIES M.
(4) CFG EXERCISES OPTION TO PURCHASE 2.171% OF FASTCOM FOR $240,000.
(5) CFG EXERCISES OPTION TO PURCHASE 4.0% OF DATALINC FOR $1.
(6) THE EARNED PREFERRED RETURNS OF SERIES A - E PREFERRED STOCK IS EQUIVALENT
TO THE PREFERRED RETURNS OF THE DATALINC INVESTORS, AND IS SHOWN AS IF
MANDATORY CONVERSION OCCURRED ON MAY 1, 1997.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO
BE CONSTRUED AS A PROJECTION OF PARTNERSHIP VALUE.
45
<PAGE>
THRUCOMM INC. Page 1 of 2
MANDATORY CONVERSION EVENT
ILLUSTRATION
CONVERSION VALUE - $60 M
A B C D E
CAPITAL UNITS PRE- PARTNER- CONVER- EARNED INVESTOR UN-
CONTRIB- PURCH- FERRED SHIP SION PRE- & OTHER ALLOCATED
UTED HASED STOCK OWNER- VALUE FERRED ALLOCA- PREFERRED
SERIES SHIP % ALLOCA- RETURN(6) TION RETURN
TION
FASTCOM LTD. $45,000,000
SERIES 100(1)
$ 445,000 44.500 H 2.013 $ 905,850
SERIES 100EA(2)
0 11.125 I 0.503 226,350
SERIES 200(1)
2,155,000 215.500 J 10.832 4,874,400
SERIES 300(1)
2,000,000 200.000 K 9.524 4,285,800
DATALINC L 73.042 ($2,419,993) 30,448,907
MIP (3) M 0.010 2,419,993 2,424,493
CFG(4) 240,000 N 2.171 976,950
ILC O 0.905 407,250
FMI P 1.000 450,000
------- ----------
100.000 45,000,000
DATALINC, LTD $15,000,000
SERIES 100
1,632,000 17.000 A 18.921 2,502,400 2,502,400
SERIES 200
1,142,500 228.500 B 8.642 1,765,423 1,765,423
SERIES 300
717,500 143.500 C 5.429 982,942 982,942
SERIES 300E1
1,207,500 241.500 D 9.137 1,585,850 1,585,850
SERIES 300E2
1,040,000 208.000 E 7.871 1,345,067 1,345,067
CFG(5) F 4.000 0 0
ICN G 46.000 0 0
-------- ----------- -----------
100.000 $8,181,682 $8,181,682
ASSUMPTIONS:
(1) AT $60 MILLION THE SERIES H, J AND K PREFERRED STOCK DO NOT RECEIVE EARNED
PREFERRED RETURNS TO ACHIEVE THE MINIUM GUARANTEED RETURN IN AN IPO
(COLUMN C).
(2) SERIES 100 FASTCOM INVESTORS RECEIVED AT NO ADDITIONAL COST 1/4 UNIT OF
SERIES 100EA FOR EACH UNIT OF SERIES 100 PURCHASED.
(3) THE MIP RECEIVES AN OWNERSHIP INTEREST IN THRUCOMM EQUIVALENT TO 4.041% AT
$60M VALUATION UNDER THE TERMS OF PREFERRED STOCK SERIES M.
(4) CFG EXERCISES OPTION TO PURCHASE 2.171% OF FASTCOM FOR $240,000.
(5) CFG EXERCISES OPTION TO PURCHASE 4.0% OF DATALINC FOR $1.
(6) THE EARNED PREFERRED RETURNS OF SERIES A - E PREFERRED STOCK IS EQUIVALENT
TO THE PREFERRED RETURNS OF THE DATALINC INVESTORS, AND IS SHOWN AS IF
MANDATORY CONVERSION OCCURRED ON MAY 1, 1997.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO
BE CONSTRUED AS A PROJECTION OF PARTNERSHIP VALUE.
46
<PAGE>
THRUCOMM INC. Page 2 of 2
MANDATORY CONVERSION EVENT
ILLUSTRATION
CONVERSION VALUE - $60 M
F G H I J K
VALUATION REMAINDER AGGREGATE THRUCOMM PRICE $ VALUE PER
BALANCE DATALINC GRAND OWNER- PAID/ LTD PARTNER
ALLOCA- ALLOCA- TOTAL SHIP UNIT UNIT
TION TION %
FASTCOM LTD.
SERIES 100(1) $ 905,850 1.5% $ 10,000 $ 20,356
SERIES 100EA(2) 226,350 0.4% 0 20,346
SERIES 200(1) 4,874,400 8.1% 10,000 22,619
SERIES 300(1) 4,285,800 7.1% 10,000 21,429
DATALINC ($30,448,907) 0
MIP (3) 2,424,493 4.0%
CFG(4) 976,950 1.6%
ILC 407,250 0.7%
FMI 450,000 0.8%
DATALINC, LTD
SERIES 100
$1,290,094 5,761,238 9,553,733 15.9% 96,000 561,984
SERIES 200
589,239 2,631,395 4,986,057 8.3% 5,000 21,821
SERIES 300
370,166 1,653,071 3,006,179 5.0% 5,000 20,949
SERIES 300E1
622,990 2,782,117 4,990,956 8.4% 5,000 20,666
SERIES 300E2
536,670 2,396,633 4,278,370 7.1% 5,000 20,569
CFG(5) 272,733 1,217,956 1,490,689 2.5%
ICN 3,136,426 14,006,497 17,142,923 28.6%
---------- ---------- ---------- -----
$6,818,318 $30,448,907 $60,000.000 100.0%
ASSUMPTIONS:
(1) AT $60 MILLION THE SERIES H, J AND K PREFERRED STOCK DO NOT RECEIVE EARNED
PREFERRED RETURNS TO ACHIEVE THE MINIUM GUARANTEED RETURN IN AN IPO
(COLUMN C).
(2) SERIES 100 FASTCOM INVESTORS RECEIVED AT NO ADDITIONAL COST 1/4 UNIT OF
SERIES 100EA FOR EACH UNIT OF SERIES 100 PURCHASED.
(3) THE MIP RECEIVES AN OWNERSHIP INTEREST IN THRUCOMM EQUIVALENT TO 4.041% AT
$60M VALUATION UNDER THE TERMS OF PREFERRED STOCK SERIES M.
(4) CFG EXERCISES OPTION TO PURCHASE 2.171% OF FASTCOM FOR $240,000.
(5) CFG EXERCISES OPTION TO PURCHASE 4.0% OF DATALINC FOR $1.
(6) THE EARNED PREFERRED RETURNS OF SERIES A - E PREFERRED STOCK IS EQUIVALENT
TO THE PREFERRED RETURNS OF THE DATALINC INVESTORS, AND IS SHOWN AS IF
MANDATORY CONVERSION OCCURRED ON MAY 1, 1997.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO
BE CONSTRUED AS A PROJECTION OF PARTNERSHIP VALUE.
47
<PAGE>
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. Fastcom ownership interests
assume the sale of all Fastcom Series 300 Units.
Column B. Sets forth the allocation of the Conversion Value of Thrucomm to
Datalinc and Fastcom.
Column C. Sets forth the Earned Preferred Returns of 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
as of May 1, 1997. Assumes the 15% Preferred Return provision of the
Fastcom Series 100 Units has terminated. Shows any Earned Preferred
Returns of Series H, J and K to achieve the Minimum Guaranteed Return,
in an IPO, and any Earned Preferred Returns of Series M Preferred
Stock.
Column D. Sets forth the distribution of the Fastcom Value to Fastcom's
Investors and Other Equity Owners, in accordance with the
rights and preferences of the Series H-P Preferred Stock, and the
distribution of the Datalinc Value to Datalinc's Investors and
Other Equity Owners in accordance with the Earned Preferred Return
provisions of the Series A - E Preferred Stock.
Column E. If the Datalinc Value is insufficient to satisfy in full the
Earned Preferred Returns of the Series A - E Preferred Stock, Column
E would set forth the balance of the Earned Preferred Return due
to each such Series.
Column F. If the Datalinc Value exceeds the aggregate Earned Preferred
Returns of the Series A-E Preferred Stock, the positive difference
will be further distributed to Datalinc's Investors and Other Equity
Owners in accordance with the conversion terms of the Series A - G
Preferred Stock.
Column G. Reflects the distribution 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 H. Represents the sum of Columns D, E, F, and G.
Column I. Sets forth Investors' and Other Equity Owners' percentage equity
interest in Thrucomm, based upon the amounts in Column H.
Column J. Reflects the amount paid for each Partnership Unit.
Column K. Reflects the resulting value of each Partnership Unit at the
time of Mandatory Conversion.
No fractional shares will be issued upon conversion.
48
<PAGE>
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. The General Partners in
their business judgment have concluded that most of any Conversion Value in
excess of $30 million is attributable to the business of Fastcom. The
General Partner believes that the conversion terms of the Preferred Stock
are as consistent as possible with the rights and preferences that each
group of Investors or Other Equity Owners now has under their respective
Partnership Agreements.
(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.
49
<PAGE>
(iii) The possible alternatives to the proposed Reorganization. In
particular, the General Partners considered several alternatives for
additional liquidity, including the prospect of continuing the businesses
of the Partnerships as separate entities, a sale of all or substantially
all of the assets, a merger, an underwritten public offering through an
investment banker, a capital infusion from various sources including
institutional investors, venture capital firms or a strategic partner, a
liquidation, and the timing and likelihood of the occurrence of such
alternatives. 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
investment banker, are more viable for corporations than partnerships. For
such reasons, the General Partners were not able to set a range of values
to the Investors of such alternatives. Based on the foregoing 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.
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. The liquidation values of
Datalinc and Fastcom, as determined by Michael Davis & Co., are $347,242
and $0, respectively, as of December 31, 1996.
(iv) The financial advice of Michael Davis & Co. that the Formula used
to allocate the Conversion Value of Thrucomm to Datalinc and Fastcom and
the roll-up transaction taken as a whole is fair from a financial point of
view to Datalinc's Investors, and the distribution of the Underlying Shares
to all of the Investors pursuant to the terms of the Preferred Stock are
consistent with the terms of the Partnership Agreement. The opinion of
Michael Davis & Co. is set forth in Appendix B to the Consent
Statement/Prospectus. At this time, the General Partners do not intend to
obtain a second fairness opinion at the time of a future Sale or Merger.
(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.
50
<PAGE>
(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 that the Formula, the conversion
terms of the Preferred Stock, and the roll-up transaction taken as a whole
is fair to Investors in Datalinc and Fastcom. 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 B. Davis, C.P.A. has been
President of Michael Davis & Co. since its inception in 1992. He is a certified
public accountant with over fourteen years of experience which include seven
years at Price Waterhouse where he served as a Senior Tax Manager and three
years as an Audit Manager at another accounting firm. Michael Davis & Co. was
selected to provide a fairness opinion based upon Mr. Davis' prior service to
ICN and the Partnerships through his position at Price Waterhouse, and his
subsequent service in connection with financial analysis in response to state
securities commission questions. Michael Davis & Co.'s areas of experience
include acquisitions and divestitures of business units, corporate finance,
business valuations, tax consulting and audits.
Michael Davis & Co. has rendered an opinion to the General Partners that,
based on the matters set forth in such opinion, the Formula and the roll-up
transaction taken as a whole is fair from a financial point of view to
Datalinc's Investors, and the distribution of the Underlying Shares to all of
the Investors pursuant to the terms of the Preferred Stock are consistent with
the terms of the Partnership Agreement. Due to the fact that Datalinc owns
between 73% and 80% of Fastcom, Michael Davis & Co. did not consider the
fairness of the roll-up transaction to the Fastcom Investors. 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.
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. Michael
Davis & Co. was not engaged to conduct an independent valuation of the
Partnerships. 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.
51
<PAGE>
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 to Datalinc's Investors.
Michael Davis & Co. has delivered a written opinion dated as of August 26,
1997, that the Formula is fair from a financial point of view to Investors of
Datalinc and that the distributions to all of the Investors, pursuant to the
terms of the Preferred Stock are consistent with the terms of the Partnership
Agreement. 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, 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 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.
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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 73% 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 168.61%, compared with 163.42% under the Formula, or a 1.97% increase
over in their return on investment under the Formula.
For further illustrative purposes, assume under the Sensitivity Analysis a
Conversion Value of $60 million and Datalinc Value of $8.3 million (instead of
$15 million under the Formula), the return on investment to the Datalinc
Investors would be an aggregate 352.23%, compared with 367.21% under the
Formula, or a 3.21% decrease in their return on investment. Similarly, a
Datalinc Value of $33.3 million would yield a 406.79% aggregate return on
investment or a 8.47% 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. Additionally, 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 to the Datalinc Investors; (ii)
Datalinc owns a significant percentage of Fastcom and will receive at least 69%
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
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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.
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 Series 300E1 Unit;
and the Series 300E2 Investors have 15.74% of the votes, or .0757 votes per
Series 300E2 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
Datalinc's Investors and that approval of the Reorganization is in the best
interests of Datalinc and its 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 (2/3) of the
outstanding Units of Fastcom is necessary to approve and adopt the Agreement and
Plan of Reorganization. Datalinc currently 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. Assuming the sale of
all of Fastcom's Series 300 Units, Datalinc will continue to own over 73% of
Fastcom's Units. 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.
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EFFECTIVE TIME AND EXPIRATION DATE
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, but not less
than 60 days after the date the Consent Statement/Prospectus is first provided
to Investors. 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.
The term "Expiration Date" means 5:00 p.m., EST, on October __, 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 Effective
Time, 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.
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ESTIMATED 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. The
total amount of estimated (including actual incurred to date) transactional
expenses are as follows:
Accounting.....................................$ 100,000
Legal.......................................... 150,000
Fairness Opinion............................... 12,000
Filing fees.................................... 500
Solicitation, printing and other costs......... 20,000
---------
Total estimated expenses.................... $ 282,500
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, (i) the Investors will not recognize any gain or loss in the
transfer of the assets and assumption of the liabilities of the Partnerships;
(ii) other than recapture of negative capital accounts, no gain or loss will be
recognized by the Investors upon the receipt of the Preferred Stock by the
Partnerships and the eventual distribution of the Underlying Shares to the
partners in liquidation of the Partnerships; and (iii) the basis of the
Underlying Shares to be eventually received by the Investors in liquidation of
the Partnerships will be equal to the adjusted basis of the Investors in their
respective interests in Datalinc and Fastcom. 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. If a Mandatory Conversion is the result of a Sale or Merger, since any
Sale or Merger is conditioned upon shareholder approval, a new tax opinion would
be required regarding the tax treatment of the consideration to be received by
Investors for the Underlying Shares.
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
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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.
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.
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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 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.
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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.
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
100,000,000 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.
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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
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 66-2/3%
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."
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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.
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.
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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.
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.
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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.
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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
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 April 30, 1997
reflects the transfer of 100% of the assets and liabilities of Fastcom in
exchange for one (1) share of each series of Thrucomm's Mandatory Convertible
Preferred Stock, Series H - P. 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 G. The Unaudited Pro Forma Condensed Combined Statements of
Operations and Cash Flows for the four months ended April 30, 1997 and 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, 1997 and 1996.
Additionally, the Unaudited Pro Forma Condensed Combined Statements of
Operations for the years ended December 1995 and 1994 are presented as the
entities are considered under common control.
The pro forma condensed combined balance sheet assumes that the
Reorganization was consummated on April 30, 1997 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.
65
<PAGE>
THRUCOMM Page 1 of 2
PRO FORMA COMBINED BALANCE SHEET
APRIL 30, 1997
HISTORICAL
DATALINC FASTCOM PRO FORMA ADJUSTMENTS COMBINED
ASSETS
Cash and cash equivalents
$ 41,621 $ 17,414 $ 240,002(f)(l)(m)$ 299,037
Trade accounts receivable
547,268 67,717 614,985
Inventories
186,498 0 186,498
Other receivables
17,708 0 17,708
Prepaid and other current assets
10,815 13,367 24,182
--------- --------- ----------- -------- --------- ---------
TOTAL CURRENT ASSETS
803,910 98,498 $ 0 $ 0 $ 240,002 1,142,410
Advances to and investment in affiliate (gross)
2,133,358 0 (2,133,358)(b) 0
Reserve for advances to affiliate
(1,676,616) 0 1,676,616 (a) 0
Property and equipment, net
868,305 1,638,517 2,506,822
Organization costs(net)
0 150 150
Other long-term receivables
10,000 0 10,000
Other assets and deposits
56,483 0 56,483
Deferred debt issue costs
0 128,300 128,300
Purchased research and development
0 0 85,251(d)(g) 85,251
--------- --------- --------- -------- -------- ---------
TOTAL ASSETS
$2,195,440 $1,865,465$ (456,742) $ 0 $ 325,253 $3,929,416
========= ========= ========= ======== ======== =========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses
$1,473,856 $ 462,762 $1,936,618
Debt due within one year
941,406 0 941,406
Lease obligation due within one year
127,346 341,990 469,336
Payable to affiliate
0 2,133,358$(2,133,358)(b) 0
--------- --------- --------- --------- ---------- ----------
TOTAL CURRENT LIABILITIES
2,542,608 2,938,110 (2,133,358)(b)$ 0 $ 0 3,347,360
Long-term capital lease obligation
222,778 603,971 826,749
--------- --------- --------- --------- --------- ---------
TOTAL LIABILITIES
2,765,386 3,542,081 (2,133,358) 0 0 4,174,109
66
<PAGE>
THRUCOMM Page 2 of 2
PRO FORMA COMBINED BALANCE SHEET
APRIL 30, 1997
HISTORICAL
DATALINC FASTCOM PRO FORMA ADJUSTMENTS COMBINED
Common stock 1(f) 1
Preferred stock:
Datalinc:
Series A-Series 100
1,632,000(c) 1,632,000
Series B-Series 200 1,027,952(c) 1,027,952
Series C-Series 300 654,433(c) 654,433
Series D-Series 300E1 1,110,889(c) 1,110,889
Series E-Series 300E2 956,791(c) 956,791
Series F-CFG 261,067(c) 1(m) 261,068
Series G-ICN 0 0
Fastcom:
Series H-Series 100 414,600(c) 414,600
Series I-Series 100EA 0 85,251(d) 85,251
Series J-Series 200 1,936,500(c) 1,936,500
Series K-Series 300 0 0
Series L-Datalinc 74,143(c) 74,143
Series M-MIP 0 0
Series N-CFG 77,029(c) 240,000(l) 317,029
Series O-ILC 132,000(c) 132,000
Series P-FMI 0 0
Retained earnings(deficit) (8,847,350)(e)(8,847,350)
Mandatory redeemable partnership interest
2,155,000 (2,155,000)(c) 0
Partners' equity (deficit)-Gen.
(2,262,212)(4,358,234) 6,620,446(e) 0
CFG Option - Datalinc
261,067 (261,067)(c) 0
Partners' equity(deficit)-Ltd.
