<PAGE>
SCHIFINO & FLEISCHER, P.A .
ATTORNEYS AT LAW
WILLIAM J. SCHIFINO ONE TAMPA CITY CENTER
FRANK N. FLEISCHER SUITE 2700
CYNTHIA C. ELLIS 201 NORTH FRANKLIN STREET
TAMPA, FLORIDA 33602
TELEPHONE (813) 223-1535
TELECOPIER (813) 223-3070
August 8, 1997
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Thrucomm, Inc.
Amendment No. 1 to the
Registration Statement on Form S-4
File No. 333-27161
Gentlemen:
On behalf of our client, Thrucomm, Inc. (the "Registrant"), we are
transmitting via Edgar for filing pursuant to the Securities Act of 1933, as
amended, (the "Act") the following:
1. Amendment No. 1 to the Registration Statement on Form S-4, File No.
333-27161, together with exhibits thereto ("Amendment No. 1").
2. Letter of Response to Comments received from the Staff of the
Commission with respect to the Registration Statement ("Response
Letter").
We respectfully request that the Staff inform us as soon as possible
regarding its timing for its review of Amendment No. 1. Under separate cover, we
will deliver, via hand delivery for the convenience of the Staff, three copies
of Amendment No. 1 and the Response Letter to James M. Daly, Assistant Director
(Room 3143, Mail Stop 3-10, 942-1800).
Please direct any questions or comments with regard to the foregoing to
the undersigned at the address set forth at the top of this letter. Please
contact me or Ms. Lina Angelici of this office.
Very truly yours,
/s/Frank N. Fleischer, for the Firm
______________________
Frank N. Fleischer
<PAGE>
SCHIFINO & FLEISCHER, P.A.
ATTORNEYS AT LAW
WILLIAM J. SCHIFINO ONE TAMPA CITY CENTER
FRANK N. FLEISCHER SUITE 2700
CYNTHIA C. ELLIS 201 NORTH FRANKLIN STREET
TAMPA, FLORIDA 33602
TELEPHONE (813) 223-1535
TELECOPIER (813) 223-3070
August 8, 1997
MAIL STOP 3-10
James M. Daly, Assistant Director
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Response to Comments Received from the
Staff of the Commission with respect to the
Registration Statement of Thrucomm, Inc.,
File No. 333-27161
Dear Mr. Daly:
The following sets forth our responses to the comments of the Staff of the
Securities and Exchange Commission (the "Staff Comments") received by letter
dated June 20, 1997 (the "Comment Letter") with respect to the Registration
Statement on Form S-4 (the "Registration Statement") filed on May 15, 1997 by
Thrucomm, Inc. (the "Registrant"). Concurrently, the Registrant is filing
Amendment No. 1 to the Registration Statement (as so amended, the "Amended
Registration Statement"). On behalf of the Registrant we have sent by facsimile
supplemental response letters on July 9, 1997 and July 31, 1997. Copies of both
supplemental letters are being filed with Amendment No. 1.
Unless otherwise set forth herein, defined terms used herein have the
meanings ascribed to such terms in the Amended Registration Statement. The
numbered responses set forth below correspond to the numbered paragraphs in the
Comment Letter.
CURRENT DEVELOPMENTS
FASTCOM SERIES 300 UNITS
In July 1997, Fastcom commenced an offering of $2,000,000 (200 Units), of
its new Series 300 Limited Partnership Units (Fastcom's "Series 300 Units"), for
working capital purposes including payables and retiring bank debt. Changes have
been made throughout the Amended Registration Statement to reflect the addition
of the new Series 300, and to portray its effect on the interests of other
Investors. Such changes include the addition of a new Series of Preferred Stock,
Series P.
<PAGE>
James M. Daly, Assistant Director
August 8, 1997
Page 2
The Series 300 Units have not been registered with the Securities and
Exchange Commission in reliance upon the exemption from such registration
requirements set forth in Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"), and Rule 506 of Regulation D and the Regulations
promulgated thereunder.