1,431,199 449,589 1,676,616(a) (5,784,308)(c) 2,226,904(e) 0
CFG Option - Fastcom
77,029 (77,029)(c) 0
--------- --------- --------- --------- --------- ---------
TOTAL EQUITY
(569,946)(1,676,616) 1,676,616 0 325,253 (244,693)
--------- --------- --------- --------- --------- ---------
TOTAL LIABILITIES & EQUITY (DEFICIT)
$2,195,440 $1,865,465 $ (456,742) $ 0 $ 325,253 $3,929,416
========= ========= ========= ========= ========== =========
67
<PAGE>
THRUCOMM
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOUR MONTHS ENDED APRIL 30, 1997
HISTORICAL Pro Forma
DATALINC FASTCOM ADJUSTMENTS COMBINED
Revenues:
Hub access fees $ 713,300 $ 90,901 $ 0 $ 804,201
VSAT/PES sales 1,850 0 0 1,850
Installation income
and other services 114,448 0 0 114,448
----------- ----------- ----------- -----------
Total revenues 829,598 90,901 0 920,499
----------- ----------- ----------- ----------
Operating expenses:
Cost of services
provided 470,873 0 0 470,873
Cost of equipment
sales and installation
fees 42,252 0 0 42,252
Selling, general and
administrative 213,357 794,837 0 1,008,194
Research and development,
net of refund 0 137,677 0 137,677
Depreciation and
amortization 126,916 115,837 0 242,753
----------- ----------- ----------- ---------
Total operating expenses 853,398 1,048,351 0 1,901,749
----------- ----------- ----------- ---------
Loss from operations (23,800) (957,450) 0 (981,250)
Income (loss) from
affiliate (849,220) 0 849,220(i) 0
Interest expense (44,168) (23,770) 0 (67,938)
----------- ----------- ----------- ---------
Net income (loss) $ (917,188) $ (981,220) $ 849,220 $(1,049,188)
============ ============ ========== ==========
68
<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 $ 0 $ 2,163,545
VSAT/PES sales 3,131,810 0 0 3,131,810
Hub equipment sales 255,000 0 0 255,000
Terminal equipment
sales 50,805 0 0 50,805
Installation income
and other services 300,395 0 (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 0 0 1,349,499
Cost of equipment
sales and installation
fees 3,315,001 0 0 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 0 364,977
Depreciation and
amortization 473,024 106,680 0 579,704
----------- --------- --------- ---------
Total operating
expenses 5,848,926 1,777,344 (48,340) 7,577,930
----------- --------- --------- ---------
Loss from operations (16,505) (1,708,210) 0 (1,724,715)
Income (loss) from
affiliate (481,752) 0 481,752(i) 0
Interest expense (158,292) (7,830) 0 (166,122)
----------- --------- --------- ---------
Net income (loss) $ (656,549) $(1,716,040) $ 481,572 $(1,890,837)
=========== ========= ========= =========
69
<PAGE>
THRUCOMM
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
HISTORICAL Pro Forma
DATALINC FASTCOM ADJUSTMENTS COMBINED
Revenues:
Hub access fees $ 1,701,591 $ 0 $ 0 $ 1,701,591
VSAT/PES sales 120,587 0 0 120,587
Hub equipment sales 38,000 0 0 38,000
Terminal equipment sales 20,033 0 0 20,033
Installation income
and other services 288,526 0 0 288,526
--------- ---------- ---------- ----------
Total revenues 2,168,737 0 0 2,168,737
--------- ---------- ---------- ---------
Operating expenses:
Cost of hub access
services 1,170,600 0 0 1,170,600
Cost of equipment
sales and installation
fees 285,054 0 0 285,054
Selling, general and
administrative 562,640 653,768 0 1,216,408
Research and
development,
net of refund 0 278,426 0 278,426
Depreciation and
amortization 326,529 26,667 0 353,196
--------- ---------- ---------- ---------
Total operating
expenses 2,344,823 958,861 0 3,303,684
--------- ---------- ---------- ---------
Loss from operations (176,086) (958,861) 0 (1,134,947)
Income (loss) from
affiliate 146,710 0 (146,710)(i) 0
Interest expense (97,140) (11,241) 0 (108,381)
--------- ---------- ---------- ---------
Net loss $ (126,516) $ (970,102) $ (146,710)$(1,243,328)
========= ========== ========== =========
70
<PAGE>
THRUCOMM
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
HISTORICAL Pro Forma
DATALINC FASTCOM ADJUSTMENTS COMBINED
Revenues:
Hub access fees $ 1,515,509 $ 0 $ 0 $ 1,515,509
VSAT/PES sales 2,400,288 0 0 2,400,288
Hub equipment sales 100,000 0 0 100,000
Terminal equipment
sales 1,284 0 0 1,284
Installation income
and other services 226,557 0 0 226,557
--------- ---------- ---------- ---------
Total revenues 4,243,638 0 0 4,243,638
--------- ---------- ---------- ---------
Operating Expenses:
Cost of hub access
services 1,100,604 0 0 1,100,604
Cost of equipment
sales and installation
fees 2,386,108 0 0 2,386,108
Selling, general and
administrative 824,810 253,241 0 1,078,051
Research and
development,
net of refund (79,722) 308,659 0 228,937
Depreciation and
amortization 396,879 2,392 0 399,271
--------- --------- -------- ---------
Total operating
expenses 4,628,679 564,292 0 5,192,971
--------- --------- -------- ---------
Loss from operations (385,041) (564,292) 0 (949,333)
Income (loss) from
affiliate (566,497) 0 566,497(i) 0
Interest expense (8,173) (2,205) 0 (10,378)
--------- ---------- -------- ---------
Net income (loss $ (959,711) $ (566,497) $ 566,497 $ (959,711)
========= ========== ======== =========
71
<PAGE>
THRUCOMM
PRO FORMA COMBINED STATEMENT OF CASH FLOWS
FOUR MONTHS ENDED APRIL 30, 1997
HISTORICAL PRO FORMA
DATALINC FASTCOM ADJUSTMENTS COMBINED
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (917,188) $ (981,220) $ 849,220 (i) $ (1,049,188)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and
amortization 126,916 119,537 246,453
Income(loss) in affiliate 849,220 0 (849,220)(i) 0
(Increase) decrease in:
Trade accounts
receivable 26,811 (53,505) (26,694)
Inventories 95,052 0 95,052
Other receivables 23,804 38,221 62,025
Prepaid and other
current assets 9,695 2,655 12,350
Other assets and
deposits 16,047 0 16,047
Increase in accounts payable and accrued
expenses 553,748 154,705 708,453
---------- --------- ---------- ---------
Net cash provided by (used in)
operating activities 784,105 (719,607) 0 64,498
---------- --------- ---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property
and equipment (83,575) (109,899) (193,474)
Advances made to affiliate (787,427) 0 787,427(j) 0
---------- --------- ---------- --------
Net cash provided by (used in) investing
activities (871,002) (109,899) 787,427 (193,474)
---------- --------- ---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions 0 0 240,002(f)(l)(m) 240,002
Advances from affiliate 0 787,427 (787,427)(j) 0
Additions to borrowings 234,000 56,161 290,161
Reductions in borrowings
and capital lease
obligations (130,057) (8,834) (138,891)
---------- ---------- ---------- --------
Net cash provided by (used in) financing
activities 103,943 834,754 (547,425) 391,272
---------- ---------- ---------- --------
Net increase in cash and
cash equivalents 17,046 5,248 240,002 262,296
Cash and cash equivalents,
beginning of year 24,575 12,166 36,741
----------- ---------- ---------- --------
Cash and cash equivalents,
end of year $ 41,621 $ 17,414 $ 240,002 $ 299,037
=========== ========== ========== =========
72
<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 (i) $(1,890,837)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and
amortization 473,024 106,680 579,704
Income (loss)
in affiliate 481,752 0 (481,752)(i) 0
(Increase) decrease in:
Trade accounts
receivable (267,279) (14,212) (281,491)
Inventories 433,929 0 433,929
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) 0 (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 (1,009,002)
---------- --------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of equipment - Acquisitions of property and equipment
(144,817) (636,975) (781,792)
Investment made in affiliate - Advances made to affiliate
(160,287) 0 160,287(j) 0
---------- --------- --------- ---------
Net cash used in investing activities
(305,104) (636,975) 160,287 (781,792)
---------- --------- --------- ---------
Cash flows from financing activities:
Capital contributions 0 2,017,500 240,002(f)(l)(m) 2,257,502
Advances from affiliate 0 160,287 (160,287)(j) 0
Additions to
borrowings 638,280 0 638,280
Reductions in borrowings and capital
lease obligations (890,190) 0 (890,190)
Debt issue costs (4,289) (11,595) (15,884)
---------- --------- --------- ---------
Net cash provided by (used in) financing activities
(256,199) 2,166,192 79,715 1,989,708
---------- --------- --------- ---------
Net increase(decrease) in cash and cash equivalents
(53,254) 12,166 240,002 198,914
Cash and cash equivalents, beginning of year
77,829 0 77,829
---------- ---------- --------- ---------
Cash and cash equivalents, end of year
$ 24,575 $ 12,166 $ 240,002 $ 276,743
========== ========= ======== ========
73
<PAGE>
THRUCOMM
PRO FORMA ADJUSTMENTS
The following pro forma adjustments are necessary:
a. To eliminate $1,676,616 reserve established in fiscal 1997 related to
the advances to and investment in Fastcom recorded by Datalinc.
b. To eliminate $2,133,358 advances to and investment in affiliate and payable
recorded by Datalinc and Fastcom, as of April 30, 1997, 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 (the "minority interests"). The step-up in the minority interests
are based on the fair value of the Series 200 Fastcom limited partners
interests which were acquired during May to September 1996. As these
interests were either 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 of purchased in-process research and development
costs. However, under FAS 121 this asset is considered impaired and would be
written off subsequent to the Reorganization.
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 Datalinc's equity income (loss) in Fastcom for the respective
period presented.
j. To eliminate advances made by Datalinc and received by Fastcom during the
respective period presented.
k. No tax benefits or tax asset relating to operating losses have been recorded
as all losses, have been utilized 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.
74
<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 and 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 and development,
net of refund (80) -1.9 0 0.0 0 0.0
Depreciation and
amortization 397 9.4 327 15.1 473 8.1
------ -------- ------ -------- ------ -------
Operating income (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
======= ======== ====== ======== ====== =======
FOUR MONTHS ENDED APRIL 30,
Percent Percent
of of
1996 REVENUES 1997 REVENUES
------- --------- ------- ----------
Revenues $ 1,010 100.0% $ 829 100.0%
Operating expenses:
Cost services and sales 621 61.5 512 61.8
Selling, general &
administrative 207 20.5 214 25.8
Research and development,
net of refund 0 0.0 0 0.0
Depreciation and amortization 158 15.6 127 15.3
------- ------ -------- --------
Operating income (loss) 24 2.4 (24) -2.9
(Income)loss from affiliate 463 45.8 849 102.4
Interest expense 56 5.5 44 5.3
------- ------ -------- --------
Net loss $ (495) -49.0 $ (917) -110.6
======= ====== ======== ========
75
<PAGE>
FOUR MONTHS ENDED APRIL 30, 1997 COMPARED WITH FOUR MONTHS ENDED APRIL
30, 1996
REVENUES for the four months ended April 30, 1997 decreased approximately
$181,000 (17.9 percent) from 1996. Hub access fee revenues increased
approximately $80,000 from $633,000 in 1996 to $713,000 in 1997 (12.6 percent)
as a result of Datalinc obtaining a significant new customer during 1996. This
customer accounted for approximately 570 new sites, raising the total number of
sites to 1,105 in service at April 30, 1997, as compared with 535 sites at April
30, 1996.
The lack of new customer activity in 1997 significantly reduced equipment sales
and installation fees by approximately $261,000 from $377,000 in 1996 to
$116,000 in 1997 (69.2 percent). Datalinc has signed on two new customers in
June 1997 for 30 new sites.
COST OF SERVICES AND SALES decreased by $109,000 (17.6 percent) for the four
months ended April 30, 1997 over the same period in 1996. Cost of hub access
services increased $68,000 from $402,000 in 1996 to $470,000 in 1997 (16.9
percent). Cost of services as a percent of hub access fee revenues increased
from 63.5 percent in 1996 to 65.9 percent in 1997 as a result of the lower
profit margin required to sign Datalinc's largest customer in 1996.
With the lack of new customer development for the first four months of 1997,
cost of equipment sales decreased $177,000 from $219,000 in 1996 to $42,000 in
1997(80.8 percent)resulting in margins of $158,000 in 1996 and $74,000 in 1997.
Cost of equipment sales as a percent of equipment sales and installation fees
decreased from 58.1 percent in 1996 to 36.2 percent in 1997. This decrease in
cost of sales as a percent of sales is principally a result of minimal equipment
sales and installation fees for the first four months of 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased approximately $6,000 (2.9
percent) from $207,000 for the four months ended April 30, 1996 to $213,000 for
the same period in 1997. This is principally due to the expenses incurred
related to the Reorganization offset by the reversal of the accrual associated
with the MIP that was terminated during 1997.
DEPRECIATION AND AMORTIZATION decreased approximately $31,000 (19.6 percent)
from $158,000 for the four months ended April 30, 1996 to $127,000 for the same
period in 1997.
This decrease is principally a result of
Datalinc transferring equipment under capital lease to Fastcom on January 1,
1997.
(INCOME) LOSS FROM AFFILIATE increased $386,000 from $463,000 loss in the four
months ended April 30, 1996 to a $849,000 loss in the same period in 1997.
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 through April 30, 1997 reflects a decrease in the net assets available
to Datalinc in the event of liquidation of Fastcom. At April 30, 1997,
Datalinc's investment is $457,000.
INTEREST EXPENSE decreased approximately $12,000 (21.4 percent) from $56,000 in
the four months ended April 30, 1996 to $44,000 in the same period in 1997. This
decrease is principally due to interest expense related to a loan that was
76
<PAGE>
repaid by Datalinc in early 1996. However, Datalinc's wholly-owned subsidiary,
Thrucomm, has continued to draw on its $600,000 line of credit to assist in
funding operations. The amount drawn on the line was $521,000 at April 30, 1997.
NET LOSS was $917,000 (110.6 percent of total revenues) in the four months ended
April 30, 1997 as compared to $495,000 (49.0 percent of total revenues) in the
same period in 1996 as a result of factors described above.
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.
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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.
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
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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.
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 on 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 $1,800,000 at April 30, 1997,
as compared to a deficiency of approximately $884,000 at April 30, 1996. 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. Effective, January 1, 1997, Datalinc transferred $586,000
of equipment under capital lease to Fastcom as this equipment was utilized in
Fastcom's Network. Datalinc has guaranteed the lease that was transferred to
Fastcom.
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 negotiated an
extension through September 30, 1997 and the line had an unused available
balance of approximately $79,000 at April 30, 1997. Additionally, Datalinc has
negotiated with its bank for an additional $500,000 line of credit which will be
guaranteed by Blue Chip with related parties of Datalinc and Fastcom. This line
of credit is due in January 1998. Under the terms of Blue Chip's guarantee,
Datalinc can borrow funds which can only be used for monthly operating expenses.
Also under the guarantee, Blue Chip is entitled to a $8,000 consulting fee
payable on the last day of October 1997. Due to delays in finalizing the
guarantee, Datalinc has borrowed $250,000 from Blue Chip as of June 1997. In the
event Blue Chip's guarantee is not fully discharged by October 31, 1997, Blue
Chip will be entitled to monthly consulting fees of $3,000 per month beginning
in November, 1997. Also if the guarantee is not fully discharged, Blue Chip is
entitled to receive warrants to purchase a .5% interest in Thrucomm for a
nominal exercise price within three years.
As of July 15, 1997, Datalinc owes one of its main vendors approximately $1.6
million for services and purchases made in prior months. This vendor is willing
to write a note for the $1.6 million owed which would be due on December 15,
1997. Datalinc would be required to pay a $150,000 installment by September 15,
1997. Datalinc is currently negotiating terms on the note such as the interest
rate.
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During the four month period, Datalinc's operating activities generated $784,000
of 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 Four Months
December 31, YEAR ENDED DECEMBER 31, ENDED APRIL 30,
1994 1995 1996 1996 1997
(Dollar amounts
in thousands)
Statement of Operations Data:
Revenues (1) - - $ 69 $ 5 $ 91
Expenses:
Operating, general &
administrative $ 253 $ 654 1,306 263 795
Research and
development 309 278 365 26 138
Depreciation and
amortization 2 27 107 33 116
Interest expense 2 11 7 0 23
------ ------ ------- ------- ------
Net loss $ (566) $ (970) $(1,716) $ (317) $ (981)
====== ====== ======= ======= ======
(1) Fastcom is a development stage enterprise and has had no significant
revenues.
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FOUR MONTHS ENDED APRIL 30, 1997 COMPARED WITH FOUR MONTHS ENDED APRIL
30, 1996
REVENUES for the four months ended April 30, 1997 increased approximately
$86,000 over the same period in 1996 as Fastcom obtained its first customer in
1996. 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 $532,000
(202.2 percent) from $263,000 for the four months ended April 30, 1996 to
$795,000 for the four months ended April 30, 1997. 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 $112,000 (430.8 percent) from $26,000 for the
four months ended April 30, 1996 to $138,000 for the four months ended April 30,
1997, principally as Fastcom continues to develop the technology related to its
Network and new radios.
DEPRECIATION AND AMORTIZATION increased approximately $83,000 (251.5 percent)
from $33,000 for the four months ended April 30, 1996 to $116,000 for the four
months ended April 30, 1997. 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. Additionally,
Datalinc transferred equipment under capital lease to Fastcom as the equipment
was part of Fastcom's Network on January 1, 1997.
INTEREST EXPENSE increased approximately $23,000 (100 percent) from $0
for the four months ended April 30,
1996 to $23,000 for the four months ended April 30, 1997. This
principally is a result of Fastcom entering into several capital leases during
1997.
NET LOSS was $981,000 for the four months ended April 30, 1997 as compared to
$317,000 in the same period in 1996 as a result of factors described above.
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.
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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.
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 $91,000 in net
revenues for 1997 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 $1,677,000 at April 30, 1997, which is primarily due to Fastcom's
cumulative losses of $4.3 million. Fastcom also has a working capital deficiency
of $2.8 million at April 30, 1997. The increase in the working capital
deficiency is due to increased development costs and capital leases being
entered into during the year. Effective January 1, 1997, Fastcom received
$586,000 of equipment under capital lease from Datalinc as this equipment was
utilized in Fastcom's Network. Datalinc has guaranteed the lease that was
transferred to Fastcom. In April 1997, Fastcom's lessor, ILC, financed in excess
of $1 million of equipment resulting in ILC obtaining a .905% interest in
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Fastcom. ILC's partnership interest was recorded as debt issuance costs at the
fair value determined on the pricing of the Series 200 units sold in 1996.
Fastcom has historically been highly dependent on obtaining necessary financing
from Datalinc, a related party and owes Datalinc $2.1 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. Fastcom is in the process of initiating an additional limited
partner offering, Series 300, which is anticipated to raise approximately
$2,000,000 in gross proceeds. These proceeds will be utilized to pay Fastcom's
creditors as well as fund the further development of its Network. 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 April 30, 1997 totaled $2,133,358. 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 eliminated, which was considered by management in establishing the
relative ownership interests of Fastcom and Datalinc in Thrucomm.
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
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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.
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
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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.
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
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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 DP1000s 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.
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).
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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.
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.
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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
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
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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.
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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 a three year agreement with Nova Engineering, an
engineering firm specializing in the field of spread spectrum modulation. This
agreement (i) provides Fastcom exclusive proprietary rights to all designs and
algorithms that result from the collaborative effort between the engineering
firm and Fastcom, and (ii) pays the engineering firm a royalty for each
transceiver placed in service.
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
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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 sub-contracting 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
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.
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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.
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:
o 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.
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o 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.
o 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.
o 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.
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
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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.
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.
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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 54 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.
MARK J. GIANINNI, age 43 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 51, 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
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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 59, 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.
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.
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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.
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."
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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 "NonEmployee 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.
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.
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ICN is entitled to receive 46% 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. 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 92% 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 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 $201,119, (FMI's "Initial
Distribution"). FMI's Initial Distribution is determined as follows: (i) the
aggregate cash Capital Contributions of the Fastcom Investors, $4,600,000; (ii)
divided by 22.872%, 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% 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 Board of
Directors of Thrucomm have approved base annual salaries of $150,000 for Mr.
Kolenda and $160,000 for Mr. Gianinni.
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 G Preferred Stock. Assuming
Conversion Values of Thrucomm at $20 million, $30 million, and $60 million, the
value of ICN's Underlying Shares or other consideration would be: $2,601,100,
$6,382,330 and $17,142,923, or 13.0%, 21.3% and 28.6% of the equity interests of
Thrucomm, respectively.
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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 P Preferred Stock. Assuming
Conversion Values of Thrucomm at $20 million, $30 million and $60 million, the
value of FMI's Underlying Shares or other consideration would be: $110,000,
$210,000 and $450,000 or 0.5%, 0.7% and 0.8% of the equity interests of
Thrucomm, respectively. The combined value of the Series G and P Preferred
Stock, after Mandatory Conversion, assuming the same Conversion Values of
Thrucomm, would be: $2,711,100, $6,592,330 and $17,592,923 or 13.5%, 22.0% and
29.4% 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: $1,007,500, $185,613, and $0,
respectively, for a total of $1,193,113.
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."
FASTCOM MANAGEMENT INCENTIVE PLAN
In July 1997, Datalinc terminated its Management Incentive Plan (Datalinc's
"Plan") and in its place Fastcom approved and established a Management Incentive
Plan (Fastcom's "Plan"). Fastcom has reserved up to 500 MIP Special Limited
Partner Units (the "MIP Units") for issuance under its Plan. Pursuant to
Fastcom's Plan, the Board of Directors of FMI may grant MIP Units to key
employees (the "MIP Special Limited Partners"). At present, 430 MIP Units have
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been granted to the following key employees: Thomas A. Egner, Jr. - 100 MIP
Units; Thomas C. Greggo - 100 MIP Units; Rene Tremblay - 100 MIP Units; Michael
C. Mothershead - 30 MIP Units; J. Thomas Dichiaro - 75 MIP Units; and James R.
Spurlock - 25 MIP Units.
Unless otherwise provided for , all rights of the MIP Units shall vest as
follows: (i) 33 1/3% on the first anniversary of the date of grant; (ii) 66 2/3%
on the second anniversary of the date of grant; and (iii) 100% on the third
anniversary date. The "Date of Grant" for each MIP Unit shall be the date
determined by FMI. In order that the MIP Special Limited Partners will be vested
to the full extent that they were vested under the former Datalinc Plan, the
Date of Grant of their MIP Units is the same as the date that the MIP Special
Limited Partners were originally granted comparable units under Datalinc's Plan.
MIP Special Limited Partners are entitled, under Fastcom's Partnership
Agreement, as amended, to receive in the aggregate residual Distributions an
amount equal to 0.01% of Fastcom Distributions from Sales and Refinancing
Proceeds and upon liquidation. The Fastcom Partnership Agreement was further
amended to reflect a corresponding .01% reduction in Datalinc's share of such
Distributions. MIP Special Limited Partners are not entitled to receive any
Distributions from Cash Flow, and do not carry any voting rights. In addition,
the MIP Units are subject to forfeiture and to other terms and conditions, as
set forth in Fastcom's Plan and Fastcom's Partnership Agreement.
Upon Mandatory Conversion, all of the outstanding MIP Units will be
converted into Underlying Shares or such other assets received in the Mandatory
Conversion Event. Only MIP Special Limited Partners who hold vested MIP Units
will be entitled to receive their pro-rata share of the Underlying Shares or
other assets. Underlying Shares or assets that relate to MIP Units which have
not vested will be held in trust by Thrucomm, will continue to be subject to the
terms of the MIP Units, and will only be distributed to MIP Special Limited
Partners if and when the rights thereto have vested. See "Description of
Thrucomm's Securities - Preferred Stock - Series M."
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 $20 MILLION $30 MILLION $60 MILLION
OF BENEFICIAL OWNER VALUE VALUE VALUE
(PERCENT) (PERCENT) (PERCENT)
ICN and FMI (2) 13.56 22.00 29.40
John F. Kolenda (2) 7.17 11.36 15.01
Mark J. Gianinni (2) 6.78 10.99 14.66
Blue Chip (3) 16.44 14.90 13.06
Z. David Patterson (3) 16.44 14.90 13.06
CFG (4) 2.93 3.37 4.11
Joseph F. Bert (4) 2.93 3.82 4.51
R. Brandon Harrison * * *
Vincent Rinaldi * * *
All officers and
directors as a group 34.50 42.32 48.44
(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) ICN and FMI are jointly owned by Mark Giannini and John Kolenda.
(3) Blue Chip is an affiliate of Mr. Patterson who serves on the Boards of ICN,
FMI and Thrucomm pursuant to the Blue Chip Agreements which also provide
that Messrs. Kolenda and Gianinni shall vote their ICN stock such that they
and a designee of Blue Chip comprise the majority of the ICN Board.
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, and prior to a Mandatory Conversion Event.
(4) Assumes CFG exercises its Datalinc and Fastcom Options to acquire a 4%
interest in Datalinc and a 2.171% interest in Fastcom. Joseph F. Bert is
the beneficial owner of the units held by CFG and he individually owns
units in both Datalinc and Fastcom.
* Indicates less than 1% beneficial ownership.
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DESCRIPTION OF THRUCOMM'S SECURITIES
COMMON STOCK
Thrucomm is authorized to issue 100,000,000 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 - P
(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, which is filed as an exhibit to the Registration Statement of which
this Consent Statement/Prospectus is a part, and to the Certificate of
Designation, Preferences and Rights relating to the Preferred Stock (the
"Certificate of Designation"), which is to be filed with the Secretary of State
of Florida.
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THE CONVERSION FEATURE
The Preferred Stock shall be mandatorily convertible into shares of
Thrucomm's Common Stock ("Underlying Shares") upon the earliest to occur of one
of the following events: (i) the completion of an initial public offering of
Thrucomm's Common Stock (an "IPO"), (ii) the sale of all or substantially all of
the assets of Thrucomm (a "Sale"), (iii) the merger of Thrucomm into a
non-affiliated entity, whereby Thrucomm is not the surviving entity (a
"Merger"), or (iv) the sale of one-third or more of the equity interests in
Thrucomm, in a single transaction, to one or more investors (an "Investment"),
(collectively, the "Mandatory Conversion Events"). The "sale of all or
substantially all of the assets of Thrucomm" is defined in the Reorganization
Agreement as the sale of at least 80% of Thrucomm's assets.
In order to provide Investors with an opportunity to vote for or against a
Sale or Merger, the Preferred Stock will be mandatorily convertible into
Underlying Shares PRIOR to the Sale or Merger upon (i) the approval of a
proposed Sale or Merger by Thrucomm's Board of Directors, and (ii) the execution
of a Sale or Merger agreement that sets forth the consideration to be received
by Thrucomm's shareholders, and that is conditioned upon such shareholders'
approval. In the event the Sale or Merger is not approved by the stockholders,
the Preferred Stock will have already been converted into Underlying Shares
based upon a proposed transaction that was never approved or consummated, 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 Conversion Value of Thrucomm in the
Mandatory Conversion Event. The Board of Directors of Thrucomm, ICN and FMI have
developed a Formula for allocating the Conversion Value of Thrucomm to Fastcom
and Datalinc in a Mandatory Conversion Event. In any Mandatory Conversion Event,
the minimum Conversion Value of Thrucomm shall be not less than $20 million and
it will be allocated to Datalinc and Fastcom in the manner prescribed by the
Formula. See "The Formula." The number of Underlying Shares that Investors and
Other Equity Owners will receive upon the occurrence of a Mandatory Conversion
Event is determined by application of the Formula and the rights and preferences
of the Preferred Stock. The terms of the Preferred Stock are designed to
allocate Underlying Shares in a manner which is as consistent as possible with
the rights and preferences that each group of Investors or Other Equity Owners
now have under the Partnership Agreements.
CONVERSION TERMS OF THE PREFERRED STOCK
The rights and preferences of each Series of Preferred Stock upon Mandatory
Conversion is set forth below.
SERIES A PREFERRED STOCK
The Series A Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Returns of the Series A
Preferred Stock, plus (ii) 18.921% of (a) the difference, if any, of the
Datalinc Value minus the Earned Preferred Returns of the Series A - E Preferred
Stock, and (b) the remainder of Datalinc's share of the Fastcom Value.
SERIES B PREFERRED STOCK
The Series B Preferred Stock shall be convertible into a number of
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Underlying Shares equal to (i) the Earned Preferred Returns of the Series B
Preferred Stock, plus (ii) 8.642% of (a) the difference, if any, of the Datalinc
Value minus the Earned Preferred Returns of the Series A - E Preferred Stock,
and (b) the remainder of Datalinc's share of the Fastcom Value.
SERIES C PREFERRED STOCK
The Series C Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Returns of the Series C
Preferred Stock, plus (ii) 5.429% of (a) the difference, if any, of the Datalinc
Value minus the Earned Preferred Returns of the Series A - E Preferred Stock,
and (b) the remainder of Datalinc's share of the Fastcom Value.
SERIES D PREFERRED STOCK
The Series D Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Return of the Series D
Preferred Stock, plus (ii) 9.137% of (a) the difference, if any, of the Datalinc
Value minus the Earned Preferred Returns of the Series A E Preferred Stock, and
(b) the remainder of Datalinc's share of the Fastcom Value.
SERIES E PREFERRED STOCK
The Series E Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Return of the Series E
Preferred Stock, plus (ii) 7.871% of (a) the difference, if any, of the Datalinc
Value minus the Earned Preferred Returns of the Series A E Preferred Stock, and
(b) the remainder of Datalinc's share of the Fastcom Value.
SERIES F PREFERRED STOCK
The Series F Preferred Stock shall be convertible into a number of
Underlying Shares equal to 4.0% of (i) the difference, if any, of the Datalinc
Value minus the Earned Preferred Returns of the Series A - E Preferred Stock,
and (ii) the remainder of Datalinc's share of the Fastcom Value.
SERIES G PREFERRED STOCK
The Series G Preferred Stock shall be convertible into a number of
Underlying Shares equal to 46% of (i) the difference, if any, of the Datalinc
Value minus the Earned Preferred Returns of the Series A - E Preferred Stock,
and (ii) the remainder of Datalinc's share of the Fastcom Value.
SERIES H PREFERRED STOCK
The Series H Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Return of the Series H
Preferred Stock, if any, plus (ii) 2.013% of the Fastcom Value.
SERIES I PREFERRED STOCK
The Series I Preferred Stock shall be convertible into a number of
Underlying Shares equal to 0.503% of the Fastcom Value.
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SERIES J PREFERRED STOCK
The Series J Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Return of the Series J
Preferred Stock, if any, plus (ii) 10.832% of the Fastcom Value.
SERIES K PREFERRED STOCK
The Series K Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Return of the Series K
Preferred Stock, if any, plus (ii) 9.524% of the Fastcom Value.
SERIES L PREFERRED STOCK
The Series L Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) 73.042% of the Fastcom Value, (ii) minus the sum
of any Earned Preferred Returns of the Series H, J, K and M Preferred Stock.
SERIES M PREFERRED STOCK
The Series M Preferred Stock shall be convertible into Underlying Shares in
an amount equal to (i) 0.01% of the Fastcom Value (ii) plus any Earned Preferred
Return of the Series M Preferred Stock.
SERIES N PREFERRED STOCK
The Series N Preferred Stock shall be convertible into a number of
Underlying Shares equal to 2.171% of the Fastcom Value.
SERIES O PREFERRED STOCK
The Series O Preferred Stock shall be convertible into a number of
Underlying Shares equal to 0.905% of the Fastcom Value.
SERIES P PREFERRED STOCK
The Series P Preferred Stock shall be convertible into a number of
Underlying Shares equal to 1.0% of the Fastcom Value.
EARNED PREFERRED RETURNS OF THE PREFERRED STOCK
SERIES A-E EARNED PREFERRED RETURNS
The Datalinc Series 100 - 300E2 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 shall be entitled to Earned Preferred Returns (the "Earned
Preferred Returns"), 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 C of "Thrucomm Ownership Tables." Earned
Preferred Returns shall be declared at the time of Mandatory Conversion, and
will be factored into the calculation of the number of Underlying Shares.
The amount of Earned Preferred Returns accruing per share per month shall
be computed by dividing the annual rate (10% for the Series A and B; 8% of the
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Series C-E) by twelve. The amount of Earned Preferred Returns payable for any
period shorter than a full month shall be computed on the basis of a 360-day
year of 12, 30-day months.
The Preferred Returns on Datalinc Series 300E1 and 300E2 Units accrue from
the dates of the individual Subscription Agreements of each Investor in those
Units. However, the Earned Preferred Returns 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 FMI believe that the dates chosen for
the Earned Preferred Returns 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 H, J AND K EARNED PREFERRED RETURNS
The Fastcom Series 100, 200 and 300 Investors may be entitled under certain
circumstances to a Minimum Guaranteed Return on their investment. Accordingly,
the Series H, J and K Preferred Stock shall be entitled to Earned Preferred
Returns upon Mandatory Conversion, if necessary to ensure that Fastcom's Series
100, 200 and 300 Investors receive the benefit of their Minimum Guaranteed
Return, as provided for under Fastcom's Partnership Agreement. See "Equity
Ownership of the Partnerships - The Fastcom Investors."
SERIES H
The Earned Preferred Return on the Series H Preferred Stock is measured as
a 30% discount to the Fastcom Value in an IPO. 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 H Preferred Stock need only
be calculated, if the Discounted Fastcom Value is less than $18,431,595 (the
"Series H Guaranteed Minimum Fastcom Value"). The Series H adjusted ownership
interest is calculated as follows:
SERIES H GUARANTEED MINIMUM FASTCOM VALUE X .02013 X 100 = % ADJUSTED OWNERSHIP
- ----------------------------------------------------------- INTEREST
DISCOUNTED FASTCOM VALUE
For example, if the Fastcom Value is $21,000,000 in an IPO, the Discounted
Fastcom Value is $21,000,000 x .70 = $14,700,000. Since the Discounted Fastcom
Value is less than the Series H Preferred Stock's Guaranteed Minimum Fastcom
Value, it is necessary to make an adjustment to the Series H Preferred Stock's
interest. The adjusted ownership interest of the Series H Preferred Stock would
be: ($18,431,595 / $14,700,000) x .02013 x 100 = 2.524%. The Series H Earned
Preferred Return in this illustration is equal to 2.54% of the Fastcom Value
minus 2.013% of the Fastcom Value. Any Earned Preferred Return on the Series H
Preferred Stock in an IPO shall result in a corresponding decrease in the
distribution to the Series L Preferred Stock upon Mandatory Conversion. See "The
Formula - Determining the Values of Thrucomm, Datalinc and Fastcom" for how to
calculate the Fastcom Value.
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SERIES J
The Earned Preferred Return on the Series J Preferred Stock is also
measured as a 30% discount to the Fastcom Value in an IPO. If the Discounted
Fastcom Value is less than $19,894,940 (the "Series J Guaranteed Minimum
Fastcom Value"), the adjusted ownership interest of the Series J Preferred Stock
is calculated as follows:
SERIES J GUARANTEED MINIMUM FASTCOM VALUE X .10832 X 100 = % ADJUSTED OWNERSHIP
- ---------------------------------------------------------- INTEREST
DISCOUNTED FASTCOM VALUE
If the Fastcom Value is $21,000,000 in an IPO, the Discounted Fastcom Value
would be $21,000,000 x .70 = $14,700,000. Since the Discounted Fastcom Value is
less than the Series J's Guaranteed Minimum Fastcom Value, it is necessary to
make an adjustment to the Series J Preferred Stock's equity interest. The
adjusted ownership interest of the Series J Preferred Stock would be:
($19,894,940 / $14,700,000) x .10832 x 100 = 14.66%. The Series J Earned
Preferred Return in this illustration is equal to 14.66% of the Fastcom Value
minus 10.832% of the Fastcom Value. Any Earned Preferred Return on the Series J
Preferred Stock in an IPO shall result in a corresponding decrease in the
distribution to the Series L Preferred Stock upon Mandatory Conversion.
SERIES K
The aggregate minimum Guaranteed Return of the Series 300 Units is $2
million. Accordingly, if 9.524% of the Fastcom Value in any Mandatory Conversion
Event is less than $2 million, assuming the sale of all of the Series 300 Units,
the Earned Preferred Return on the Series K Preferred Stock will be equal to the
difference between $2 million and 9.524% of the Fastcom Value.
SERIES M
The Series M Preferred Stock is entitled, under the circumstances described
below, to receive an Earned Preferred Return upon Mandatory Conversion in an
amount equal to $750,000, plus 4.3% of Datalinc's aggregate share of the
Conversion Value of Thrucomm, which is calculated as follows: (i) the sum of (a)
the Datalinc Value, (b) the Fastcom Allocation to Datalinc and (c) the Fastcom
Allocation to the MIP Units, minus the Earned Preferred Return of the Datalinc
Investors; (ii) the difference in (i), minus $750,000; (iii) the difference in
(ii), multiplied by .043; (iv) the sum of (a) the product in (iii) and (b)
$750,000, minus $2,100.
If the Conversion Value of Thrucomm is less than $30 million, the MIP Units
shall not be entitled to any Earned Preferred Return. MIP Units may be entitled
to an Earned Preferred Return when the Conversion Value of Thrucomm is $30
million or greater (the "MIP Minimum Conversion Value"). However, the MIP
Minimum Conversion Value is subject to an adjustment upwards, if within 6 months
from the date of the adoption of the Plan, Fastcom, Datalinc and/or Thrucomm
receive a capital infusion(s), that is/are reflected as equity in the financial
statements of the Partnerships or Thrucomm. Upon the occurrence of such capital
infusion, the MIP Minimum Conversion Value shall be increased dollar for dollar
by the amount of the infusion(s), however the MIP Minimum Conversion Value shall
not exceed $35 million. Accordingly, MIP Units shall be entitled to an Earned
Preferred Return when the Conversion Value of Thrucomm equals or exceeds the MIP
Minimum Conversion Value.
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DIVIDENDS
DIVIDEND PARTICIPATION OF THE PREFERRED STOCK
Prior to Mandatory Conversion, all Series of Preferred Stock will have a
twenty percent (20%) participation in any dividend declared on Thrucomm's Common
Stock.
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. Dividends may not be paid 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. In addition to any distribution to the Preferred Stock upon
liquidation, the Preferred Stockholders shall be entitled to a participation of
twenty percent (20%) in any liquidation proceeds to the Common Stockholders. 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 the surviving
corporation in such consolidation or merger) will not be deemed to be a
liquidation, dissolution or winding-up, voluntary or involuntary.
TRANSFER AGENT
The transfer agent for the Preferred Stock and Common Stock is Thrucomm.
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,
110
<PAGE>
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.
111
<PAGE>
GLOSSARY
"ATM" (Automated Teller Machine) - A machine placed by a banking
institution at branch and offsite locations to operate unattended to receive and
dispense currency as well as perform other ancillary services for its customers.
"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.
"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 a small diameter (approximately 1 meter in diameter) antenna and
electronics to establish a communications terminal, used mostly for data. VSAT
networks compete with other, land line-based networks such as private lines
and frame relay.
112
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
NUMBER
DATALINC, LTD.
Report of Independent Certified Public Accountants . . . . . . . . . . . . .F-2
Consolidated Balance Sheets, December 31, 1995, 1996
and Unaudited April 30, 1997 . . . . . . . . . .. . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995 and 1996 and Unaudited Four Months
Four Months Ended April 30, 1996 and 1997. . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Changes in Partners Equity
for the Years Ended December 31, 1994, 1995 and 1996
and Unaudited Four Months Ended April 30, 1997. . . . . . . . . . . . . . . .F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1994, 1995 and 1996 and Unaudited
Four Months Ended April 30, 1996 and 1997 . . . . . . . . . . . . . . . . . .F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . F-8
FASTCOM, LTD.
Report of Independent Certified Public Accountants . . . . . . . . . . . . .F-20
Balance Sheets, December 31, 1995, 1996 and Unaudited April 30, 1997. . . . F-21
Statements of Operations for the Years Ended December 31, 1995
and 1996, and for the Nine Months from Inception through December 31, 1994
and Unaudited Four Months Ended April 30, 1996 and 1997 . . . . . . . . . .F-22
Statements of Changes in Partners Equity (Deficit) for the Years Ended December
31, 1995 and 1996 and for the Nine Months from Inception through December 31,
1994 and Unaudited Four Months Ended April 30, 1997. . . . . . . . . . . . .F-23
Statements of Cash Flows for the Years Ended December 31, 1995
and 1996 and for the Nine Months from Inception through
December 31, 1994 and Unaudited Four Months Ended
April 30, 1996 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .F-27
THRUCOMM, INC.
Report of Independent Certified Public Accountants . . . . . . . . . . . . .F-34
Balance Sheet, December 31, 1996 and Unaudited April 30, 1997. . . . . . . .F-35
Statement of Operations and Accumulated Deficit for the
Period from Inception through December 31, 1996 and
Unaudited Four Months Ended April 30, 1997 . . . . . . . . . . . . . . . . .F-36
Statement of Cash Flows for the Period from Inception through
December 31, 1996 and Unaudited Four Months Ended April 30, 1997 . . . . . .F-37
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .F-38
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.
/s/ Price Waterhouse LLP
__________________________
PRICE WATERHOUSE LLP
Tampa, Florida
February 12, 1997
F-2
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
Consolidated Balance Sheets
December 31, April 30,
1995 1996 1997
(unaudited)
ASSETS
Cash and cash equivalents $ 77,829 $ 24,575 $ 41,621
Trade accounts receivable 306,800 574,079 547,268
Inventories 715,479 281,550 186,498
Other receivables 20,633 41,512 17,708
Prepaid and other current assets 45,800 20,510 10,815
---------- ---------- ----------
Total current assets 1,166,541 942,226 803,910
Advances to and investment in affiliate, net of
reserves of $345,644, $827,396 and $1,676,616 840,000 518,535 456,742
Property and equipment, net 1,090,163 1,498,452 868,305
Organization costs, net of accumulated
amortization of $79,673 and $79,952 279 - -
Other long-term receivables 10,000 10,000 10,000
Other assets and deposits 25,135 72,530 56,483
---------- ---------- ----------
Total assets $3,132,118 $3,041,743 $2,195,440
========== ========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 838,241 $ 920,108 $1,473,856
Debt due within one year 720,000 746,152 941,406
Capital lease obligations due within one year 146,086 297,953 127,346
---------- ---------- ----------
Total current liabilities 1,704,327 1,964,213 2,542,608
Debt - long term 120,000 5,208 -
Capital lease obligations - long term 304,000 725,080 222,778
---------- ---------- ----------
Total liabilities 2,128,327 2,694,501 2,765,386
========== ========== ==========
Commitments and contingencies (Note 9)
Partners' equity (deficit) 1,003,791 347,242 (569,946)
---------- ---------- ----------
Total liabilities and partners' equity $3,132,118 $3,041,743 $2,195,440
========== ========== ==========
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 four
For the year ended months ended
December 31, April 30
1994 1995 1996 1996 1997
(unaudited)
REVENUES:
Hub access fees $1,515,509 $1,701,591 $2,094,411 $ 632,969 $ 713,300
VSAT/PES sales 2,400,288 120,587 3,131,810 28,200 1,850
Hub equipment sales 100,000 38,000 255,000 205,000 -
Terminal equipment sales 1,284 20,033 50,805 49,703 -
Installation income and
other services 226,557 288,526 300,395 94,213 114,448
---------- ---------- --------- --------- ---------
TOTAL REVENUES 4,243,638 2,168,737 5,832,421 1,010,085 829,598
---------- ---------- --------- --------- ---------
OPERATING EXPENSES:
Cost of hub access svs 1,100,604 1,170,600 1,349,499 402,290 470,873
Cost of equipment sales
and installation fees 2,386,108 285,054 3,315,001 218,871 42,252
Selling, general and
administrative 824,810 562,640 711,402 207,662 213,357
Research and development,
net of refund (79,722) - - - -
Depreciation and
amortization 396,879 326,529 473,024 157,956 126,916
---------- ---------- --------- --------- ---------
TOTAL OPERATING EXPENSES:
4,628,679 2,344,823 5,848,926 986,779 853,398
---------- ---------- --------- --------- ---------
(Loss) income from
operations (385,041) (176,086) (16,505) 23,306 (23,800)
(Loss) income from
affiliate (566,497) 146,710 (481,752) (462,852) (849,220)
Interest expense (8,173) (97,140) (158,292) (55,575) (44,168)
---------- ---------- --------- --------- ---------
Net loss $ (959,711) $ (126,516) $(656,549) $(495,121) $(917,188)
========== ========== ========= ========= =========
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 100 Series 200 Series 300
Limited Limited Limited CFG
General Partners Partners Partners Option
Partner (17 units)(228 1/2 units)(593 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 contributions 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
Net loss
(unaudited) - (424,750) (193,435) (299,003) - (917,188)
Transfer of net loss in excess of Series 100 and 200 limited
partner capital contributions to general partner (unaudited) -
(595,477) 424,750 170,727 - - -
-------- --------- --------- ---------- ---------- ---------
Partners' equity (deficit) -
April 30, 1997 (unaudited)
$(2,262,212) $ - $ - $1,431,199 $ 261,067 $ (569,946)
=========== ========= ======== ========== ========== ==========
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 (Page 1 of 2)
- --------------------------------------------------------------------------------
For the year ended For the four months ended
December 31, April 30,
1994 1995 1996 1996 1997
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (959,711) $ (126,516) $ (656,549 $ (495,121)$ (917,188)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and
amortization 396,879 326,529 473,024 157,956 126,916
(Income)loss of affiliate 566,497 (146,710) 481,752 462,852 849,220
(Increase) decrease in:
Trade accts receivable (113,075) 175,898 (267,279) (283,285) 26,811
Inventories 268,929 (665,961) 433,929 33,524 95,052
Other receivables 46,812 (5,263) (20,879) 20,633 23,804
Prepaid and other
current assets 14,566 (7,194) 25,290 8,797 9,695
Other assets and deposits 888 - (43,106) - 16,047
Increase (decrease) in accounts payable and
accrued expenses (232,096) 650,484 81,867 210,719 553,748
-------- ------- ------- ------- -------
Net cash provided by (used
in) operating activities (10,311) 201,267 508,049 116,075 784,105
-------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of
equipment 2,789 - - - -
Acquisitions of property
and equipment ( 79,898) (36,085) (144,817) (34,038) (83,575)
Investment made in
affiliate (74,143) - - - -
Advances made to
affiliate, net (512,449) (622,184) (160,287) (312,197) (787,427)
-------- -------- -------- -------- --------
Net cash used in investing
activities (663,701) (658,269) (305,104) (346,235) (871,002)
-------- ------- ------- ------- -------
The accompanying Notes to Financial Statements are
an integral part of these financial statements
F-6
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
Consolidated Statements of Cash Flows (Page 2 of 2)
- --------------------------------------------------------------------------------
For the year ended For the four months ended
December 31, April 30,
1994 1995 1996 1996 1997
(unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to borrowings 255,200 840,000 638,280 277,000 234,000
Reductions in borrowings and capital
lease obligations (94,239) (316,394) (890,190) (106,697) (130,057)
Debt issue costs - - (4,289) - -
-------- ------- ------- ------- -------
Net cash provided by (used in)
financing activities 160,961 523,606 (256,199) 170,303 103,943
-------- ------- ------- ------- -------
Net increase (decrease) in cash
and cash equivalents (513,051) 66,604 (53,254) (59,857) 17,046
Cash and cash equivalents,
beginning of year 524,276 11,225 77,829 77,829 24,575
-------- ------- ------- ------- -------
Cash and cash equivalents,
end of year $ 11,225 $ 77,829 $ 24,575 $ 17,972 $ 41,621
======== ======== ======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Capital lease obligations
entered into $267,703 $ 202,394 $ 736,217 $ - $ -
======== ======== ======= ======= =======
Interest paid $ 8,173 $ 97,140 $ 147,426 $ 30,747 $ 42,592
======== ======== ======= ======= =======
Capital lease obligations transferred to affiliate
$ - $ - $ - $ - $586,806
======== ======== ======= ======= =======
The accompanying Notes to Financial Statements are
an integral part of these financial statements
F-7
<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.
F-8
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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.
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
F-9
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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 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
F-10
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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.
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
F-11
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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.
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.
F-12
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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.
Interim Financial Data
The interim financial data at April 30, 1997, and for the four months ended
April 30, 1997 and 1996, are unaudited; however, in the opinion of
management, such interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for the fair statement of the
results of the interim periods.
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.
(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
F-13
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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:
F-14
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
For the nine For the
months ended year ended
December 31, December 31,
1994 1995 1996
Results of Operations:
Revenues $ - $ - $ 69,134
Expenses (566,497) (970,102) (1,785,174)
---------- ---------- ------------
Net loss $ (566,497) $ (970,102) $ (1,716,040)
========== ========== ============
December 31,
1995 1996
Financial position:
Current assets $ 1,662 $ 80,621
Noncurrent assets 204,081 947,555
---------- ------------
Total assets $ 205,743 $ 1,028,176
========== ============
Payable to affiliate $ 1,185,644 $ 1,345,931
Other liabilities 148,955 509,641
----------- -----------
Total liabilities 1,334,599 1,855,572
Partners deficit (1,128,856) (827,396)
----------- -----------
Total liabilities and partners deficit $ 205,743 $ 1,028,176
=========== ===========
4. INVENTORIES:
December 31,
1995 1996
Satellite equipment $ 527,098 $ 130,332
Transmission equipment 184,763 142,054
Materials and supplies 3,618 9,164
----------- -----------
$ 715,479 $ 281,550
=========== ===========
5. PROPERTY AND EQUIPMENT:
December 31,
1995 1996
Hub and network equipment installed $ 2,304,832 $ 3,166,309
Software 62,076 63,767
Leasehold improvements 137,274 137,274
Furnishings and equipment 191,183 209,049
----------- -----------
2,695,365 3,576,399
Less accumulated depreciation and amortization (1,605,202) (2,077,947)
----------- -----------
$ 1,090,163 $ 1,498,452
=========== ===========
F-15
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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.