MIP CHANGES
Datalinc terminated its Management Incentive Plan and in its place, a new
plan has been created in Fastcom. Under the terms of the new plan, participants
therein have been issued a Special Limited Partner Unit in Fastcom. On August
1, 1997, Fastcom's General Partner, FMI, approved the Plan. The changes were
instituted to avoid adverse tax consequences to the Partnerships, the
Registrant, and the participants in the plan.
The MIP Units are entitled, under Fastcom's amended Partnership Agreement,
to receive a .01% Distribution from Sales and Refinancing Proceeds after the
return of the Fastcom Investors' Capital Contributions and Preferred Returns, if
any, and the Initial Distributions to the Other Equity Owners of Fastcom. The
Series M Preferred Stock, which now corresponds with the MIP Units, will be
entitled, in a Mandatory Conversion Event, to receive Underlying Shares or other
assets equal to .01% of the Fastcom Value. In the future, under certain
circumstances where there has been a significant increase in the value of the
business, the Series M Preferred Stock could receive an Earned Preferred Return.
The Registration Statement has been revised as appropriate. See "Description of
the Securities - The Preferred Stock - Earned Preferred Returns."
BLUE CHIP AND OTHER LIQUIDITY MATTERS
Datalinc has negotiated with its bank for an additional $500,000 line of
credit which will be guaranteed by Blue Chip. The line of credit is due in
January 1998. Under the terms of Blue Chip's guarantee, the line of credit can
only be used for monthly operating expenses, and 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 had borrowed $100,000 as of June 27, 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.
Datalinc owes one of its principal vendors, Hughes Networks Systems,
approximately $1.6 million for services and purchases made in prior months. This
vendor is willing to write a note for the amount owed which would be due on
December 15, 1997. Datalinc would be required to make an installment of $150,000
on the note which would be due on September 15, 1997. Datalinc is currently
negotiating terms on the note, such as the interest rate. The Registration
Statement has been revised to disclose all of these developments. Please see
pages 8, 26, and 71 of the Amended Registration Statement for disclosure of
these events related to Blue Chip and/or liquidity.
<PAGE>
James M. Daly, Assistant Director
August 8, 1997
Page 3
SPECIFIC RESPONSES TO THE COMMENT LETTER
1. The Staff's comment letter requested that the Registrant provide individual
partnership supplements for Datalinc and Fastcom. We responded to this comment
by supplemental letter and were advised by telephone on July 28, 1997 of the
Staff's decision to allow the registration process to proceed without filing
individual partnership supplements.
2. The Amended Registration Statement has been revised to register 12 million
Underlying Shares of Common Stock, which represents the Registrant's bona fide
estimate of the maximum number of shares to be issued in a Mandatory Conversion
Event.
3. The Registrant's pricing formula has been the subject of both supplemental
response letters. The Reorganization Agreement has been amended to provide that
a Mandatory Conversion will not be deemed to have occurred unless the Conversion
Value of Thrucomm is at least $20 million. In addition, the Amended
Reorganization Agreement provides that the Registrant will not sell more than
40% of its equity if the Mandatory Conversion Event is an IPO. We are confident
that these revisions to the Reorganization Agreement are responsive to the
Staff's concerns regarding the pricing formula. Changes have been made
throughout the document as appropriate. See "The Formula" at page 34, for
example.
In addition, the Staff expressed its concern that the Registrant has not
set a date by which a Mandatory Conversion must occur without reinitiating the
Investors' approval process. In the second supplemental letter we expressed our
belief that a time limit could have significant adverse consequences to the
Registrant and to Investors because the uncertainties associated with a right to
unwind or restructure the plan of Reorganization would create a serious
impediment to the Registrant's future ability to obtain additional funds. This
matter is still unresolved.
4. The Registrant has provided the requested disclosure addressing the worst
case scenario in the event that a Mandatory Conversion Event does not occur. See
pages iii, 1, and 16.
5. The Registrant has deleted the phrase "or other value" and similar language
throughout the document. In all Mandatory Conversion Events, including a Sale
or Merger, Investors will receive Underlying Shares.