6. DEBT:
December 31,
1995 1996
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. 240,000 120,000
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 840,000 751,360
---------- ----------
Less current portion of total debt (720,000) (746,152)
---------- ----------
Debt - long term $ 120,000 $ 5,208
========== ==========
Capital lease obligations, at varying rates of
imputed interest from 8% to 13% $ 450,086 $1,023,033
Less current portion of capital lease obligations (146,086) (297,953)
---------- ----------
Capital lease obligations - long term $ 304,000 $ 725,080
========== ==========
F-16
<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
==========
F-17
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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 $17,000 at December 31, 1996, 1995 and
1994, respectively, which are included in other receivables.
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
F-18
<PAGE>
Datalinc, Ltd.
(A Florida Limited Partnership)
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
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%
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
on a pro rata basis 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-19
<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.
/s/ Price Waterhouse LLP
________________________
PRICE WATERHOUSE LLP
Tampa, Florida
February 12, 1997
F-20
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited Partnership)
Balance Sheets
- --------------------------------------------------------------------------------
December 31, April 30,
1995 1996 1997
(unaudited)
ASSETS
Cash $ - $ 12,166 $ 17,414
Trade accounts receivable - 14,212 67,717
Other receivables - 38,221 -
Prepaid and other current assets 1,662 16,022 13,367
---------- ---------- ------------
Total Current Assets 1,662 80,621 98,498
Property and equipment, net 203,856 947,388 1,638,517
Debt issue costs, net - - 128,300
Organization costs, net of accumulated
amortization of $58, $116 and $133 225 167 150
---------- ---------- ------------
$ 205,743 $1,028,176 $ 1,865,465
========== ========== ============
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable and accrued
expenses $ 148,955 $ 308,057 $ 462,762
Capital lease obligations due
within one year - 58,715 341,990
Payable to affiliate 1,185,644 1,345,931 2,133,358
---------- ---------- -----------
Total current liabilities 1,334,599 1,712,703 2,938,110
Capital lease obligations -
long term portion - 142,869 603,971
---------- ---------- -----------
Total liabilities 1,334,599 1,855,572 3,542,081
Commitments and contingencies (Note 6)
Mandatory redeemable partnership interest
(Note 1) - 2,155,000 2,155,000
Non-redeemable partners' interest
and deficit accumulated during the
development stage (1,128,856) (2,982,396) (3,831,616)
---------- ---------- -----------
$ 205,743 $ 1,028,176 $ 1,865,465
========== ========== ============
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 Operations
=-------------------------------------------------------------------------------
Cumulative
For the nine operation
months from For the four from
inception For the Months ended inception to
through year ended April 30, April 30,
Dec. 31, Dec. 31, 1996 1997 1997
1994 1995 1996 (unaudited) (unaudited)
Revenues:
Service fees $ - $ - $ 69,134 $ 5,286 $ 90,901 $ 160,035
Expenses:
Operating,
general
and
adminis-
trative 253,241 653,768 1,305,687 262,756 794,837 3,007,533
Research and
development 308,659 278,426 364,977 25,888 137,677 1,089,739
Depreciation &
amortization 2,392 26,667 106,680 33,642 115,837 251,576
Interest
expense 2,205 11,241 7,830 118 23,770 45,046
-------- --------- ----------- --------- -------- ---------
Net loss $(566,497) $(970,102) $(1,716,040)$(317,118)$(981,220)$(4,233,859)
========= ========= =========== ========= ======== ===========
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)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT) - PAGE 1 OF 2
- ------------------------------------------------------------------------------
Datalinc, Series 100 Series 200
Ltd. Limited Limited
Limited Partners Partners CFG ILC
General Partner (55 5/8 (215 1/2 Option Limited
Partner Interest units) units) (Note 1) Partner 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)
--------- --------- -------- --------- --------- ------- --------
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)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT) - PAGE 2 OF 2
- --------------------------------------------------------------------------------
Datalinc, Series 100 Series 200
Ltd. Limited Limited
Limited Partners Partners CFG ILC
General Partner (55 5/8 (215 1/2 Option Limited
Partner Interest units) units) (Note 1) Partner Total
Non-redeemable partners' interest and deficit accumulated during the
development stage -
December 31, 1996
(3,406,754) - 347,329 - 77,029 - (2,982,396)
Debt issue costs associated with equipment financing
(unaudited)
- - - - - 132,000 132,000
Net loss
(unaudited)
(9,812) (824,196) (27,288)(117,472) - (2,452) (981,220)
Transfer of net loss in excess of Datalinc's and redeemable
partnership interests to general partner
(unaudited)
(941,668) 824,196 - 117,472 - - -
---------- --------- -------- ------- ---------- -------- --------
Non-redeemable partners' interest and deficit accumulated
during the development stage- April 30, 1997
(unau$ited)
$(4,358,234) $ - $ 320,041 $ - $ 77,029 $129,548$(3,831,616)
========== ======== ======== ======= ======== ======= ==========
The accompanying Notes to Financial Statements are an integral
part of these financial statements.
F-24
<PAGE>
Fastcom, Ltd. (Page 1 of 2)
(A Development Stage Enterprise and Florida Limited Partnership)
STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
Cumulative
For the nine For the cash
months from For the four months flows from
inception year ended inception to
through ended April 30 April 30,
December 31, December 31, 1996 1997 1997
1994 1995 1996 (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(566,497) $(970,102) $(1,716,040 $(317,118) $(981,220)$(4,233,859)
Adjustments
to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and
amortization 2,392 26,667 106,680 33,642 119,537 255,276
(Increase) decrease in:
Trade accounts
receivable- - - (14,212) (945) (53,505) (67,717)
Other receivables
(51,011) 51,011 (38,221) - 38,221 -
Prepaid and other
current assets - (1,662) (14,360) 39 2,665 (13,367)
Increase in accounts
payable and accrued expenses
53,953 95,002 159,102 306,397 154,705 462,762
-------- -------- ---------- --------- --------- ---------
Net cash provided by (used in)operating activities
(561,163) (799,084) (1,517,051) 22,015 (719,607) (3,596,905)
-------- -------- ---------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment
(653) (158,071) (636,975) (390,692) (109,899) (905,578)
Organization costs (283) - - - - (283)
-------- -------- ---------- --------- --------- ---------
Net cash used in investing activities
(936) (158,071) (636,975) (390,692) (109,899) (905,881)
-------- -------- ---------- --------- --------- ---------
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)
STATEMENTS OF CASH FLOWS (Page 2 of 2)
- -------------------------------------------------------------------------------
Cumulative
For the nine For the cash
months from For the four months flows from
inception year ended inception to
through ended April 30 April 30,
December 31, December 31, 1996 1997 1997
1994 1995 1996 (Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions
10 333,600 2,017,500 61,999 - 2,351,110
Advances received from affiliate, net
563,460 622,184 160,287 312,197 787,427 2,133,358
Additions to borrowing under capital leases
- - - - 56,161 56,161
Repayments of capital lease obligations
- - (11,595) - (8,834) (20,429)
-------- -------- --------- -------- -------- ---------
Net cash provided by financing activities
563,470 955,784 2,166,192 374,196 834,754 4,520,200
-------- -------- --------- -------- -------- ---------
Net increase (decrease) in cash
1,371 (1,371) 12,166 5,519 5,248 17,414
Cash, beginning of year
- 1,371 - - 12,166 -
-------- -------- --------- -------- -------- ---------
Cash, end of year
$ 1,371 $ - $ 12,166 $ 5,519 $ 17,414 $ 17,414
======== ======== ========= ======== ======== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Capital contribution of property
and equipment
$ 74,133 $ - $ - $ - $ - $ 74 133
======== ======== ========= ======== ======== =========
Capital lease obligations entered into
$ - $ - $ 213,179 $ - $110,244 $ 323,423
======== ======== ========= ======== ======== =========
CFG option (Note 1)
$ - $ - $ 77,029 $ - $ - $ 77,029
======== ======== ========= ======== ======== =========
Interest paid $ 2,205 $ 11,241 $ 4,755 $ 93 $ 7,347 $ 25,548
======== ======== ========= ======== ======== =========
Capital lease transferred from affiliate
$ - $ - $ - $ - $586,806 $ 586,806
======== ======== ========= ======== ======== =========
ILC debt issue costs associated with equipment financing
$ - $ - $ - $ - $132,000 $ 132,000
======== ======== ========= ======== ======== =========
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
- --------------------------------------------------------------------------------
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 into Thrucomm, 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.
F-27
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited Partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
Expenses in the amount of $30,400 were 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 Interest").
Accordingly, the total cash contributions obtained during the Series 200
offering of $2,155,000 at December 31, 1996, has been reflected as a
Mandatorily Redeemable Partnership Interest.
F-28
<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 appropriate 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
F-29
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited Partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 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 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.
F-30
<PAGE>
Fastcom, Ltd.
(A Development Stage Enterprise and Florida Limited Partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
Interim Financial Data
The interim financial data at April 30, 1997, and for the four months ended
April 30, 1997 and 1996, are unaudited; however, in the opinion of
management, such interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for the fair statement of the
results of the interim periods.
3. PROPERTY AND EQUIPMENT:
December 31,
1995 1996
Hub and network equipment installed $ 51,011 $ 355,745
Software 17,351 37,749
Office furniture and equipment 32,027 209,794
Construction in progress 132,468 479,723
------------ ------------
232,857 1,083,011
Less accumulated
depreciation and amortization (29,001) (135,623)
------------ ------------
$ 203,856 $ 947,388
============ ============
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
============
F-31
<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
F-32
<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 on a pro rata basis 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.
F-33
<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.
/s/ Price Waterhouse LLP
_________________________
PRICE WATERHOUSE LLP
Tampa, Florida
February 12, 1997
F-34
<PAGE>
Thrucomm, Inc.
(A wholly-owned subsidiary of Datalinc, Ltd.)
Balance Sheet
- --------------------------------------------------------------------------------
December 31, April 30,
1996 1997
(Unaudited)
ASSETS
Cash $ 3,001 $ 76
Debt issue costs 4,289 -
Prepaid expenses - 131
Receivable from affiliate 314,000 502,808
------------ ------------
$ 321,290 $ 503,015
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Accrued expenses $ 722 $ 722
Line of credit 321,289 520,289
------------ ------------
Total liabilities 322,011 521,011
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 1
Accumulated deficit (722) (17,997)
------------ ------------
$ 321,290 $ 503,015
============= =============
The accompanying Notes to Financial Statements are an integral
part of these financial statements.
F-35
<PAGE>
Thrucomm, Inc.
(A wholly-owned subsidiary of Datalinc, Ltd.)
Statement of Operations and Accumulated Deficit
- --------------------------------------------------------------------------------
For the period For the four
from inception months ended
through April 30, 1997
December 31, 1996 (Unaudited)
Interest expense $ 722 $ 12,986
Amortization expense - 4,289
------------ -------------
Net loss (722) (17,275)
Accumulated deficit, beginning of year - (722)
------------ -------------
Accumulated deficit, end of year $ (722) $ (17,997)
============ =============
The accompanying Notes to Financial Statements are an integral
part of these financial statements.
F-36
<PAGE>
Thrucomm, Inc.
(A wholly-owned subsidiary of Datalinc, Ltd.)
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
For the period For the four
from inception months ended
through April 30, 1997
December 31, 1996 (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (722) $ (17,275)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Amortization expense - 4,289
Increase in prepaid expenses - (131)
Increase in accrued expenses 722 -
------------ ------------
Net cash (used in) operating activities - (13,117)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Line of credit borrowings 321,289 199,000
Advances to affiliates (314,000) (188,808)
Debt issue costs (4,289) -
Proceeds from issuance of common stock 1 -
------------ ------------
Net cash provided by (used in)
financing activities 3,001 (10,192)
------------ ------------
Net increase (decrease) in cash 3,001 (2,925)
------------ -------------
Cash, beginning of period - 3,001
------------ -------------
Cash, end of period $ 3,001 $ 76
============ =============
The accompanying Notes to Financial Statements are an integral
part of these financial statements.
F-37
<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 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, 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-38
<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.
INTERIM FINANCIAL DATA
The interim financial data at April 30, 1997, and for the four months ended
April 30, 1997 and 1996, are unaudited; however, in the opinion of
management, such interim data includes all adjustments, consisting only of
normal recurring adjustments, necessary for the fair statement of the
results of the interim periods.
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.
F-39
<PAGE>
Thrucomm, Inc.
(A wholly-owned subsidiary of Datalinc, Ltd.)
Notes to Financial Statements
- -------------------------------------------------------------------------------
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.
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-40
<PAGE>
TABLE OF CONTENTS
AVAILABLE INFORMATION..................V
SUMMARY................................ 1 THRUCOMM, INC.
SELECTED FINANCIAL INFORMATION.........14
RISK FACTORS...........................16
THE REORGANIZATION.....................22
EQUITY OWNERSHIP OF THE PARTNERSHIPS...27
THE FORMULA............................34
THRUCOMM OWNERSHIP TABLES..............38
RECOMMENDATION OF THE GENERAL PARTNERS.43
FAILURE TO APPROVE THE REORGANIZATION..47
CONSENT PROCEDURES.....................48 MANDATORY CONVERTIBLE
CERTAIN TAX CONSEQUENCES...............50 PREFERRED STOCK
COMPARATIVE RIGHTS OF INVESTORS........51 SERIES A-P
PRO FORMA CONDENSED FINANCIAL
INFORMATION............................58
DATALINC LTD., MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..................67
FASTCOM LTD., MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION ----------------------------
AND RESULTS OF OPERATIONS..............73 CONSENT STATEMENT/PROSPECTUS
BUSINESS - FASTCOM.....................76 ----------------------------
BUSINESS - DATALINC....................85
MANAGEMENT.............................87
PRINCIPAL STOCKHOLDERS.................93
DESCRIPTION OF THRUCOMM'S SECURITIES...95
LEGAL MATTERS..........................101
EXPERTS................................101
GLOSSARY...............................102
INDEX TO FINANCIAL STATEMENTS..........F-1 Sepetmber ___, 1997
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.
113
<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 FBCA 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
II-1
<PAGE>
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 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 **
2.1.1 (Revised) Agreement and Plan of Reorganization, by and among Datalinc,
Ltd.., Fastcom, Ltd. and Thrucomm, Inc., dated August 1, 1997**
2.1.2 (Revised) Agreement and Plan of Reorganization by and among Datalinc,
Ltd., Fastcom, Ltd., and Thrucomm, Inc. dated August 26, 1997 -
Included as Appendix A to the Consent Statement/Prospectus.*
3.1 Articles of Incorporation of Thruco, Inc. **
3.11 Articles of Amendment to Articles of Incorporation of Thruco, Inc.
changing the corporate name to 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.**
II-2
<PAGE>
10.1.2 Purchase Agreement by and among Thrucomm, Inc., Blue Chip/Datalinc
Corporation, Integrated Communications Networks, Inc., John F.Kolenda,
Mark J. Gianinni and Datalinc, Inc., dated August 27, 1997.*
10.1.3 Terms Sheet, Blue Chip Guarantee to Datalinc, Ltd., dated
July 9, 1997 **
10.1.4 $100,000 Demand Note between Datalinc, Ltd. and Blue Chip Capital
Fund Limited, dated June 27, 1997.***
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
dated July 25, 1997. * +
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 **
10.9.1 Fastcom, Ltd., Management Incentive Plan, dated August 1, 1997.**
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.**
10.10.3 $500,000 Line of Credit, Commitment Letter from United Bank, dated
July 18, 1997.**
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.**
10.13 Letter from Hughes Network Systems, dated July 17, 1997. **
23.1 Consent of Price Waterhouse LLP dated August 27, 1997 - Included at
Page II-8.*
23.2 Consent of Michael T. Williams, P.A. - Included in Exhibit 5.1.*
II-3
<PAGE>
23.3 Consent of Schifino & Fleischer, P.A. - Included in Exhibit 8.1.**
23.4 Consent of Michael Davis and Company, P.A. dated August 26, 1997 -
Included in Exhibit 99.2.*
24.1 Powers of Attorney **
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. dated August 26, 1997 -
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.**
- -----------------
* Filed herewith.
** Previously filed.
+ Confidential information has been omitted from exhibit pursuant to a request
for confidential treatment and has been filed separately with the commission.
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.
II-4
<PAGE>
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.
(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
II-5
<PAGE>
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.
(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-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS PREEFFECTIVE AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON
AUGUST 26, 1997.
THRUCOMM, INC.
*
BY: ______________________________
Mark J. Gianinni
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS PRE-EFFECTIVE
AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
* President and Director August 26, 1997
___________________________ (Principal Executive Officer)
Mark J. Gianinni
/s/ John F. Kolenda * Chairman of the Board and August 26, 1997
___________________________ Chief Financial Officer and
John F. Kolenda Director (Principal Financial
and Accounting Officer)
*
___________________________ Director August 26, 1997
Joseph F. Bert
* Director August 26, 1997
___________________________
R. Brandon Harrison, Jr.
*
___________________________ Director August 26, 1997
Z. David Patterson
*
___________________________ Director August 26, 1997
Vincent Rinaldi
* John F. Kolenda, by signing his name hereto, does sign this document on
behalf of the persons named above pursuant to the Power of Attorney executed
by each such person and filed with the Securities and Exchange Commission.
II-7
<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
August 27, 1997
II-8
<PAGE>
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 **
2.1.1 (Revised) Agreement and Plan of Reorganization, by and among
Datalinc, Ltd.., Fastcom, Ltd. and Thrucomm, Inc., dated August 1,
1997. **
2.1.2 (Revised) Agreement and Plan of Reorganization, by and among
Datalinc, Ltd., Fastcom, Ltd., and Thrucomm, Inc. dated August 26,
1997 - Included as Appendex 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.
changing the corporate name to 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.**
10.1.2 Purchase Agreement by and among Thrucomm, Inc., Blue Chip/Datalinc
Corporation, Integrated Communications Networks, Inc.,
John F. Kolenda, Mark J. Gianinni and Datalinc, Inc., dated
August 27, 1997.*
10.1.3 Terms Sheet, Blue Chip Guarantee to Datalinc, Ltd., dated
July 9, 1997**
10.1.4 $100,000 Demand Note between Datalinc, Ltd. and Blue Chip
Capital Fund Limited, dated June 27, 1997.**
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 dated July 25, 1997.* +
II-9
<PAGE>
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 **
10.9.1 Fastcom, Ltd., Management Incentive Plan, dated August 1, 1997.**
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.**
10.10.3 $500,000 Line of Credit, Commitment Letter from United Bank, dated
July 18, 1997.**
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 **
10.13 Letter from Hughes Network Systems, dated July 17, 1997 **
23.1 Consentof Price Waterhouse LLP dated August 27, 1997 - Included at
Page II-8.*
23.2 Consent of Michael T. Williams, P.A. - Included in Exhibit 5.1.*
23.3 Consent of Schifino & Fleischer, P.A. - Included in Exhibit 8.1.**
23.4 Consent of Michael Davis and Company, P.A. dated August 26, 1997 -
Included in Exhibit 99.2.*
24.1 Powers of Attorney **
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. dated August 26, 1997
- 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.**
- -----------------
* Filed herewith.
** Previously filed.
+ Confidential information has been omitted from exhibit pursuant to a request
for confidential treatment and has been filed separately with the commission.
II-10
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
of
Datalinc, Ltd.
Fastcom, Ltd.
and
Thrucomm, Inc.
August 26, 1997
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION dated as of the 26th day of August,
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 Preferred Stock, Series A-G and
Fastcom will receive shares of Thrucomm's Mandatory Convertible
Preferred Stock, Series H-P (the Mandatory Convertible Preferred
Stock, Series A-G and H-P, collectively referred to as the "Preferred
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.
2.1 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 Preferred Stock. The Preferred Stock will be held
by the Partnerships 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"). 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 in Datalinc (collectively, the "Datalinc Distributees") and the
Partners in Fastcom (collectively, the "Fastcom Distributees"), and the
Partnerships will dissolve.
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.
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<PAGE>
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, 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 PREFERRED STOCK.
The manner and basis of issuing the Preferred Stock are as follows:
(a) STOCK CONSIDERATION.
At the Effective Date, the Partnerships shall receive the following
number of shares of Preferred Stock:
TO DATALINC:
1 share of Preferred Stock, Series A; the Underlying Shares to be
distributed to the holders of Series 100 Limited Partnership Units upon
Mandatory Conversion;
1 share of Preferred Stock, Series B; the Underlying Shares to be
distributed to the holders of Series 200 Limited Partnership Units upon
Mandatory Conversion;
1 share of Preferred Stock, Series C; the Underlying Shares to be
distributed to the holders of Series 300 Limited Partnership Units upon
Mandatory Conversion;
1 share of Preferred Stock, Series D; the Underlying Shares to be
distributed to the holders of Series 300E1 Limited Partnership Units upon
Mandatory Conversion;
1 share of Preferred Stock, Series E; the Underlying Shares to be
distributed to the holders of Series 300E2 Limited Partnership Units upon
Mandatory Conversion;
1 share of Preferred Stock, Series F; the Underlying Shares to be
distributed to the holder of the Managing Dealer Units upon Mandatory
Conversion; and
1 share of Preferred Stock, Series G; the Underlying Shares to be
distributed to Datalinc's General Partner upon Mandatory Conversion.
TO FASTCOM:
1 share of Preferred Stock, Series H; the Underlying Shares to be
distributed to the holders of Series 100 Limited Partnership Units upon
Mandatory Conversion;
1 share of Preferred Stock, Series I; the Underlying Shares to be
distributed to the holders of Series 100EA Limited Partnership Units upon
Mandatory Conversion;
A-2
<PAGE>
1 share of Preferred Stock, Series J; the Underlying Shares to be
distributed to the holders of Series 200 Limited Partnership Units upon
Mandatory Conversion;
1 share of Preferred Stock, Series K; the Underlying Shares to be
distributed to the holders of Series 300 Limited Partnership Units upon
Mandatory Conversion;
1 share of Preferred Stock, Series L; the Underlying Shares to be
distributed to Datalinc, as the holder of the Datalinc Limited Partnership
Units, upon Mandatory Conversion;
1 share of Preferred Stock, Series M; the Underlying Shares to be
distributed to the holders of MIP Special Limited Partnership Units upon
Mandatory Conversion;
1 share of Preferred Stock, Series N; the Underlying Shares to be
distributed to the holder of the Managing Dealer Units upon Mandatory
Conversion;
1 share of Preferred Stock, Series O; the Underlying Shares to be
distributed to Information Leasing Corporation upon Mandatory Conversion; and
1 share of Preferred Stock, Series P; the Underlying Shares to be
distributed to Fastcom's General Partner upon Mandatory Conversion.
(b) DIVIDENDS
Dividend Participation of the Preferred Stock
Prior to a Mandatory Conversion Event, as defined in Section 2.4(e), all
Series of Preferred Stock shall have a twenty percent (20%) participation in any
dividend declared on Thrucomm's Common Stock.