6. The Registrant has provided an organizational chart at the end of the
Summary at page 13.
7. Pursuant to the Staff's request, the discussion of dissenters' rights, in the
"Risk Factors and Material Considerations" section of the Summary at page 2, has
been revised to cover both Datalinc and Fastcom Investors. In addition, it has
been expanded to disclose that there are no appraisal or similar rights under
the Partnership Agreements or voluntarily provided for under the Reorganization
Agreement or otherwise. The Registrant has further disclosed that Investors will
have appraisal rights in the event of a Sale or Merger after the Reorganization
is approved. Similar revisions have been made at pages 12 and 23.
<PAGE>
James M. Daly, Assistant Director
August 8, 1997
Page 4
The Staff also requested in Comment No. 7 that the Registrant briefly
outline "any other rights which may be available to Investors under state law or
agreement." The Registrant assumes the Staff did not intend its request to be so
broad, and the disclosure has been revised to state that there are no appraisal
or "similar" rights in connection with the Reorganization. A thorough discussion
of Investors rights with respect to Distributions, and a comparison of numerous
other rights presently exist in the Consent Statement/Prospectus at pages 27 -
33, and at pages 51 - 57, respectively. We believe that this disclosure has been
responsive to your request.
8. The Registrant has provided the requested disclosure. See pages 1, 6, 16,
and 96.
9. The term "substantially all" with respect to a sale of assets has been
quantified by the Registrant as a sale of at least 80% of Thrucomm's assets. The
Registration Statement has been revised accordingly. See pages 6, and 96.
10. The Mandatory Conversion feature of the Preferred Stock in connection with a
Sale or Merger has been clarified, and the reason for structuring the
Reorganization in this manner has been stated. In addition, a separate Risk
Factor has been added with respect to this feature of the Reorganization in
which the Preferred Stock could be converted based upon a proposed Merger or
Sale that subsequently is not approved. See pages 1 and 16.
11. The Registrant has provided the requested disclosure regarding Blue Chip's
intention to consent to the Reorganization. CFG has also indicated that it will
consent to the Reorganization. See page 8.
12. As discussed above under "Current Developments," Fastcom is issuing a new
Series 300 Limited Partnership Units, and Thrucomm will issue a Series of
Preferred Stock to Fastcom, but not directly to the new Investors. An additional
Series of Preferred Stock is being registered in Amended Registration Statement.
The disclosure has been provided at page 18 and elsewhere in the document as
necessary.
13. The requested disclosure regarding the Partnerships' need for additional
capital has been provided at page 24.
14. As mentioned above, the Amended Reorganization Agreement provides that
Thrucomm will not sell more than 40% of its equity in an IPO. Appropriate
revisions have been made throughout the Amended Registration Statement. See page
34.
15. The Amended Registration Statement contains the requested disclosure
regarding the General Partners' determinations as to the fairness of the roll-up
transaction to the Investors in both Partnerships.
See the last paragraph at page 44.
16. The General Partners considered several alternatives to the Reorganization
including the continuation of the Partnerships, a sale of the assets, a merger,
a public offering, a capital infusion from a large investor and liquidation. The
liquidation values of $347,242 and $0 for Datalinc and Fastcom, respectively,
have been disclosed. See Subpart iii at page 44. The General Partners believe
<PAGE>
James M. Daly, Assistant Director
August 8, 1997
Page 5
that there is little likelihood of the occurrence of the other alternatives in
the absence of the Reorganization. Therefore, the General Partners were not able
to set a range of values on the other alternatives and the references to a
"range of values" for such alternatives has been deleted.
17. The Formula and Conversion terms of the Preferred Stock are disclosed in
detail in "The Formula" at pages 34 - 37, in "Thrucomm Ownership Tables" at
pages 38 - 42 and under "Discription of Thrucomm's Securities - The Mandatory
Convertible Preferred Stock" at pages 95 - 101. Subpart (i) has been revised
only to disclose why the General Partners believe the Formula and the conversion
terms of the Preferred Stock support the General Partners' fairness
determination.