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.
(c) VOTING RIGHTS
Except as provided by law, the holders of the Preferred Stock will not
be entitled to vote.
(d) 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,
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<PAGE>
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 the surviving corporation in
such consolidation or merger) will not be deemed to be a liquidation,
dissolution or winding-up, voluntary or involuntary.
(e) CONVERSION
The Preferred Stock shall be mandatorily convertible into Underlying
Shares upon the earliest to occur of one of the following events: (i)
the completion of an initial public offering of Thrucomm's Common
Stock (an "IPO"), (ii) the sale of all or substantially all of the
assets of Thrucomm (a "Sale"), (iii) the merger of Thrucomm into a
non-affiliated entity, whereby Thrucomm is not the surviving entity (a
"Merger"), or (iv) the sale of one-third or more of the equity
interest in Thrucomm, in a single transaction, to one or more
investors (an "Investment"), (collectively, the "Mandatory Conversion
Events"). The "sale of all or substantially all of the assets of
Thrucomm" shall occur upon the sale of at least 80% of Thrucomm's
assets.
The Preferred Stock will be mandatorily convertible into Underlying
Shares prior to a Sale or Merger upon (i) the approval of a proposed
Sale or Merger by Thrucomm's Board of Directors, and (ii) the
execution of a Sale or Merger agreement that sets forth the
consideration to be received by Thrucomm's shareholders, and that is
conditioned upon such shareholders' approval. In the event a Sale or
Merger is not approved by the stockholders, the Preferred Stock will
have been converted into Underlying Shares based upon a proposed
transaction, and there shall be no further right to convert into
Underlying Shares of Thrucomm.
(f) RIGHTS AND PREFERENCES OF SERIES A-P PREFERRED STOCK UPON MANDATORY
CONVERSION
SERIES A Preferred Stock
The Series A Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Returns of the Series A
Preferred Stock, plus (ii) 18.921% of (a) the difference, if any, of the
Datalinc Value minus the Earned Preferred Returns of the Series A - E Preferred
Stock, and (b) the remainder of Datalinc's share of the Fastcom Value.
Series B Preferred Stock
The Series B Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Returns of the Series B
Preferred Stock, plus (ii) 8.642% of (a) the difference, if any, of the Datalinc
Value minus the Earned Preferred Returns of the Series A - E Preferred Stock,
and (b) the remainder of Datalinc's share of the Fastcom Value.
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Series C Preferred Stock
The Series C Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Returns of the Series C
Preferred Stock, plus (ii) 5.429% of (a) the difference, if any, of the Datalinc
Value minus the Earned Preferred Returns of the Series A - E Preferred Stock,
and (b) the remainder of Datalinc's share of the Fastcom Value.
Series D Preferred Stock
The Series D Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Return of the Series D
Preferred Stock, plus (ii) 9.137% of (a) the difference, if any, of the Datalinc
Value minus the Earned Preferred Returns of the Series A - E Preferred Stock,
and (b) the remainder of Datalinc's share of the Fastcom Value.
Series E Preferred Stock
The Series E Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Return of the Series E
Preferred Stock, plus (ii) 7.871% of (a) the difference, if any, of the Datalinc
Value minus the Earned Preferred Returns of the Series A - E Preferred Stock,
and (b) the remainder of Datalinc's share of the Fastcom Value.
Series F Preferred Stock
The Series F Preferred Stock shall be convertible into a number of
Underlying Shares equal to 4.0% of (i) the difference, if any, of the Datalinc
Value minus the Earned Preferred Returns of the Series A - E Preferred Stock,
and (ii) the remainder of Datalinc's share of the Fastcom Value.
Series G Preferred Stock
The Series G Preferred Stock shall be convertible into a number of
Underlying Shares equal to 46% of (i) the difference, if any, of the Datalinc
Value minus the Earned Preferred Returns of the Series A - E Preferred Stock,
and (ii) the remainder of Datalinc's share of the Fastcom Value.
Series H Preferred Stock
The Series H Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Return of the Series H
Preferred Stock, if any, plus (ii) 2.013% of the Fastcom Value.
Series I Preferred Stock
The Series I Preferred Stock shall be convertible into a number of
Underlying Shares equal to 0.503% of the Fastcom Value.
Series J Preferred Stock
The Series J Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Return of the Series J
Preferred Stock, if any, plus (ii) 10.832% of the Fastcom Value.
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Series K Preferred Stock
The Series K Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) the Earned Preferred Return of the Series K
Preferred Stock, if any, plus (ii) 9.524% of the Fastcom Value.
Series L Preferred Stock
The Series L Preferred Stock shall be convertible into a number of
Underlying Shares equal to (i) 73.042% of the Fastcom Value, (ii) minus the sum
of any Earned Preferred Returns of the Series H, J, K and M Preferred Stock.
Series M Preferred Stock
The Series M Preferred Stock shall be convertible into Underlying Shares in
an amount equal to (i) 0.01% of the Fastcom Value (ii) plus any Earned Preferred
Return of the Series M Preferred Stock.
Series N Preferred Stock
The Series N Preferred Stock shall be convertible into a number of
Underlying Shares equal to 2.171% of the Fastcom Value.
Series O Preferred Stock
The Series O Preferred Stock shall be convertible into a number of
Underlying Shares equal to 0.905% of the Fastcom Value.
Series P Preferred Stock
The Series P Preferred Stock shall be convertible into a number of
Underlying Shares equal to 1.0% of the Fastcom Value.
No fractional shares will be issued to any Series of Preferred Stock upon
Mandatory Conversion.
(g) EARNED PREFERRED RETURNS OF THE PREFERRED STOCK
The Series A-E, H, J, K, and M Preferred Stock shall be entitled to
Earned Preferred Returns (the "Earned Preferred Returns"), upon the
occurrence of a Mandatory Conversion Event as set forth below:
(1) Series A-E Earned Preferred Returns
The Datalinc Series 100 - 300E2 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 shall be entitled to
Earned Preferred Returns (the "Earned Preferred Returns"), upon
Mandatory Conversion, in an amount which shall be equal or nearly
equal to the Datalinc Investors' cash Capital Contributions, plus
Preferred Return. Earned Preferred Returns shall be declared at
the time of Mandatory Conversion, and will be factored into the
calculation of the number of Underlying Shares.
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The amount of Earned Preferred Returns accruing 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
Earned Preferred Returns payable for any period shorter than a
full month shall be computed on the basis of a 360-day year of
12, 30-day months.
The Preferred Returns on Datalinc Series 300E1 and 300E2 Units
accrue from the dates of the individual Subscription Agreements
of each Investor in those Units. However, the Earned Preferred
Returns on the Series D and E Preferred Stock, shall accrue from
June 1, 1993 and September 1, 1993, respectively.
(2) Series H, J and K Earned Preferred Returns
The Fastcom Series 100, 200 and 300 Investors may be entitled to
a Minimum Guaranteed Return on their investment. Accordingly, the
Series H, J and K Preferred Stock shall be entitled to Earned
Preferred Returns upon Mandatory Conversion, if necessary to
ensure that Fastcom's Series 100, 200 and 300 Investors receive
the benefit of their Minimum Guaranteed Return, as provided for
under Fastcom's Partnership Agreement.
(i) Series H
The Earned Preferred Return on the Series H Preferred Stock
is measured as a 30% discount to the Fastcom Value in an
IPO. 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 H
Preferred Stock shall be made where the Discounted Fastcom
Value in an IPO is less than $18,431,595 (the "Series H
Guaranteed Minimum Fastcom Value"). The Series H adjusted
ownership interest is calculated as follows:
Series H Guaranteed Minimum Fastcom Value x .02013 x 100 = % Adjusted Ownership
- ----------------------------------------- Interest
Discounted Fastcom Value
Any Earned Preferred Return on the Series H Preferred Stock
shall result in a corresponding decrease in the distribution
to the Series L Preferred Stock upon Mandatory Conversion.
(ii) Series J
The Earned Preferred Return on the Series J Preferred Stock
is measured as a 30% discount to the Fastcom Value. If the
Discounted Fastcom Value in an IPO is less than $19,894,940
(the "Series J Guaranteed Minimum Fastcom Value"), the
adjusted ownership interest of the Series J Preferred Stock
in an IPO is calculated as follows:
Series J Guaranteed Minimum Fastcom Value x .10832 x 100 = % Adjusted Ownership
- ----------------------------------------- Interest
Discounted Fastcom Value
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Any Earned Preferred Return on the Series J Preferred Stock
shall result in a corresponding decrease in the distribution
to the Series L Preferred Stock upon Mandatory Conversion.
(iii) Series K
The aggregate maximum Guaranteed Return of the Series 300
Units is $2 million. Accordingly, if 9.524% of the Fastcom
Value is less than $2 million, assuming the sale of all of
the Series 300 Units, the Earned Preferred Return on the
Series K Preferred Stock will be equal to the difference
between $2 million and 9.524% of the Fastcom Value in any
Mandatory Conversion Event.
(3) Series M Earned Preferred Return
The Series M Preferred Stock is entitled, under the circumstances
described below, to receive an Earned Preferred Return upon the
occurrence of any Mandatory Conversion Event in an amount equal
to $750,000, plus 4.3% of Datalinc's aggregate share of the
Conversion Value of Thrucomm. Four and three tenths of a percent
of Datalinc's aggregate share of the Conversion Value of Thrucomm
is calculated as follows: (i) the sum of (a) the Datalinc Value,
(b) the Fastcom allocation to Datalinc and (c) the Fastcom
allocation to the MIP Units, minus the Earned Preferred Return of
the Datalinc Investors; (ii) the difference in (i), minus
$750,000; (iii) the difference in (ii), multiplied by .043; (iv)
the sum of (a) the product in (iii) and (b) $750,000, minus
$2,100.
If the Conversion Value of Thrucomm is less than $30 million, the
MIP Units shall not be entitled to any Earned Preferred Return.
Except as set forth below, the MIP Units are entitled to an
Earned Preferred Return when the Conversion Value of Thrucomm is
$30 million or greater (the "MIP Minimum Conversion Value"). The
MIP Minimum Conversion Value is subject to an adjustment upwards,
if within 6 months from the date of the adoption of Fastcom's
Management Incentive Plan, Fastcom, Datalinc and/or Thrucomm
receive a capital infusion(s), that is/are reflected as equity in
the financial statements of the Partnerships or Thrucomm. Upon
the occurrence of such capital infusion, the MIP Minimum
Conversion Value shall be increased dollar for dollar by the
amount of the infusion(s), however the MIP Minimum Conversion
Value shall not exceed $35 million. Accordingly, MIP Units shall
be entitled to an Earned Preferred Return when the Conversion
Value of Thrucomm equals or exceeds the MIP Minimum Conversion
Value.
2.5 THE FORMULA.
The number of Underlying Shares that will be distributed to Datalinc and
Fastcom upon the occurrence of a Mandatory Conversion Event shall be determined
pursuant to the following formula (the "Formula"): The Conversion Value, minus
the Datalinc Value, equals the Fastcom Value.
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(a) CONVERSION VALUE
If the Mandatory Conversion Event is an IPO, the Conversion Value is
equal to the value of Thrucomm (the "Thrucomm Value"), minus the gross
proceeds of the IPO (the "Gross Proceeds"). The Thrucomm Value shall
be equal to the Gross Proceeds multiplied by the fraction of the
number of authorized Common Shares sold in the IPO (the "Multiplier").
The total number of Common Shares of Thrucomm that may be sold in an
IPO shall not exceed forty percent (40%) of the total number of
authorized Common Shares of Thrucomm.
If Mandatory Conversion should occur as a result of a Sale, Merger, or
Investment, the Conversion Value shall be equal to the aggregate
consideration received or proposed to be received in that Sale or
Merger or the aggregate funds invested in an Investment. A Mandatory
Conversion occurs, in the event of a Sale or Merger when (i) the Board
of Directors of Thrucomm approve a proposed Sale or Merger, and (ii)
the parties to the proposed Sale or Merger have executed an agreement
of sale or merger that sets forth the consideration to be received by
Thrucomm's shareholders, and is conditioned on such shareholder's
approval.
In any Mandatory Conversion Event, the Conversion Value shall not be
less than $20 million.
(b) THE DATALINC VALUE AND THE FASTCOM VALUE
The Datalinc Value and the Fastcom Value shall be equal to the portion
of the Conversion Value that is allocated to them in one of the
following manners:
(i) If the Conversion Value is $30 million, thirty percent (30%)
of the Conversion Value shall be allocated to Datalinc and
seventy percent (70%) to Fastcom;
(ii) If the Conversion Value of $60 million, twenty-five percent
(25%) of the Conversion Value shall be allocated to Datalinc and
seventy-five percent (75%) to Fastcom; and
(iii) If the Conversion Value is in excess of $60 million, twenty
percent (20%) of the Conversion Value shall be allocated to
Datalinc and eighty percent (80%) to Fastcom.
(iv) If the Conversion Value of Thrucomm is greater 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
(v) If the Conversion Value of Thrucomm is greater 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:
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Datalinc Value = $15,000,000 + Conversion Value of Thrucomm - $60,000,000
-------------------------------------------
10
(vi) If the Conversion Value of Thrucomm is less than $30
million, the Datalinc Value shall be $9 million (the "Minimum
Datalinc Value").
The Fastcom Value shall always be equal to the Conversion Value
minus the Datalinc Value.
2.6 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,
(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.
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2.6 REGISTRATION STATEMENT
Datalinc and Thrucomm have prepared a joint Consent Statement/Prospectus
that is included in Thrucomm's Registration Statement No. 333-27161, as amended
and filed with the U. S. Securities & Exchange Commission (the "Consent
Statement/Prospectus"). The Consent Statement/Prospectus sets forth certain
matters described elsewhere in this Agreement and shall be deemed to be a part
of this Agreement.
III. REPRESENTATIONS AND WARRANTIES OF DATALINC.
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 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. 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.
Datalinc does not own any interest in any other corporation, business trust or
similar entity, except Thrucomm and Fastcom. The minute books of Datalinc
contains accurate records of all meetings of its Partners since its formation.
3.2 CAPITALIZATION.
All of the issued and outstanding Partnership Units of Datalinc are duly
authorized, validly issued and outstanding, fully paid and nonassessable, and
were not issued in violation of the preemptive rights of any person. To
Datalinc's knowledge, there are no subscriptions, options, warrants, rights or
calls or other commitments or agreements to which the holders of Datalinc
Partnership Units 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.
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3.4 PROPERTIES.
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.
3.5 CONTRACTS; NO DEFAULT.
To the knowledge of Datalinc, all material 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 (individually, the "Datalinc Contract"
and collectively, 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.
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.
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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
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, 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 which are 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.
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.
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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, 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.
3.13 EMPLOYEES.
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.
Datalinc has provided Fastcom and Thrucomm with audited balance sheets as
of December 31, 1995 and 1996 and related statements of operations, statements
of cash flows and statements of partners' equity of Datalinc for the one-year
periods ended December 31, 1994, 1995 and 1996, and compiled balance sheets and
related statements of operations, statements of cash flows and statement of
partners' equity for the four-month period ended April 30, 1996 and 1997
(collectively, the "Financial Statements"). To its knowledge, 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"). 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.
To the knowledge of Datalinc, since April 30, 1997, 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;
(b) any material damage, destruction or loss of any material properties of
Datalinc, whether or not covered by insurance;
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(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 right (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; (iv) obligations or liabilities incurred by virtue of
the execution of this Agreement; or (v) liabilities pursuant to
litigation; 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.
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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"). 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.
(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) Datalinc has previously made available to Thrucomm true and complete copies
of any and 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. 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
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(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; (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.
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) To the knowledge of Datalinc:
(1) Each Employee Plan and Compensation Arrangement currently and
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) Datalinc (under the terms of Section 414(b) or (c)
of the Code) is not required to make any contribution thereto.
(3) 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) There are no failures to provide continuation coverage, as defined in
Section 4980 B(l) of the Code, to any such qualified beneficiaries.
(5) There are no actions, suits or claims pending (other than routine
claims for benefits) 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
currently is the subject of any audit, investigation or examination by
any governmental or quasi-governmental agency, nor is any such audit,
investigation or examination is pending or threatened.
(6) 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.
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(7) With respect to each Employee Plan: (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) 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) 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); (v) Datalinc has 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. 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) Datalinc has 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.
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.
Datalinc has provided Thrucomm with copies of the key man life insurance
policies on Mr. John F. Kolenda and Mr. Mark J. Gianinni. Subsequent to the
consummation of the Reorganization, Datalinc shall use its best efforts to cause
the transfer of, and otherwise assign such key man life insurance policies for
the benefit of Thrucomm.
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.
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3.20 BUSINESS LOCATIONS.
Datalinc does not own or lease, any real or personal property, in any
state, except as set forth in the Consent Statement/Prospectus. Datalinc has 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 Consent Statement/Prospectus.
3.21 INTELLECTUAL PROPERTY.
"Intellectual" 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. All
of the patents, trademark registrations and copyrights 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 rights of any third
party.
3.23 CLIENTS AND SUPPLIERS.
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
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contains or will contain any untrue statement of a material fact, or omits or
will out 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.
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. 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. 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.
All of the Partnership Units of Fastcom are duly authorized, validly issued
and outstanding, fully paid and nonassessable, and were not issued in violation
of the preemptive rights of any person. To Fastcom's knowledge, there are no
subscriptions, options, warrants, rights or calls or other commitments or
agreements to which the holders of Fastcom's Partnership Units 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.
4.4 PROPERTIES.
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
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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; NO DEFAULT.
To the knowledge of Fastcom, all material 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 (individually, the "Fastcom Contract" and
collectively, 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.
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, 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 conformity 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
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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, 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 which are 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.
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
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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.
4.13 EMPLOYEES.
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.
Fastcom has provided Datalinc and Thrucomm with audited balance sheets as
of December 31, 1995 and 1996 and related statements of operations, statements
of cash flows and statements of partners' equity of Datalinc for the one-year
periods ended December 31, 1994, 1995 and 1996, and compiled balance sheets and
related statements of operations, statements of cash flows and statement of
partners' equity for the four-month period ended April 30, 1996 and 1997
(collectively, the "Financial Statements"). To its knowledge, 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"). 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 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.
To the knowledge of Fastcom, since April 30, 1997, 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
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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;
(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
litigation; 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"). 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.
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(2) "Multi-employer Plan" means a plan, as defined in ERISA Section 3(37),
to which either Fastcom 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 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) Fastcom has previously made available to Thrucomm
true and complete copies of any and 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 40(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
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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; (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. 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) To the knowledge of Fastcom:
(1) Each Employee Plan and Compensation Arrangement currently and
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) is not required to make any
contribution thereto.
(3) 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) There are no failures to provide continuation coverage, as
defined in Section 4980 B(l) of the Code, to any such qualified
beneficiaries.
(5) There are no actions, suits or claims pending (other than routine
) 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 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) 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: (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
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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) 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) 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) Fastcom has 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. 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) Fastcom has 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.
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.
Fastcom has provided Thrucomm with copies of the key man life insurance
policies on Mr. John F. Kolenda and Mr. Mark J. Gianinni. Subsequent to the
consummation of the Reorganization, Fastcom shall use its best efforts to cause
the transfer of, and otherwise assign such key man life insurance policies for
the benefit of Thrucomm. 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 Consent Statement/Prospectus. Fastcom has 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
Consent Statement/Prospectus.
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4.21 INTELLECTUAL PROPERTY.
"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. To its
knowledge, 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 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.
4.23 CLIENTS AND SUPPLIERS.
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.
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 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.
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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.
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, 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.
5.3 NO BREACHES.
To its knowledge, the making and performance of this Agreement (including,
without limitation, the issuance of the Thrucomm Preferred 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, rights and
preferences as may be determined from time to time by the Board of Directors of
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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 Preferred 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 rights 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.
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.
Datalinc and Fastcom have been provided with audited balance sheets of
Thrucomm as of December 31, 1996 and related statements of operations,
statements of cash flows and statements of stockholders' equity of Thrucomm for
the one-year period ended December 31, 1996 and compiled balance sheets and
related statements of operations, statements of cash flows and statement of
stockholder' equity for the four-month period ended April 30, 1997
(collectively, the "Financial Statements"). To Thrucomm's knowledge, 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 June 30,
1997, 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
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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; NO DEFAULT.
To the knowledge of Thrucomm, all material 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 (individually, the "Thrucomm Contract"
and collectively, 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. Subsequent to the consummation of the
Reorganization, Thrucomm shall use its best efforts to cause the transfer and
otherwise assign for the benefit of Thrucomm, the Thrucomm Contracts.
5.9 TAXES.
Thrucomm 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 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, 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.
To Thrucomm's knowledge, there is no claim action, proceeding or
investigation pending or threatened against or affecting Thrucomm before or by
any court, arbitrator or governmental agency or authority which in the
reasonable judgment of Thrucomm 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
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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.
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.
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.
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.
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(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: (i) 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; (ii) 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; (iii) the books
and records of Datalinc; (iv) 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;
(v) 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 (vi) 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: (i) 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; (ii) a certificate, dated as of the Closing Date,
executed by the Fastcom General Partner, certifying the Certificate of
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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; (iii) the books and records of
Fastcom; (iv) 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; (v) 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 (vi) 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.
(c) Thrucomm.
At the Closing, Thrucomm shall deliver, or cause to be delivered, to
the Partnerships: (i) 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; (ii) 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; (iii)
certificates representing the Preferred Stock issuable upon
consummation of the Reorganization; (iv) a written consent by any
lender whether bank consent is required as to the consummation of the
Reorganization; and (v) 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 or any schedule, certificate or other instrument delivered
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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 Consent
Statement/Prospectus.
(f) Reorganization.
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 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.
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(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
its Intellectual Property.
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 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 Consent
Statement/Prospectus.
(f) Reorganization.
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 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 its
Intellectual Property.
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 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. 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.
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.
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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.
X. 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 and their partners 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 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 right 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
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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).
XI. TERMINATION
10.1 TERMINATION PRIOR TO CLOSING.
(a) If the Closing has not occurred by December 31, 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 December 31, 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 right 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
XII. 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.
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.
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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.
XIII. 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.
12.3 NON-DISCLOSURE.
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
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<PAGE>
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
Integrated Communication Networks, Inc.,
General Partner
If to Fastcom:
1641 Commerce Avenue, North
St. Petersburg, FL 33716
Attn: John F. Kolenda, Chairman of the Board
Fastcom Management, Inc.,
General Partner
If to Thrucomm:
1641 Commerce Avenue, North
St. Petersburg, FL 33716
Attn: Mark J. Gianinni, President
Any such notice, when sent in accordance with this section 12.5, shall be
deemed to have been given and received on the earliest of (i) the day delivered
to such address or sent by facsimile transmission, (G) 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.
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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 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.
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.
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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: /s/ John F. Kolenda
------------------------------
John F. Kolenda
Chairman of the Board
FASTCOM, LTD.,
a Florida limited partnership
By: Fastcom Management, Inc.,
a Florida corporation
General Partner
By: /s/ John F. Kolenda
--------------------------------
John F. Kolenda
Chairman of the Board
THRUCOMM, INC.
a Florida corporation
By: /s/ John F. Kolenda
---------------------------------
John F. Kolenda
Chairman of the Board
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APPENDIX "B"
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.
August 26, 1997
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MICHAEL DAVIS & COMPANY, P.A.
Certified Public Accountants
201 East Kennedy Blvd. Office: (813)228-8919
Suite 715 FAX: (813)223-7104
Tampa, Florida 33602 August 26, 1997 [email protected]
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 Formula used to allocate the Conversion Value of Thrucomm, Inc., a
newly organized Florida corporation ("Thrucomm") in a Mandatory Conversion Event
and distributed to Datalinc, Ltd. ("Datalinc") and Fastcom, Ltd. ("Fastcom")
pursuant to the terms and subject to the conditions set forth in the proposed
Agreement and Plan of Reorganization (the "Reorganization Agreement") by and
among Thrucomm, Fastcom and Datalinc, (Fastcom and Datalinc collectively
referred to as the "Partnerships"). The general partner of Datalinc is
Integrated Communication Networks, Inc. ("ICN") and the general partner of
Fastcom is Fastcom Management, Inc. ("FMI") (collectively, the "General
Partners"). Certain capitalized terms used in this opinion are defined in the
Consent Statement/Prospectus of Thrucomm. We understand that Datalinc will hold
at least 73 percent of the outstanding Units of Fastcom (assuming the issuance
of all of the limited partnership interests offered in Fastcom=s ongoing private
placement of $2 million of its Series 300 Units), and that ICN has given
Datalinc's 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 "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's Mandatory Convertible Preferred Stock, Series A-G.
Datalinc's sole assets will be one share of Common Stock and the Series A-G
Preferred Stock of Thrucomm. Fastcom will receive one share of each series
of Thrucomm's Mandatory Convertible Preferred Stock, Series H-P, which will
be Fastcom's 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 consolidation of the businesses
of the Partnerships;
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<PAGE>
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.
August 26, 1997
(iv) Fastcom and Datalinc will hold the Preferred Shares of Thrucomm, until the
occurrence of a single triggering event (a "Mandatory Conversion Event" or
"Mandatory Conversion"), at which time the Preferred Stock will be
converted into shares of Thrucomm=s non-cumulative, common stock, no par
value (the "Underlying Shares" or the "Common Stock");
(v) Following a Mandatory Conversion of the Preferred Stock, Datalinc and
Fastcom will commence the dissolution of the Partnerships and the
distribution of the assets of the Partnerships, being the Underlying
Shares, to the Investors. After the dissolution of the Partnerships, the
Investors will become shareholders of Thrucomm.
Our opinion expressed herein relates solely to the Formula used to allocate the
Conversion Value in a Mandatory Conversion event to Datalinc and Fastcom and
ultimately distributed by the Partnerships to the Investors in accordance with
the rights and preferences of the Preferred Stock. 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 the Conversion Value
between Fastcom and Datalinc. The basis for the Formula is the Conversion Value
of Thrucomm determined upon the occurrence of the Mandatory Conversion Event.
The value apportioned to Fastcom is equal to the Conversion Value less the
Datalinc value, determined by the General Partners to be a minimum of $9
million. However, the value of Datalinc will be adjusted to a maximum of 25% of
the Conversion Value assuming a Conversion Value of between $30 million and $60
million, and to a maximum of 20% of the Conversion Value assuming a Conversion
Value over $60 million. The General Partners have provided illustrations of the
Mandatory Conversion Event assuming values of $30 million and $60 million. See
attached Exhibits A and B. In addition, the General Partners have set a minimum
Conversion Value of $20 million before a Mandatory Conversion Event is
acceptable. The minimum Conversion Value is illustrated in the attached Exhibit
C. These Exhibits illustrate the receipt by the Partnerships, in terms of dollar
value, of the Underlying Shares of Thrucomm and the distribution to the various
classes of Investors in dissolution of each Partnership. The Investors=
distribution rights 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 27 through 33 of the
Consent Statement/Prospectus of Thrucomm, Inc. The allocations of the Preferred
Stock as shown in the Exhibits are provided for in the Designation of Class,
Series, Preferences and Right of Preferred Shares of Thrucomm, Inc., and are
summarized at pages 94 through 99 of the Consent Statement/Prospectus. The
allocations reflected in Exhibits A through C are consistent with the terms of
the Partnership Agreements.
In determining fairness of the proposed Reorganization, from a financial point
of view, the General Partners prepared a sensitivity analysis using various
alternative amounts in apportioning the Conversion Value to Datalinc and
Fastcom. We reviewed the sensitivity analysis prepared by the General Partners
and provided a summary assuming Conversion Values at $30 million and $60
million, attached as Exhibit D. Footnotes A, B and C of Exhibit D describe the
apportionment of the Conversion Values between Fastcom and Datalinc, Footnote B
is the apportionment method used in the proposed Reorganization. The return on
B-3
<PAGE>
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.
August 26, 1997
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, IF ANY, REALIZED BY THE INVESTORS. The aggregate variance
in return on investment to the Investors of Datalinc assuming the two
alternatives of apportioning the Conversion Value between Datalinc and Fastcom
relative to the method proposed in the Reorganization is approximately -1.97%
and 1.72%, respectively, based on a Conversion Value of $30 million and -8.47%
and 3.21%, respectively, based on a Conversion Value of $60 million. At a
minimum Conversion Value of $20 million the aggregate variance in return on
investment to the Investors of Datalinc is -2.04% and 0.74%. Due to the fact
that Datalinc holds approximately 73 percent of the outstanding voting rights of
Fastcom the variance attributable to Fastcom was not considered.
Other factors considered in determining fairness of the Formula contemplated in
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, the
Capital Contributions of the Investors was considered more relevant 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 General Partners 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.
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 General Partners
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 General Partners 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
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<PAGE>
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.
August 26, 1997
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 formula used to allocate the Conversion Value to
Datalinc and Fastcom and distributed to the Investors in accordance with the
rights and preferences of the Preferred Stock. 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 ICN and FMI, 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 Formula used to
allocate the Conversion Value to Datalinc and Fastcom and the roll-up
transaction taken as a whole is fair, from a financial point of view, to
Datalinc=s Investors, and the resultant 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,
/s/ Michael Davis & Company, P.A.
___________________________________
MICHAEL DAVIS & COMPANY, P.A.
B-5
<PAGE>
MICHAEL B. DAVIS, C.P.A.
RESUME
MICHAEL DAVIS & COMPANY, P.A.
President
December, 1992 to Present
PRICE WATERHOUSE
Senior Tax Manager
December, 1986 to December, 1992
THOMAS CRAIG & COMPANY
Audit Manager
September, 1983 to December, 1986
ALVAREZ & FERRARO, CERTIFIED PUBLIC ACCOUNTANTS
Accountant
January, 1983 to September, 1983
EDUCATION
Florida State University
B.S., Accounting
April, 1983
PROFESSIONAL EXPERIENCE
[0- 33] Acquisitions and divestiture of business units [0- 33] Corporate
finance - conventional and nonconventional financing through financial
institutions and private placements [0- 33] Business valuations [0- 33] Tax
consulting services to public and private entities [0- 33] Audit, review
and compilation services to public and private entities [0- 33] Estate
planning and compliance [0- 33] Business consulting services and strategic
planning
PROFESSIONAL AFFILIATIONS
American Institute of Certified Public Accountants
Florida Institute of Certified Public Accountants
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<PAGE>
EXHIBIT A THRUCOMM INC. Page 1 of 2
MANDATORY CONVERSION EVENT
ILLUSTRATION
CONVERSION VALUE - $30M
A B C D E
CAPITAL UNITS PRE- PARTNER- CONVER- EARNED INVESTOR UN-
CONTRIB- PURCH- FERRED SHIP SION PRE- & OTHER ALLOCATED
UTED HASED STOCK OWNER- VALUE FERRED ALLOCA- PREFERRED
SERIES SHIP % ALLOCA- RETURN(6) TION RETURN
TION
FASTCOM LTD. $21,000,000
SERIES 100(1)
$ 445,000 44.500 H 2,013 $ 107,310 $ 530,040
SERIES 100EA(2)
0 11.125 I 0.503 0 105,630
SERIES 200(1)
2,155,000 215.500 J 10.832 803,880 3,078,600
SERIES 300(1)
2,000,000 200.000 K 9.524 0 2,000,040
DATALINC L 73.042 ($2,282,506) 13,056,314
MIP (3) M 0.010 1,371,316 2,100
CFG(4) 240,000 N 2.171 455,910
ILC O 0.905 190,050
FMI P 1.000 210,000
------- ----------
100.000 21,000,000
DATALINC, LTD $ 9,000,000
SERIES 100
1,632,000 17.000 A 18.921 2,502,400 2,502,400
SERIES 200
1,142,500 228.500 B 8.642 1,765,423 1,765,423
SERIES 300
717,500 143.500 C 5.429 982,942 982,942
SERIES 300E(1)
1,207,500 241.500 D 9.137 1,585,850 1,585,850
SERIES 300E(2)
1,040,000 208.000 E 7.871 1,345,067 1,345,067
CFG(5) F 4.000 0 0
ICN G 46.000 0 0
-------- ----------- -----------
100.000 $8,181,682 $8,181,682
ASSUMPTIONS:
(1) AT $30 MILLION THE SERIES H AND J PREFERRED STOCK RECEIVE EARNED
PREFERRED RETURNS TO ACHIEVE THE MINIUM GUARANTEED RETURN (COLUMN C).
(2) SERIES 100 FASTCOM INVESTORS RECEIVED AT NO ADDITIONAL COST 1/4 UNIT OF
SERIES 100EA FOR EACH UNIT OF SERIES 100 PURCHASED.
(3) THE MIP RECEIVES AN OWNERSHIP INTEREST IN THRUCOMM EQUIVALENT TO 4.578% AT
$30M VALUATION UNDER THE TERMS OF PREFERRED STOCK SERIES M.
(4) CFG EXERCISES OPTION TO PURCHASE 2.171% OF FASTCOM FOR $240,000.
(5) CFG EXERCISES OPTION TO PURCHASE 4.0% OF DATALINC FOR $1.
(6) THE EARNED PREFERRED RETURNS OF SERIES A - E PREFERRED STOCK IS EQUIVALENT
TO THE PREFERRED RETURNS OF THE DATALINC INVESTORS, AND IS SHOWN AS IF
MANDATORY CONVERSION OCCURRED ON MAY 1, 1997.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO
BE CONSTRUED AS A PROJECTION OF PARTNERSHIP VALUE.
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EXHIBIT A THRUCOMM INC. Page 2 of 2
MANDATORY CONVERSION EVENT
ILLUSTRATION
CONVERSION VALUE - $30M
F G H I J K
VALUATION REMAINDER AGGREGATE THRUCOMM PRICE $ VALUE PER
BALANCE DATALINC GRAND OWNER- PAID/ LTD PARTNER
ALLOCA- ALLOCA- TOTAL SHIP UNIT UNIT
TION TION %
FASTCOM LTD.
SERIES 100(1) $ 530,040 1.8% $ 10,000 $ 11,911
SERIES 100EA(2) 105,630 0.4% 0 9,495
SERIES 200(1) 3,078,600 10.3% 10,000 14,286
SERIES 300(1) 2,000,040 6.7% 10,000 10,000
DATALINC ($13,056,314) 0
MIP (3) 1,373,416 4.6%
CFG(4) 455,910 1.5%
ILC 190,050 0.6%
FMI 210,000 0.7%
DATALINC, LTD
SERIES 100
$ 154,834 2,470,385 5,127,619 17.1% 96,000 301,625
SERIES 200
70,719 1,128,327 2,964,469 9.9% 5,000 12,974
SERIES 300
44,426 708,827 1,736,196 5.8% 5,000 12,099
SERIES 300E1
74,770 1,192,955 2,853,575 9.5% 5,000 11,816
SERIES 300E2
64,410 1,027,662 2,437,140 8.1% 5,000 11,717
CFG(5) 32,733 522,253 554,985 1.8%
ICN 376,426 6,005,904 6,382,330 21.3%
---------- ---------- ---------- -----
$ 818,318 $13,056,314 $30,000.000 100.0%
ASSUMPTIONS:
(1) AT $30 MILLION THE SERIES H, J AND K PREFERRED STOCK RECEIVE EARNED
PREFERRED RETURNS TO ACHIEVE THE MINIUM GUARANTEED RETURN (COLUMN C).
(2) SERIES 100 FASTCOM INVESTORS RECEIVED AT NO ADDITIONAL COST 1/4 UNIT OF
SERIES 100EA FOR EACH UNIT OF SERIES 100 PURCHASED.
(3) THE MIP RECEIVES AN OWNERSHIP INTEREST IN THRUCOMM EQUIVALENT TO 4.578% AT
$30M VALUATION UNDER THE TERMS OF PREFERRED STOCK SERIES M.
(4) CFG EXERCISES OPTION TO PURCHASE 2.171% OF FASTCOM FOR $240,000.
(5) CFG EXERCISES OPTION TO PURCHASE 4.0% OF DATALINC FOR $1.
(6) THE EARNED PREFERRED RETURNS OF SERIES A - E PREFERRED STOCK IS EQUIVALENT
TO THE PREFERRED RETURNS OF THE DATALINC INVESTORS, AND IS SHOWN AS IF
MANDATORY CONVERSION OCCURRED ON MAY 1, 1997.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO
BE CONSTRUED AS A PROJECTION OF PARTNERSHIP VALUE.
B-8
<PAGE>
EXHIBIT B THRUCOMM INC. Page 1 of 2
MANDATORY CONVERSION EVENT
ILLUSTRATION
CONVERSION VALUE - $60 M
A B C D E
CAPITAL UNITS PRE- PARTNER- CONVER- EARNED INVESTOR UN-
CONTRIB- PURCH- FERRED SHIP SION PRE- & OTHER ALLOCATED
UTED HASED STOCK OWNER- VALUE FERRED ALLOCA- PREFERRED
SERIES SHIP % ALLOCA- RETURN(6) TION RETURN
TION
FASTCOM LTD. $45,000,000
SERIES 100(1)
$ 445,000 44.500 H 2.013 $ 905,850
SERIES 100EA(2)
0 11.125 I 0.503 226,350
SERIES 200(1)
2,155,000 215.500 J 10.832 4,874,400
SERIES 300(1)
2,000,000 200.000 K 9.524 4,285,800
DATALINC L 73.042 ($2,419,993) 30,448,907
MIP (3) M 0.010 2,419,993 4,500
CFG(4) 240,000 N 2.171 976,950
ILC O 0.905 407,250
FMI P 1.000 450,000
------- ----------
100.000 45,000,000
DATALINC, LTD $15,000,000
SERIES 100
1,632,000 17.000 A 18.921 2,502,400 2,502,400
SERIES 200
1,142,500 228.500 B 8.642 1,765,423 1,765,423
SERIES 300
717,500 143.500 C 5.429 982,942 982,942
SERIES 300E(1)
1,207,500 241.500 D 9.137 1,585,850 1,585,850
SERIES 300E(2)
1,040,000 208.000 E 7.871 1,345,067 1,345,067
CFG(5) F 4.000 0 0
ICN G 46.000 0 0
-------- ----------- -----------
100.000 $8,181,682 $8,181,682
ASSUMPTIONS:
(1) AT $60 MILLION THE SERIES H, J AND K PREFERRED STOCK DO NOT RECEIVE EARNED
PREFERRED RETURNS TO ACHIEVE THE MINIUM GUARANTEED RETURN (COLUMN C).
(2) SERIES 100 FASTCOM INVESTORS RECEIVED AT NO ADDITIONAL COST 1/4 UNIT OF
SERIES 100EA FOR EACH UNIT OF SERIES 100 PURCHASED.
(3) THE MIP RECEIVES AN OWNERSHIP INTEREST IN THRUCOMM EQUIVALENT TO 4.041% AT
$60M VALUATION UNDER THE TERMS OF PREFERRED STOCK SERIES M.
(4) CFG EXERCISES OPTION TO PURCHASE 2.171% OF FASTCOM FOR $240,000.
(5) CFG EXERCISES OPTION TO PURCHASE 4.0% OF DATALINC FOR $1.
(6) THE EARNED PREFERRED RETURNS OF SERIES A - E PREFERRED STOCK IS EQUIVALENT
TO THE PREFERRED RETURNS OF THE DATALINC INVESTORS, AND IS SHOWN AS IF
MANDATORY CONVERSION OCCURRED ON MAY 1, 1997.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO
BE CONSTRUED AS A PROJECTION OF PARTNERSHIP VALUE.
B-9
<PAGE>
EXHIBIT B THRUCOMM INC. Page 2 of 2
MANDATORY CONVERSION EVENT
ILLUSTRATION
CONVERSION VALUE - $60 M
F G H I J K
VALUATION REMAINDER AGGREGATE THRUCOMM PRICE $ VALUE PER
BALANCE DATALINC GRAND OWNER- PAID/ LTD PARTNER
ALLOCA- ALLOCA- TOTAL SHIP UNIT UNIT
TION TION %
FASTCOM LTD.
SERIES 100(1) $ 905,850 1.5% $ 10,000 $ 20,356
SERIES 100EA(2) 226,350 0.4% 0 20,346
SERIES 200(1) 4,874,400 8.1% 10,000 22,619
SERIES 300(1) 4,285,800 7.1% 10,000 21,429
DATALINC ($30,448,907) 0
MIP (3) 2,424,493 4.0%
CFG(4) 976,950 1.6%
ILC 407,250 0.7%
FMI 450,000 0.8%
DATALINC, LTD
SERIES 100
$1,290,094 5,761,238 9,553,733 15.9% 96,000 561,984
SERIES 200
589,239 2,631,395 4,986,057 8.3% 5,000 21,821
SERIES 300
370,166 1,653,071 3,006,179 5.0% 5,000 20,949
SERIES 300E1
622,990 2,782,117 4,990,956 8.4% 5,000 20,666
SERIES 300E2
536,670 2,396,633 4,278,370 7.1% 5,000 20,569
CFG(5) 272,733 1,217,956 1,490,689 2.5%
ICN 3,136,426 14,006,497 17,142,923 28.6%
---------- ---------- ---------- -----
$6,818,318 $30,448,907 $60,000.000 100.0%
ASSUMPTIONS:
(1) AT $60 MILLION THE SERIES H, J AND K PREFERRED STOCK DO NOT RECEIVE EARNED
PREFERRED RETURNS TO ACHIEVE THE MINIUM GUARANTEED RETURN (COLUMN C).
(2) SERIES 100 FASTCOM INVESTORS RECEIVED AT NO ADDITIONAL COST 1/4 UNIT OF
SERIES 100EA FOR EACH UNIT OF SERIES 100 PURCHASED.
(3) THE MIP RECEIVES AN OWNERSHIP INTEREST IN THRUCOMM EQUIVALENT TO 4.041% AT
$60M VALUATION UNDER THE TERMS OF PREFERRED STOCK SERIES M.
(4) CFG EXERCISES OPTION TO PURCHASE 2.171% OF FASTCOM FOR $240,000.
(5) CFG EXERCISES OPTION TO PURCHASE 4.0% OF DATALINC FOR $1.
(6) THE EARNED PREFERRED RETURNS OF SERIES A - E PREFERRED STOCK IS EQUIVALENT
TO THE PREFERRED RETURNS OF THE DATALINC INVESTORS, AND IS SHOWN AS IF
MANDATORY CONVERSION OCCURRED ON MAY 1, 1997.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO
BE CONSTRUED AS A PROJECTION OF PARTNERSHIP VALUE.
B-10
<PAGE>
EXHIBIT C THRUCOMM INC. Page 1 of 2
MANDATORY CONVERSION EVENT
ILLUSTRATION
CONVERSION VALUE - $20M
A B C D E
CAPITAL UNITS PRE- PARTNER- CONVER- EARNED INVESTOR UN-
CONTRIB- PURCH- FERRED SHIP SION PRE- & OTHER ALLOCATED
UTED HASED STOCK OWNER- VALUE FERRED ALLOCA- PREFERRED
SERIES SHIP % ALLOCA- RETURN(6) TION RETURN
TION
FASTCOM LTD. $11,000,000
SERIES 100(1)
$ 445,000 44.500 H 2.013 $ 358,931 $ 580,361
SERIES 100EA(2)
0 11.125 I 0.503 0 55,330
SERIES 200(1)
2,155,000 215.500 J 10.832 1,887,080 3,078,600
SERIES 300(1)
2,000,000 200.000 K 9.524 952 360 2,000,000
DATALINC L 73.042 ($3,198,371) 4,836,249
MIP (3) M 0.010 0 1,100
CFG(4) 240,000 N 2.171 0 238,810
ILC O 0.905 0 99,550
FMI P 1.000 0 110,000
------- ----------
100.000 11,000,000
DATALINC, LTD $ 9,000,000
SERIES 100
1,632,000 17.000 A 18.921 2,502,400 2,502,400
SERIES 200
1,142,500 228.500 B 8.642 1,765,423 1,765,423
SERIES 300
717,500 143.500 C 5.429 982,942 982,942
SERIES 300E(1)
1,207,500 241.500 D 9.137 1,585,850 1,585,850
SERIES 300E(2)
1,040,000 208.000 E 7.871 1,345,067 1,345,067
CFG(5) F 4.000 0 0
ICN G 46.000 0 0
-------- ----------- -----------
100.000 $8,181,682 $8,181,682
ASSUMPTIONS:
(1) AT $20 MILLION THE SERIES H, J AND K UNITS RECEIVE EARNED PREFERRED
RETURNS TO ACHIEVE THE MINIUM GUARANTEED RETURN (COLUMN C).
(2) SERIES 100 FASTCOM INVESTORS RECEIVED AT NO ADDITIONAL COST 1/4 UNIT OF
SERIES 100EA FOR EACH UNIT OF SERIES 100 PURCHASED.
(3) THE MIP RECEIVES AN OWNERSHIP INTEREST IN THRUCOMM EQUIVALENT TO 0.06% AT
$20M VALUATION UNDER THE TERMS OF PREFERRED STOCK SERIES M.
(4) CFG EXERCISES OPTION TO PURCHASE 2.171% OF FASTCOM FOR $240,000.
(5) CFG EXERCISES OPTION TO PURCHASE 4.0% OF DATALINC FOR $1.
(6) THE EARNED PREFERRED RETURNS OF SERIES A - E PREFERRED STOCK IS EQUIVALENT
TO THE PREFERRED RETURNS OF THE DATALINC INVESTORS, AND IS SHOWN AS IF
MANDATORY CONVERSION OCCURRED ON MAY 1, 1997.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO
BE CONSTRUED AS A PROJECTION OF PARTNERSHIP VALUE.
B-11
<PAGE>
EXHIBIT C THRUCOMM INC. Page 2 of 2
MANDATORY CONVERSION EVENT
ILLUSTRATION
CONVERSION VALUE - $20M
F G H I J K
VALUATION REMAINDER AGGREGATE THRUCOMM PRICE $ VALUE PER
BALANCE DATALINC GRAND OWNER- PAID/ LTD PARTNER
ALLOCA- ALLOCA- TOTAL SHIP UNIT UNIT
TION TION %
FASTCOM LTD.