18. Subpart iii at page 44 has been revised to disclose the liquidation values
of Datalinc and Fastcom as of December 31, 1996.
19. The financial adviser has issued a new fairness opinion taking into
consideration the terms of the Amended Reorganization Agreement and other
current developments. The Amended Registration Statement accurately states the
opinion of the financial advisor that the Formula and the roll-up transaction
taken as a whole is fair to the Datalinc Investors and that the conversion terms
of the Preferred Stock are consistent with the Partnership Agreement. See the
penultimate paragraph at page 45.
20. The requested disclosure has been provided. See Subpart (iv) at page 44.
21. The requested disclosure has been provided. See page 45.
22. The Registrant has provided the requested disclosure. See page 50.
23. We have clarified the language of our Tax Opinion referred to on pages 50 -
51 reflect the fact that the Tax Opinion covers the eventual distribution of the
Underlying Shares (which is triggered upon the occurrence of a Mandatory
Conversion Event and upon the actual conversion of the Preferred Stock into
Common Stock). Our Tax Opinion addresses the eventual distribution of the
Underlying Shares to the partners in liquidation of the Partnerships, which
means it does address whether the type or terms of the Mandatory Conversion
Event will have any impact on the tax treatment of the conversion or
distribution. We have added disclosure reflecting the fact that if a Mandatory
Conversion is the result of a Sale or Merger, since such Sale or Merger would
require proxy solicitation as it is conditioned upon shareholder approval, a new
tax opinion would be required thereby regarding the tax treatment of the
consideration to be received by Investors in a Sale or Merger for the already
issued Underlying Shares.
24. (a) The Registrant has provided the requested disclosure as of April 30,
1997. See page 59.
(b) The Registrant has provided the requested disclosure as of April 30,
1997. Additionally we have included Pro Forma Statement of Cash Flows Statement
as of April 30, 1997. See page 64.
<PAGE>
James M. Daly, Assistant Director
August 8, 1997
Page 6
25. The Registrant has added the Pro Forma Statement of Operations as requested.
See pages 62and 63.
26. The Registrant has excluded the charges as requested and the appropriate
disclosures have been made in Pro Forma Adjustment (g) at page 66.
27. The letter of the various series of Preferred Stock have been reassigned to
accommodate the new Fastcom Series 300 Units and the movement of the MIP Units
from Datalinc into Fastcom. The first and second full paragraphs at page 92 has
been revised accordingly. The Registrant has combined the interests of ICN's
Series G Stock with FMI's Series P Stock to disclose the combined value of the
General Partners' interests.
28. As a result of the new Series 300 Units and the new MIP, all of the
ownership percentages have changed. The new figures at the top of page 92 have
been reconciled with the new percentages in the table at page 94.
29. The financial statements have been updated to comply with the requirements
of Rule 3-12 of Regulation S-X, and include the four months ended April 30,
1997.
30. A currently dated consent has been included which is dated August 7, 1997.
OTHER
Exhibit 10.5, Payment Agreement by and between Fastcom and Nova
Engineering, contains certain confidential information. The agreement has been
filed with the confidential information redacted, and the Registrant will
promptly file with the Commission a formal request for Confidential Treatment.
If you have any questions or further comments, please contact either Lina
Angelici or the undersigned at (813) 223-1535. Thank you.
Very truly yours,
/s/Frank N. Fleischer
__________________________
Frank N. Fleischer
cc: Michael T. Williams, Esq.
Patrick Keller, CPA
<PAGE>
SCHIFINO & FLEISCHER, P.A.
ATTORNEYS AT LAW
WILLIAM J. SCHIFINO ONE TAMPA CITY CENTER
FRANK N. FLEISCHER SUITE 2700
CYNTHIA C. ELLIS 201 NORTH FRANKLIN STREET
TAMPA, FLORIDA 33602
TELEPHONE (813) 223-1535
TELECOPIER (813) 223-3070
July 9, 1997
BY FACSIMILE
Jennifer Ours, Esq.