SERIES 100(1) $ 580,361 2.9% $ 10,000 $ 13,042
SERIES 100EA(2) 55,330 0.3% 0 4,973
SERIES 200(1) 3,078,600 15.4% 10,000 14,286
SERIES 300(1) 2,000,000 10.0% 10,000 10,000
DATALINC ($4,836,249) 0
MIP (3) 1,100 0.0%
CFG(4) 238,810 1.2%
ILC 99,550 0.5%
FMI 110,000 0.5%
DATALINC, LTD
SERIES 100
$ 154,834 915,067 3,572,301 17.9% 96,000 210,135
SERIES 200
70,719 417,949 2,254,091 11.3% 5,000 9,856
SERIES 300
44,426 262,560 1,289,928 6.4% 5,000 8,989
SERIES 300E1
74,770 441,888 2,102,508 10.5% 5,000 8,706
SERIES 300E2
64,410 308,661 1,790,138 9.0% 5,000 8,606
CFG(5) 32,733 193,450 226,183 1.1%
ICN 376,426 2,224,675 2,601,100 13.0%
---------- ---------- ---------- -----
$ 818,318 $4,836,249 $20,000.000 100.0%
ASSUMPTIONS:
(1) AT $20 MILLION THE SERIES H, J AND K UNITS RECEIVE EARNED PREFERRED
RETURNS TO ACHIEVE THE MINIUM GUARANTEED RETURN (COLUMN C).
(2) SERIES 100 FASTCOM INVESTORS RECEIVED AT NO ADDITIONAL COST 1/4 UNIT OF
SERIES 100EA FOR EACH UNIT OF SERIES 100 PURCHASED.
(3) THE MIP RECEIVES AN OWNERSHIP INTEREST IN THRUCOMM EQUIVALENT TO 0.06% AT
$20M VALUATION UNDER THE TERMS OF PREFERRED STOCK SERIES M.
(4) CFG EXERCISES OPTION TO PURCHASE 2.171% OF FASTCOM FOR $240,000.
(5) CFG EXERCISES OPTION TO PURCHASE 4.0% OF DATALINC FOR $1.
(6) THE EARNED PREFERRED RETURNS OF SERIES A - E PREFERRED STOCK IS EQUIVALENT
TO THE PREFERRED RETURNS OF THE DATALINC INVESTORS, AND IS SHOWN AS IF
MANDATORY CONVERSION OCCURRED ON MAY 1, 1997.
THE ABOVE ESTIMATE SERVES ONLY AS AN ILLUSTRATION AND IS NOT TO
BE CONSTRUED AS A PROJECTION OF PARTNERSHIP VALUE.
B-12
<PAGE>
Exhibit D
"Thrucomm, Inc." Page 1 of 3
Mandatory Conversion Event
Return on Investment - Sensitivity Analysis
Conversion value: $30 Million
Return Return Return
Capital on on on
Con- Invest- Invest- Invest-
tributed A ment B ment C ment
FASTCOM LTD.
Series 100 445,000 635,670 42.85% 635,670 42.85% 635,750 42.87%
Series 200 2,155,000 3,078,600 42.86% 3,078,600 42.86% 3,078,600 42.86%
Series 300 2,000,000 2,000,000 0.00% 2,000,040 0.00% 2,381,000 19.05%
CFG 240,000 217,100 -9.54% 455,910 89.96% 542,750 126.15%
FMI 100,000 ** 210,000 ** 250,000 **
ILC 90,500 ** 190,050 ** 226,250 **
MIP 1,225,938 ** 1,373,416 ** 1,350,204 **
Datalinc Ltd. (INCLUDED IN DATALINC LTD.)
DATALINC LTD.
Series 100 1,632,000 5,240,365 221.10% 5,127,619 214.19% 5,029,066 208.15%
Series 200 1,142,500 3,015,965 163.98% 2,964,469 159.47% 2,919,456 155.53%
Series 300 717,500 1,768,545 146.49% 1,736,196 141.98% 1,707,918 138.04%
Series 300E1 1,207,500 2,908,020 140.83% 2,853,575 136.32% 2,805,983 132.38%
Series 300E2 1,040,000 2,484,041 138.85% 2,437,140 134.34% 2,396,141 130.40%
CFG 578,821 ** 554,985 ** 534,151 **
ICN 6,656,435 ** 6,382,330 ** 6,142,731 **
---------- ---------- ----------
30,000,000 30,000,000 30,000,000
========== ========== ==========
Aggregate Return on Investment
to Investors 168.61% 163.42% 158.88%
Variance -1.97% 1.72%
Footnotes:
A. Valuation allocation of $10 million for Fastcom Ltd. and $20 million for
Datalinc Ltd.
B. Valuation allocation of $21 million for Fastcom Ltd. and $9 million for
Datalinc Ltd.
C. Valuation allocation of $25 million for Fastcom Ltd. and $5 million for
Datalinc Ltd.
Note: Return on investment is measured by value received in excess of capital
contributed divided by capital contributed. (** - Infinite)
B-13
<PAGE>
Exhibit D
"Thrucomm, Inc." Page 2 of 3
Mandatory Conversion Event
Return on Investment - Sensitivity Analysis
Conversion value: $60 Million
Return Return Return
Capital on on on
Con- Invest- Invest- Invest-
tributed A ment B ment C ment
FASTCOM LTD.
Series 100 445,000 670,933 50.77% 1,132,200 154.43% 1,299,933 192.12%
Series 200 2,155,000 3,078,600 42.86% 4,874,400 126.19% 5,596,533 159.70%
Series 300 2,000,000 2,539,733 26.99% 4,285,800 114.29% 4,920,733 146.04%
CFG 240,000 578,933 141.22% 976,950 307.06% 1,121,683 367.37%
FMI 266,667 ** 450,000 ** 516,667 **
ILC 241,333 ** 407,250 ** 467,583 **
MIP 2,631,313 ** 2,424,493 ** 2,347,243 **
Datalinc Ltd. (INCLUDED IN DATALINC LTD.)
DATALINC LTD.
Series 100 1,632,000 10,413,423 538.08% 9,553,733 485.40% 9,228,427 465.47%
Series 200 1,142,500 5,378,713 370.78% 4,986,057 336.42% 4,837,476 323.41%
Series 300 717,500 3,252,851 353.36% 3,006,179 318.98% 2,912,840 305.97%
Series 300E1 1,207,500 5,406,103 347.71% 4,990,956 313.33% 4,833,865 300.32%
Series 300E2 1,040,000 4,635,995 345.77% 4,278,370 311.38% 4,143,045 298.37%
CFG 1,672,432 ** 1,490,689 ** 1,421,918 **
ICN 19,232,971 ** 17,142,923 ** 16,352,054 **
---------- ---------- ----------
60,000,000 60,000,000 60,000,000
========== ========== ==========
Aggregate Return on
Investment to Investors 406.79% 367.21% 352.23%
Variance -8.47% 3.21%
Footnotes:
A. Valuation allocation of $26.7 million for Fastcom Ltd. and $33.3 million
for Datalinc Ltd.
B. Valuation allocation of $45 million for Fastcom Ltd. and $15 million for
Datalinc Ltd.
C. Valuation allocation of $51.7 million for Fastcom Ltd. and $8.3 million for
Datalinc Ltd.
Note: Return on investment is measured by value received in excess of capital
contributed divided by capital contributed. (** - Infinite)
B-14
<PAGE>
Exhibit D
"Thrucomm, Inc." Page 3 of 3
Mandatory Conversion Event
Return on Investment - Sensitivity Analysis
Conversion value: $20 Million
Return Return Return
Capital on on on
Con- Invest- Invest- Invest-
tributed A ment B ment C ment
FASTCOM LTD.
Series 100 445,000 635,691 42.85% 635,691 42.85% 635,691 42.85%
Series 200 2,155,000 3,078,600 42.86% 3,078,600 42.86% 3,078,600 42.86%
Series 300 2,000,000 2,000,000 0.00% 2,000,000 0.00% 2,000,000 0.00%
CFG (1) 240,000 238,810 -0.50% 325,650 35.69%
FMI ** 110,000 ** 150,000 **
ILC ** 99,550 ** 135,750 **
MIP ** 1,100 ** 1,500 **
Datalinc Ltd. (INCLUDED IN DATALINC LTD.)
DATALINC LTD.
Series 100 1,632,000 3,657,343 124.10% 3,572,301 118.89% 3,541,376 117.00%
Series 200 1,142,500 2,292,933 100.69% 2,254,091 97.29% 2,239,967 96.06%
Series 300 717,500 1,314,329 83.18% 1,289,928 79.78% 1,281,056 78.54%
Series 300E1 1,207,500 2,143,575 77.52% 2,102,508 74.12% 2,087,574 72.88%
Series 300E2 1,040,000 1,825,515 75.53% 1,790,138 72.13% 1,777,273 70.89%
CFG 244,161 ** 226,183 ** 219,645 **
ICN 2,807,853 ** 2,601,100 ** 2,525,918 **
---------- ---------- ----------
20,000,000 20,000,000 20,000,000
Aggregate Return on Investment
to Investors 95.73% 91.81% 90.39%
Variance -2.04% 0.74%
Footnotes:
A. Valuation allocation of $5.7 million for Fastcom Ltd. and $14.3 million for
Datalinc Ltd.
B. Valuation allocation of $11 million for
Fastcom Ltd. and $9 million for Datalinc Ltd.
C. Valuation allocation of $15 million for Fastcom Ltd. and $5 million for
Datalinc Ltd.
(1) It is assumed at a minimum valuation of $5.7 million for Fastcom Ltd.
CFG will not exercise its option.
Note: Return on investment is measured by value received in excess of capital
contributed divided by capital contributed. (** - Infinite)
B-15
<PAGE>
Thrucomm, Inc. EXHIBIT E
Factors Considered in Determining Fairness
DATALINC, LTD. FASTCOM, LTD.
-------------- -------------
(i) Current No current market exists for No current market exists for
Market the partnership units. Partners the partnership units. Partners
Price: are prohibited from transfering are prohibited from transfering
partnership interest without partnership interest without
prior written consent of prior written consent of
general partner. general partner.
(ii)Historical 11,994,775 16,472,670
Market Price:
No historical market has No historical market has
existed for the partnership existed for the partnership
units. Value is determined units. Value is determined
based on capital invested based on capital invested
relative to ownership relative to ownership
percentage of investors.
(iii) Net Book Value 347,242 (827,396
(Deficit):
(iv) Going Without Additional infusion of Without additional infusion of
Concern capital substantial doubt capital substantial doubt
Value: of the partnership's ability of the partnership's ability
to continue as a going to continue as a going
concern. concern.
(v) Liquidation Value: 347,242 -0-
(vi) Capital
Contributed 5,739,500 4,840,000
B-16
<PAGE>
"Thrucomm, Inc."
Variance
DATALINC LTD.
(i) Variance at $30 million
Series 100 -2.20% 1.92%
Series 200 -1.74% 1.52%
Series 300 -1.86% 1.63%
Series 300E1 -1.91% 1.67%
Series 300E2 -1.92% 1.68%
Aggregate -1.97% 1.72%
(ii) Variance at $60 million
Series 100 -9.00% 3.41%
Series 200 -7.88% 2.98%
Series 300 -8.21% 3.10%
Series 300E1 -8.32% 3.15%
Series 300E2 -8.36% 3.16%
Aggregate -8.47% 3.21%
(iii) Variance at $20 million
Series 100 -2.38% 0.87%
Series 200 -1.72% 0.63%
Series 300 -1.89% 0.69%
Series 300E1 -1.95% 0.71%
Series 300E2 -1.98% 0.72%
Aggregate -2.04% 0.74%
B-17
<PAGE>
EXHIBIT NO.
5.1
Opinion of Michael T. Williams, P.A.
<PAGE>
Michael T. Williams, Esq.
2503 West Gardner Court
Tampa, FL 33611
July 29, 1997
Fastcom, Ltd.
RE: Registration Statement on Form S4
Gentlemen:
I have acted as your counsel in the preparation on a Registration Statement
on Form SB-4 (the "Registration Statement") filed by you with the Securities and
Exchange Commission covering Series a-M Preferred Stock of Thrucomm, Inc. (the
"Stock").
In so acting, I have examined and relied upon such records, documents and
other instruments as in our judgment are necessary or appropriate in order to
express the opinion hereinafter set forth and have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals,
and the conformity to original documents of all documents submitted to us
certified or photostatic copies.
Based on the foregoing, I am of the opinion that:
The Stock, when issued and delivered in the manner and/or the terms
described in the Registration Statement (after it is declared effective), will
duly and validly issued, fully paid and nonassessable;
I hereby consent to the reference to my name in the Registration Statement
under the caption "Legal Matter" and to the use of this opinion as an exhibit to
the Registration Statement. In giving this consent, I do not hereby admit that I
come within the category of a person whose consent is required under Section7 of
the Act, or the general rules and regulations thereunder.
Very truly yours,
/S/Michael T. Williams
- -----------------------------------
Michael T. Williams
<PAGE>
EXHIBIT 10.1.1.2
Purchase Agreement by and among Thrucomm, Inc.,
Blue Chip/Datalinc Corporation, Integrated Communications Networks, Inc.
John F. Kolenda, Mark J. Gianinni and Datalinc, Inc.
dated August , 1997
<PAGE>
AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of this 27th
day of August, 1997 by and among THRUCOMM, INC., a Florida corporation whose
address is 1641 Commerce Avenue North, St. Petersburg, Florida 33716
("Thrucomm"), BLUE CHIP/DATALINC CORPORATION, a Delaware corporation (a
wholly-owned subsidiary of Blue Chip Capital Fund Limited Partnership, a
Delaware limited partnership) whose address is 221 East Fourth Street,
Cincinnati, Ohio 45202 (the "Purchaser"), INTEGRATED COMMUNICATION NETWORKS,
INC., a Florida corporation whose address is 1641 Commerce Avenue North, St.
Petersburg, Florida 33716 ("ICN"), JOHN F. KOLENDA, an individual with a mailing
address at 1641 Commerce Avenue North, St. Petersburg, Florida 33716
("Kolenda"), MARK J. GIANINNI, an individual with a mailing address at 1641
Commerce Avenue North, St. Petersburg, Florida 33716 ("Gianinni", and together
with Kolenda, the "Shareholders"), and DATALINC, LTD., a Florida limited
partnership whose address is 1641 Commerce Avenue North, St. Petersburg, Florida
33716 (the "Partnership").
WHEREAS, an agreement (the "First Agreement") was made and entered into as
of the 30th day of April, 1993 by and among the Purchaser, ICN, the Shareholders
and the Partnership; and
WHEREAS, an agreement (the "Second Agreement") was made and entered into as
of the 1st day of September, 1993 by and among the Purchaser, ICN, the
Shareholders and the Partnership; and
WHEREAS, pursuant and subject to the First Agreement and the Second
Agreement, the Partnership sold to the Purchaser, and the Purchaser purchased
from the Partnership, three hundred eighty (380) Series 300 Limited Partnership
Units of the Partnership (the "Purchaser Units"), and the Purchaser, the
Partnership, ICN and the Shareholders entered into certain agreements in
connection therewith; and
WHEREAS, pursuant to a Reorganization as described in the Form S-4
Registration Statement filed with the Securities and Exchange Commission (the
"Commission") with respect to Thrucomm on May 15, 1997, as amended (the
"Registration Statement"), the assets of the Partnership have been or will be
transferred to Thrucomm, and the Partnership has acquired or will acquire all of
the common stock and certain preferred stock of Thrucomm; and
WHEREAS, Thrucomm and the parties to the First Agreement and the Second
Agreement desire that Thrucomm be bound by the intent of the First Agreement and
the Second Agreement such that the rights of Purchaser thereunder are not
adversely affected in any way and desire to make certain other agreements, as
more particularly set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereby agree as follows:
1. Escrow of Distributions.
(a) Distribution Escrow. The provisions of Paragraph 2 of the First
Agreement, Paragraph 2 of the Second Agreement, and the Escrow
Agreement dated as of September 1, 1993 among the Purchaser, ICN, the
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Shareholders, the Partnership and Star Bank, National Association, as
Escrow Agent (the "Distribution Escrow Agreement"), shall continue in
full force and effect.
(b) Stock Escrow. If a Mandatory Conversion Event (as defined in the
Registration Statement) shall occur prior to the receipt by the
Purchaser of a weighted average thirty-five percent (35%) per annum
internal rate of return as calculated by the Purchaser on its
investment in all of the Purchaser Units (calculated in the case of
each such Purchaser Unit from the date of purchase thereof to the date
of transfer thereof), taking into account (i) all cash Distributions,
as defined the Partnership's Amended Agreement of Limited Partnership
dated as of January 1, 1993 (the "Partnership Agreement"), received by
the Purchaser with respect to the Purchaser Units, (ii) the amount of
net cash proceeds received by the Purchaser from the sale of any
Purchaser Units, (iii) the amount of Escrowed Funds received by the
Purchaser pursuant to Paragraph 2 of the First Agreement, Paragraph 2
of the Second Agreement and the Distribution Escrow Agreement and (iv)
the market value, as determined by the Purchaser in good faith and
assuming sale within a period of not more than four (4) weeks, of any
stock of Thrucomm which the Purchaser has received pursuant to the
Mandatory Conversion Event which may be freely sold by the Purchaser
without restriction on the amount or manner of sale under applicable
securities laws or agreement (the "Rate of Return"), then each of ICN
and the Shareholders shall, immediately upon receipt of any common
stock of Thrucomm received upon conversion of Thrucomm's Mandatory
Convertible Preferred Stock, Series G (as described in the
Registration Statement), deposit such common stock (the "Escrowed
Stock"), subject to the options described in Exhibit A attached
hereto, and together with stock powers with respect to each share of
such Escrowed Stock duly executed in blank, into an escrow account
(the "Stock Escrow Account") at a financial institution reasonably
acceptable to the Purchaser (the "Stock Escrow Agent"). The Stock
Escrow Account shall be established pursuant to an Escrow Agreement in
substantially the form of Exhibit B attached hereto (the "Stock Escrow
Agreement"), which shall be entered into among the Purchaser, ICN,
Thrucomm, the Shareholders and the Stock Escrow Agent prior to the
Mandatory Conversion Event.
(c) Termination of Stock Escrow Account.
(i) The Purchaser shall notify ICN, Thrucomm, the Shareholders and
the Stock Escrow Agent at such time as the Purchaser has received
the Rate of Return, and the Stock Escrow Agent shall thereupon
release all Escrowed Stock to the registered owner thereof or
otherwise in accordance with written instructions from the
registered owner thereof, and the Stock Escrow Account shall be
closed. Until receipt by the Purchaser of the Rate of Return and
release of the Escrowed Stock i accordance with this Paragraph
1(c), but subject to any other provisions of this Agreement, all
Escrowed Stock shall remain in the Stock Escrow Account.
(ii) In the event that the Purchaser has not received the Rate of
Return prior to the date that is five (5) years from the first
deposit into the Stock Escrow Account, then on such date the
Stock Escrow Agent shall release all Escrowed Stock, if any,
remaining in the Stock Escrow Account to the Purchaser or
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<PAGE>
otherwise in accordance with written instructions from the
Purchaser, and the Stock Escrow Account shall be closed. The
Purchaser thereupon shall (A) sell such Escrowed Sto which sale
must be on an arms-length basis, (B) remit $100,000 of the
proceeds of such sale to Kolenda and $100,000 of such proceeds to
Gianinni (and if such proceeds are less than $200,000, they shall
be divided evenly between Kolenda and Gianinni), (C) retain the
balance of such proceeds to the extent sufficient to provide the
Purchaser with the Rate of Return, and (D) remit any remainder of
such proceeds to ICN and each of the Shareholders in accordance
with the proportionate ownership by ICN and each of the
Shareholders of the Escrowed Stock so sold. ICN and the
Shareholders agree to execute any documents and take any actions
as the Purchaser may reasonably deem necessary or appropriate to
effect such sale.
2. ICN and Thrucomm Board of Directors.
(a) ICN. The Shareholders shall vote their shares to elect and shall
continue to maintain a Board of Directors of ICN of not less than
three (3) and not more than five (5) persons, consisting at least of
(i) an individual nominated by the Purchaser, (ii) an individual
nominated by a majority-in-interest of the Limited Partners of the
Partnership other than the Purchaser and (iii) an individual proposed
by ICN and reasonably acceptable to the Purchaser and to the
individual nomi thereto by the Limited Partners of the Partnership
other than the Purchaser. In connection therewith, the Shareholders
shall: (A) cause all certificates representing voting shares of stock
of ICN to reflect that the Shareholders have agreed to elect members
of the Board of Directors as required under this Paragraph 2(a) and
that a copy of this Agreement may be obtained from ICN; (B) not permit
or suffer to exist the Articles of Incorporation or By-Laws of ICN to
contain any provisions which would contravene or otherwise be
inconsistent with the provisions of this Paragraph 2(a); and (C)
provide to the Purchaser such evidence as the Purchaser may reasonably
request from time to time with respect to the compliance by the
Shareholders with the provisions of this Paragraph 2(a).
(b) Thrucomm Directors Prior to Mandatory Conversion Event. At all times
prior to the occurrence of a Mandatory Conversion Event, the
Partnership shall vote its shares of Thrucomm to elect and shall
continue to maintain a Board of Directors of Thrucomm of not less than
three (3) and not more than six (6) persons, consisting at least of
(i) an individual nominated by the Purchaser, (ii) an individual
nominated by a majority-in-interest of the Limited Partners of the
Partnership than the Purchaser, (iii) an individual proposed by ICN
and reasonably acceptable to the Purchaser and to the individual
nominated thereto by the Limited Partners of the Partnership other
than the Purchaser, and (iv) so long as he desires, Mr. Vincent
Rinaldi; provided, however, that upon Mr. Rinaldi's resignation, his
vacancy shall not be filled. In connection therewith, the Partnership
and Thrucomm shall: (A) cause all certificates representing voting
shares of stock of Thrucomm to reflect that the Partnership has agreed
to elect members of the Board of Directors as required under this
Paragraph 2(b) and that a copy of this Agreement may be obtained from
Thrucomm; (B) not permit or suffer to exist the Articles of
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<PAGE>
Incorporation or By- Laws of Thrucomm to contain any provisions which
would contravene or otherwise be inconsistent with the provisions of
this Paragraph 2(b); and (C) provide to the Purchaser such evidence as
the Purchaser may reasonably request from time to time with respect to
compliance by the Partnership with the provisions of this Paragraph
2(b).
(c) Thrucomm Directors After Mandatory Conversion Event. Upon a Mandatory
Conversion Event and thereafter so long as the Escrowed Stock remains
in the Stock Escrow Account, ICN and the Shareholders shall vote their
shares of Thrucomm for election to the Board of Directors of Thrucomm
of an individual designated by the Purchaser.
3. Transfer of Interests.
(a) Transfer of Interests in the Partnership and ICN. The provisions of
Paragraph 5 of the First Agreement and Paragraph 5 of the Second
Agreement shall continue in full force and effect.
(b) Transfer of Interests in Thrucomm. Until the Purchaser has received
the Rate of Return, neither ICN nor either of the Shareholders may
transfer any portion of their stock in Thrucomm, including without
limitation any Escrowed Stock, other than pursuant to the options
referred to in Exhibit A attached hereto and except for transfers not
to exceed an aggregate of $100,000 in value for each Shareholder, to
any person or entity other than the Purchaser (a "Third Party"),
unless the sale is on an arms' length basis and the proceeds thereof
are provided to the Purchaser to the extent sufficient to provide the
Purchaser with the Rate of Return and (ii) the Third Party shall offer
in writing to purchase from the Purchaser the number of shares of
stock in Thrucomm which bears the same ratio to the total number of
shares of stock in Thrucomm held by the Purchaser as the number of
shares of stock in Thrucomm to be transferred by ICN or such
Shareholder to such Third Party bears to the total number of shares of
stock in Thrucomm held by ICN or such Shareholder, for a purchase
price no less than the amount to be paid by such Third Party for the
stock in Thrucomm held by ICN or such Shareholder and on terms
otherwise no less favorable to the Purchaser than the terms of the
transfer of the stock in Thrucomm held by ICN or such Shareholder (and
further provided that the Purchaser shall not be required to make any
representations or warranties or provide any indemnities or guaranties
with respect to the business or financial condition of Thrucomm).
(c) Consummation of Transfer. No transfer of any portion of the stock in
Thrucomm held by ICN or either Shareholder to any Third Party shall be
consummated prior to thirty (30) days after the date the Purchaser
receives the offer described in Paragraph 3(b) above, which offer
shall provide the Purchaser at least twenty (20) days within which to
elect to accept it, and in the event that the Purchaser accepts such
offer, the purchase by the Third Party of the stock in Thrucomm held
the Purchaser shall be consummated simultaneously with or immediately
after the transfer of the stock of Thrucomm held by ICN or such
Shareholder to such Third Party.
4. Life Insurance. The provisions of Paragraph 6 of the First Agreement and
Paragraph 6 of the Second Agreement shall continue in full force and effect.
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<PAGE>
5. Registration.
(a) Partnership Registration. The provisions of Paragraph 7 of the First
Agreement and Paragraph 7 of the Second Agreement shall continue in
full force and effect.
(b) Proposed Thrucomm Registration. If Thrucomm should propose to register
any equity securities issued by Thrucomm or any successor thereto for
sale under the Securities Act of 1933 (the "Act"), Thrucomm shall give
written notice to the Purchaser of such intention and, upon the
written request of the Purchaser given within twenty (20) calendar
days after such notice, Thrucomm shall use its best efforts to cause
any equity securities issued by Thrucomm or any successor thereto are
owned by the Purchaser or the Partnership of which the Purchaser has
requested registration to be included under the proposed registration
in accordance with the proposed method thereof stated in the
Purchaser's request; provided, however, that Thrucomm may, in lieu of
including any or all of such securities under the proposed
registration, elect to effect a separate registration thereof if its
proposed registration relates to an underwritten public offering and
the underwriters thereof object to the inclusion of any or all of such
securities under such registration, and provided further, that
Thrucomm shall not be required to cause such securities to be included
under the proposed registration if a majority of the Board of
Directors of Thrucomm (excluding any Director nominated by the
Purchaser) determines that such registration of such securities would
have a materially detrimental effect on the proposed registration. In
the event that Thrucomm shall elect to effect a separate registration
in accordance with the provisions of the preceding sentence, the
Purchaser may give notice to Thrucomm requesting the separate
registration at any time and Thrucomm shall use its best efforts to
cause such separate registration to become effective. If Thrucomm
determines, prior to the effectiveness of its originally proposed
registration, not to proceed with such registration, Thrucomm shall
have no further obligation under this Paragraph 5(b) to register any
equity securities under that registration statement.
(c) Registration Procedures. If and whenever Thrucomm is required by the
provisions of this Paragraph 5 to effect the registration of any
securities, Thrucomm shall, as expeditiously as possible:
(i) Prepare and file with the Commission a registration statement
with respect to such securities and use all reasonable efforts to
cause such registration statement to become effective as promptly
as possible;
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement as may be necessary to
keep such registration statement effective for three (3) months
from the date of its effectiveness;
(iii)Furnish to the Purchaser such number of copies of the prospectus
forming a part of such registration statement (including each
preliminary prospectus) as the Purchaser may reasonably request;
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<PAGE>
(iv) Use its best efforts to register or qualify the securities
covered by such registration statement under the securities or
blue sky laws of such jurisdictions as the Purchaser shall
reasonably request, and do any and all other acts and things
which may be necessary or advisable to enable the Purchaser or
the Partnership, as the case may be, to consummate the
disposition of such securities during the period provided in
Paragraph 5(c)(ii) above; and
(v) Notify the Purchaser during the period when a prospectus relating
thereto is required to be delivered under the Act, of the
happening of any event which causes the prospectus forming a part
of such registration statement to include an untrue statement of
a material fact or to omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were
made, and at the requ of the Purchaser prepare and furnish the
Purchaser a reasonable number of copies of the supplement to or
any amendment of such prospectus necessary so as to render such
prospectus, as amended or supplemented, in compliance with the
provisions of the Act.
(d) Expenses. All expenses incurred by Thrucomm in complying with this
Paragraph 5, including without limitation all registration and filing
fees, printing expenses, expenses of complying with securities or blue
sky laws, fees and disbursements of counsel for Thrucomm and counsel
for any underwriters of the offering and any accountants' fees and
expenses incident to or required by any such registration, shall be
borne by Thrucomm to the maximum extent permitted by law. All
underwriting fees and commissions incurred by the Purchaser or the
Partnership and all fees and disbursements of any counsel retained by
the Purchaser or the Partnership shall be borne by the Purchaser or
the Partnership, as applicable.
(e) Indemnification.
(i) In the event of any registration of securities under this
Paragraph 5, Thrucomm, ICN and the Shareholders shall defend,
indemnify and hold harmless the Purchaser, the Partnership, their
officers and directors, each underwriter thereof and each person
which controls the Purchaser, the Partnership or such underwriter
within the meaning of the Act, against any losses, claims,
damages or liabilities and any action in respect thereof, joint
or several, to which the Purchaser the Partnership or any such
officer, director, underwriter or controlling person may become
subject under the Act or otherwise, and Thrucomm, ICN and the
Shareholders shall reimburse each of the Purchaser, the
Partnership and such officers, directors, underwriters and
controlling persons for any legal or other expenses reasonably
incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action;
provided, however, that Thrucomm, ICN and the Shareholders 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
information provided to Thrucomm by the Purchaser, the
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<PAGE>
Partnership or any such officer, director, underwriter or
controlling person. This indemnity shall be in addition to any
liability which Thrucomm, ICN and the Shareholders may otherwise
have.
(ii) In the event of any registration of securities under this
Paragraph 5, the Purchaser or the Partnership, as the case may
be, shall indemnify Thrucomm, ICN and the Shareholders against
any losses, claims, damages or liabilities and any action in
respect thereof, joint or several, to which Thrucomm, ICN or the
Shareholders may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained
in any registration statement under which such securities were
registered under the Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement
thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, which is based upon
information supplied by the Purchaser or the Partnership, as the
case may be, and the Purchaser or the Partnership, as the case
may be, shall reimburse Thrucomm, ICN and the Shareholders for
any legal or other expenses reasonably incurred by Thrucomm, ICN
or the Shareholders in connection with investigating or defending
any such loss, claim, damage, liability or action; provided,
however, that neither the Purchaser nor the Partnership shall 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
information provided to the Purchaser or the Partnership by
Thrucomm, ICN or either of the Shareholders. This indemnity shall
be in addition to any liability which the Purchaser or the
Partnership may otherwise have.
(iii)If for any reason any indemnification described in Paragraph
5(e)(i) or 5(d)(ii) above may not be provided by the party or
parties required therein to provide such indemnification (the
"Indemnifying Parties"), in lieu of providing such
indemnification, the Indemnifying Parties shall contribute to the
amount paid or payable by the party or parties to be provided
such indemnification (the "Indemnified Parties") as a result of
such losses, claims, damages, liabilities or actions, in such
proportion as is appropriate to reflect the relative fault of the
parties in connection with any statement or omission which
resulted in such losses, claims, damages, liabilities or actions,
as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Parties and the Indemnified
Parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information
supplied by one of the Indemnifying Parties or by one of the
Indemnified Parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a
result of the losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or
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<PAGE>
expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The parties agree
that it would not be just and equitable if contribution pursuant
hereto were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to herein. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
6. Rights of First Refusal.
(a) Partnership and Related Entity Interests. The provisions of Paragraph
9 of the First Agreement and Paragraph 9 of the Second Agreement shall
continue in full force and effect.
(b) Thrucomm and Related Entity Interests. At any time that Thrucomm, or
any entity controlled by Thrucomm or any of its affiliates which is
engaged in any business primarily involving the transfer of data,
proposes to sell any stock or other equity interest therein, Thrucomm
agrees to notify the Purchaser of such proposed sale and to provide
the Purchaser, or cause the Purchaser to be provided, with the right
of first refusal to purchase such stock or other equity interests, o
portion thereof, for a price and on other terms no less favorable to
the Purchaser than the price at which and other terms on which
Thrucomm or such entity otherwise proposes to sell such stock or other
interests, provided that any such purchase by the Purchaser shall be
on a pro rata basis with the other Limited Partners of the
Partnership, Thrucomm and any entity controlled by Thrucomm or any of
its affiliates, to the extent that the other Limited Partners,
Thrucomm and any entity controlled by Thrucomm or any of its
affiliates have the right and desire to purchase such stock or other
equity interests.
(c) No Derogation of Partnership Agreement. The rights granted to the
Purchaser under Paragraph 6(b) above shall be in addition to, and not
in derogation of, any rights granted to the Purchaser and any other
Limited Partners under the Partnership Agreement.
(d) Resold Interests. Thrucomm agrees to use its best efforts to provide,
or cause to be provided, to the Purchaser the right of first refusal
to purchase any stock or other equity interests in Thrucomm which are
being resold by the holders thereof, for a price and on other terms no
less favorable to the Purchaser than the price at which and other
terms on which such stock or other equity interests are otherwise
proposed to be resold, provided that such right of first refusal n
only be provided to the Purchaser with respect to any stock or other
equity interests which are not purchased by Thrucomm pursuant to any
right of first refusal which Thrucomm may hold with respect to such
stock or other equity interests.
7. Legal Fees and Expenses. Except as otherwise provided in Paragraph 5 of this
Agreement, the Partnership, Thrucomm and ICN, jointly and severally, agree to
pay all legal fees and expenses incurred by the Purchaser or any of its
affiliates in connection with the consummation of the transactions contemplated
under this Agreement, such fees and expenses to be paid within thirty (30) days
after the date hereof.
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8. Representations and Warranties. Thrucomm, the Partnership, ICN and the
Shareholders jointly and severally represent and warrant to the Purchaser that:
(a) Due Execution. This Agreement has been duly executed and delivered by
Thrucomm, the Partnership, ICN and the Shareholders, as applicable,
and authorized by all requisite partnership action on the part of the
Partnership and all requisite corporate action on the part of ICN and
Thrucomm, and constitutes the legal, valid and binding obligation of
each such party, enforceable against such party in accordance with its
terms.
(b) No Violation. The execution and delivery of this Agreement by
Thrucomm, the Partnership, ICN and the Shareholders, as applicable,
and the performance by them of their obligations hereunder, do not
constitute any violation of any applicable law or any provision of the
Partnership Agreement or the Articles of Incorporation, By-Laws or
other organizational or governing documents of ICN or Thrucomm, or any
other agreement or governmental restriction to which any of them is a
pa or by which any of them is bound, or require the consent or
approval of the Limited Partners of the Partnership or any other
person or entity.
9. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
(b) No Broker. Each of the parties hereto represents and warrants that,
except as described in the succeeding sentence, it has dealt with no
broker or finder in connection with any of the transactions
contemplated hereunder, and no broker, finder or other person is or
will be entitled to any commission, finder's fee or other compensation
as a result of consummation of the transactions contemplated
hereunder. The Partnership, ICN and the Shareholders represent to the
Purchaser CFG Securities Corp. ("CFG") and/or an affiliate of CFG has
acted as a broker for them in connection with the transactions
contemplated hereunder, and covenant with the Purchaser that they
shall pay all commissions and other compensation due to CFG and any
such affiliate on or prior to the date due.
(c) Modification; Waiver. No modification or amendment of this Agreement
shall be binding unless executed in writing by all parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof, nor shall any
waiver constitute a waiver of the same provision on any other
occasion. No waiver of any of the provisions hereof shall be binding
unless executed in writing by the party making such waiver.
(d) Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
(e) Notices. All notices required under this Agreement shall be in writing
and shall be deemed to have been given on the date of personal
delivery, or of deposit in the United States mail, postage prepaid, by
registered or certified mail, return receipt requested, or of delivery
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<PAGE>
to a nationally-recognized overnight courier service with arrangements
made by the sender for payment therefor, addressed to the parties at
their addresses set forth above, or such other addresses as an party
has notified the others as provided herein.
(f) Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
(g) Severability. Any provision of this Agreement which is prohibited or
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.
(h) Headings. The headings of paragraphs and subparagraphs of this
Agreement are included for convenience of reference only and shall not
be considered in construing any provisions contained therein.
(i) Remedies. The Partnership, ICN, Thrucomm and the Shareholders
acknowledge and agree that in the event of breach of any of the
provisions of Paragraphs 2, 3 and 6 above, the Purchaser would sustain
irreparable injury, and Thrucomm, the Partnership, ICN and the
Shareholders recognize that money damages for such breach would be
difficult or impossible to ascertain. Thrucomm, the Partnership, ICN
and the Shareholders therefore agree that the Purchaser shall be
entitled, in additio to any other remedies and damages available, to
an injunction to restrain the violation of any of such provisions.
(j) Third Party Beneficiaries. Neither the Limited Partners of the
Partnership nor any other person or entity shall be deemed third party
beneficiaries with respect to any provision of this Agreement, except
that the Limited Partners shall be deemed third party beneficiaries
with respect to the provisions of Paragraph 6(b) hereof.
(k) Conflict. In the event of any conflict between the provisions of this
Agreement and any provisions of the First Agreement or the Second
Agreement, the provisions of this Agreement shall be controlling.
Without limiting the generality of the foregoing, it is hereby
acknowledged by the parties hereto that Paragraphs 4 and 8 of the
First Agreement and Paragraphs 4 and 8 of the Second Agreement are
deleted and no longer in force and effect.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
BLUE CHIP/DATALINC CORPORATION
By: _______________________________
Title: ____________________________
INTEGRATED COMMUNICATION NETWORKS, INC.
By: _______________________________
Title: ____________________________
-----------------------------------
JOHN F. KOLENDA
-----------------------------------
MARK J. GIANINNI
DATALINC, LTD.
By: Integrated Communication
Networks, Inc., its
General Partner
By: __________________________
Title: _______________________
THRUCOMM, INC.
By: __________________________
Title: _______________________
11
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EXHIBIT 10.5
Payment Agreement by and between
Fastcom, Ltd. and Nova Engineering
dated July 25, 1997
<PAGE>
PAYMENT AGREEMENT
THIS AGREEMENT made as of the 25th day of July, 1997 by and between FASTCOM,
LTD., a Florida limited partnership ("FASTCOM") and Nova Engineering ("Nova"),
and effective the 1st day of August, 1997 or as otherwise mutually agreed upon
by the parties hereto.
1. GRANT AND SCOPE OF ENGAGEMENT AND PAYMENT. FASTCOM engages Nova, subject to
the tenrms and conditions of this Agreement, to continue to perform engineering
services for the DP1OOO radio (the Radio) and any modifications thereof,
including but not limited to the DP1000 model for additional uses. Payment for
the engineering services shall be on a time and materials basis.
2. ADDITIONAL PAYMENTS. In addition to the payment set forth in paragraph I
above, FASTCOM agrees to pay Nova the sum of $* per Radio for each Radio
placed in service by FASTCOM after the effective date of this Agreement. This
payment will be paid quarterly upon the receipt by FASTCOM of proceeds of the
placement in service of the Radios which are the subject of this Paragraph 2
during such quarter, no later than ninety (90) days following the end of each
quarter.
3. TERM. This Agreement shall terminate three (3) years from the effective date
hereof as written above.
4. INTELLECTUAL PROPERTY.
a. Nova agrees that services performed hereunder constitute work for hire
and that any invention, improvement or discovery conceived or made by Nova,
either alone or in cooperation with others, during the term of this
Agreement and which relates in an way to the services provided by Nova, is
hereby assigned to and shall be the exclusive property of FASTCOM. Nova,
shall fully disclose to FASTCOM all such inventions, improvements, or
discoveries, whether or not subject to patent, copyright, or other
protection. If requested by FASTCOM, Nova will, at the expense of FASTCOM,
sign all papers (including documents confirming the assignment herein) and
do all other acts necessary to assist FASTCOM to obtain patents, copyrights
or other property rights in such inventions in any and all countries and to
assign such patents, copyrights or other property fights to FASTCOM.
b. Nova agrees that it will not provide FASTCOM with any designs, plans,
models, samples, software, integrated circuits, reports, or other writing
or product which Nova either knows or has reason to believe are covered by
the valid patent, copyright, or other form of intellectual property right
of a third party-
c. In performing hereunder, Nova may utilize or incorporate into the
subject designs some of its own designs, know-how, inventions, or
technologies (herein collectively called "Background Technologies"). Nova
hereby grants to FASTCOM a non-exclusive, perpetual, fully-paid and
royaltyfree license to and under any patents, trade secret fights, or other
intellectual property rights of Nova in such Background Technologies, so
that Fastcom may make, have developed hereunder, ftee of any claims of
inffingement by Nova. It is understood, however, that title to any such
Back-ground Technologies shall remain with Nova.
* Confidential information has been omitted pursuant to a request for confiden-
tial treatment and has been filed separately with the Commission
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5. BINDING EFFECT. The rights and obligations of the parties hereunder shall
inure to the benefit of, and be binding and enforceable upon the respective
successors, assigns and transferees of either party.
6. ARBITRATION. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, regarding the failure or refiisal to perform
the whole or any part of this Agreement shall be settled by arbitration in
Pinellas County, Florida, in accordance with the rules of the American
Arbitration Association, and the judgment upon the award rendered may be entered
in any court having jurisdiction hereof Any decision made by an arbitrator or by
the arbitrators under this provision shall be enforceable as a final and binding
decision as if it were a final decision or decree by a court of competent
jurisdiction.
7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The warranties, representations,
covenants and agreements set forth herein shall survive the termination of this
Agreement or any part thereof.
8. 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.
9. AMENDMENT AND WAIVER. This Agreement may not be modified or amended except by
an instrument in writing duly executed by the parties hereto. No waiver of
compliance with any provision or condition hereof and no consent provided herein
shall be effective unless evidenced by an instrument in writing duly executed by
the party hereto sought to be charged with such waiver or consent.
10. NOTICES. Notices and requests required or permitted hereunder shall be
deemed to be delivered hereunder if mailed with postage prepaid or delivered in
writing.
11. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
and all such counterparts shall counterparts shall constitute one and the same
instrument.
12. CAPTIONS. Captions used herein are for the convenience only and are not a
part of this Agreement and shall not be used in construing it.
13. EXECUTION OF DOCUMENTS. At any time and from time to time, the parties
hereto shall execute such documents as are necessary to effect this Agreement.
14. EXPENSES. Each of the parties to this Agreement shall pay its own expenses
in connection with this Agreement and the transactions contemplated hereby,
including the fees and expenses of its counsel, certified public accountants and
other experts.
15. ASSIGNABILITY. This Agreement shall not be assignable by Nova without the
prior written consent of FASTCOM.
16. VENUE; PROCESS. The parties to this Agreement agree that jurisdiction and
venue shall properly lie in the Sixth Judicial Circuit of the State of Florida,
in and for Pinellas County, Florida, or in the United States District Court for
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Payment Agreement
Page 3
the Middle District of Florida (Tampa Division), with respect to any legal
proceedings arising from this Agreement. The parties further agree that the
mailings of any process shall constitute valid and lawful process against them.
17. 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 (except that if any choice of
law provision under Florida law would result in the application to the law of a
state or jurisdiction other than the State of Florida, such provision shall not
apply).
18. SEVERABILITY OF PROVISIONS. The invalidity or unenforceability of any
particular provision hereof shall not affect the remaining provisions of this
Agreement, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provisions were omitted.
19. DUE AUTHORIZATION. This Agreement has been duly and validly authorized by
all action necessary for such due and valid authorization, is binding upon the
parties hereto and is enforceable in accordance with its terms.
20. RELIANCE, All representations and warranties contained herein, or any
certificate or other instrument delivered in connection herewith, shall be
deemed to have been relied upon by the parties hereto, notwithstanding any
independent investigation made by or on behalf of such parties.
21. This clause has been deleted.
22. ATTORNEY'S FEES. The parties hereby agree that in the event any of the terms
and conditions contained in this Agreement must be enforced by reason of any
past, existing or future delinquency of payment, of failure of observance or of
performance by any of the parties hereto, in each such instance, the
nonprevailing party shall be liable for reasonable collection and/or legal fees,
trial and appellate levels, any expenses and legal fees incurred, including time
spent in supervision of paralegal work and paralegal time, and any other
expenses and costs incurred in connection with the enforcement of any available
remedy.
23. PROVISIONS. The terms and provisions of this Agreement are contractual and
not merely recital- This Agreement is voluntarily entered into and is not based,
in whole or in part, upon any representation or statement of any kind not
contained herein by any party hereto or their respective attorneys or
representatives, oral or otherwise, as to their merit, legal validity, or value
of any claim, demand, action, or cause of action of any of the parties hereto
or as to any other matter whatsoever. The undersigned parties hereto acknowledge
and agree (1) that they are and have been represented by legal counsel in
connection with the negotiation, drafting, and preparation of this Agreement;
(2) that the terms and provisions of this Agreement and the legal effect thereof
have been carefully explained to them by their own legal counsel; (3) that they
have entered into this Agreement freely and voluntarily without coercion or
undue influence; (4) that they believe this Agreement is beneficial to
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Payment Agreement
Page 4
themselves; and (5) that they are duly authorized and competent to execute this
Agreement. The undersigned parties hereto acknowledge and agree that the wording
and language of this Agreement are the product of joint cooperation,
collaboration, and negotiation among the parties to this Agreement and their
respective legal counsel, and are not the product of any particular party
bearing the sole responsibility for draftsmanship.
IN WITNESS WHEREOF, the undersigned have hereunto caused this Agreement to be
executed the day and year first above written.
FASTCOM, LTD.,
a Florida limited partnership
By: Fastcom Management, Inc.,
a Florida corporation,
General Partner
/s/John F. Kolenda
By: _________________________
John F. Kolenda, Chairman
Nova Engineering
/s/Terry Hill
By: __________________________
Terry Hill, President
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