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Supplemental Response to Comments Received from
the Staff of the Commission with respect to the
Registration Statement of Thrucomm, Inc.
File No. 333-27161
Dear Ms. Ours:
The following sets forth our supplemental responses on behalf our client,
Thrucomm, Inc. (the "Registrant"), to certain comments of the Staff of the
Securities and Exchange Commission (the "Staff Comments") received by letter
dated June 20, 1997 (the "Comment Letter") with respect to the Registration
Statement on Form S-4 filed on May 15, 1997 by the Registrant (the "Registration
Statement"). The Registrant is planning to file next week its Amendment No. 1 to
the Registration Statement (as so amended, the "Amended Registration
Statement"). A copy of this letter (the "Supplemental Response Letter") will be
filed via Edgar concurrently with the filing of Amendment No. 1. Unless
otherwise set forth herein, defined terms used herein have the meanings ascribed
to such terms in the Registration Statement.
A copy of the Comment Letter is attached hereto. Numbered responses set
forth below correspond to the numbered paragraphs in the Comment Letter.
Exemption From Subpart 900
The roll-up rules contained in Subpart 900 of Regulation S-K (the "Rules"
or "Subpart 900") permit the sponsor of a roll-up transaction to apply to the
Commission for an exemption from the Rules, where the transaction does not
involve the principal concerns addressed by the Rules, and where such
disclosures are not necessary for the protection of investors or for the public
interest. See, Item 901(c). The principal concerns addressed by the Rules, as
expressed in Securities Act Release No. 6922 (October 30, 1991) (the "Roll-Up
Release"), include the following:
o Increased compensation for roll-up sponsors;
<PAGE>
Jennifer Ours, Esq.
July 9, 1997
Page 2
o Receipt of substantial payments or securities by general partners;
o Reduced investor voting rights, such as the imposition of
super-majority voting requirements to remove management or to engage
in certain business combinations, and other changes in the governing
instruments which entrench management and make a proxy contest or
other takeovers more difficult;
o Receipt by investors of securities that trade at a substantial
discount in the securities market. Securities issued in a roll-up
transaction frequently trade at a substantial discount from the value
of the successor's assets. This may result in lower returns than an
investor would have received if the partnership were left unchanged.
We have carefully considered the Commission's reasons for the adoption of
the Rules, and believe that the Reorganization contemplated by Datalinc, Fastcom
and the Registrant does not raise the above concerns. We have not applied to the
Commission on behalf of the Registrant for an exemption from the Rules,
primarily because the Reorganization involves a change from a finite-life entity
(a partnership) to a reinvesting entity (a corporation). The Partnerships are
authorized, but are generally not expected to reinvest cash (from operations or
proceeds from the sale of assets) in assets owned or to be owned by the
Partnerships. The Partnerships are expected to make Distributions to Investors
instead. The Reorganization changes the cash distribution policy of the
Partnerships; the Registrant, a corporate entity, will reinvest its cash
generated from operations or sale proceeds. As a consequence of the
Reorganization, Investors will look to the securities market and not to
Distributions for investment returns. In addition, as a result of the change
from a partnership to a corporation, the General Partners' back-end
(subordinated) interest will be eliminated, and the General Partners will
acquire in the roll-up a parity interest as a shareholder in the successor after
a Mandatory Conversion Event. We have based our decision not to apply for an
exemption from the Rules on the significance of these changes; however, we
maintain that the Reorganization does not present many of the adverse
consequences which often accompany roll-ups. Accordingly, we request that the
Staff bear this in mind when reviewing and evaluating the disclosures contained
in the Registration Statement for compliance with the Rules contained in Subpart
900 of Regulation S-K.
Numbered Responses
1. The Staff's Comment Letter requested that Registrant provide individual
partnership supplements in accordance with Item 902 of Regulation S-K ("Item
902"). We believe that the Registrant has provided all of the information sought
by Item 902 in a clear format within the principal disclosure document, and for
the reasons that follow, we respectfully request that the Staff reconsider its
request for individual partnership supplements.
Rule 145 of the General Rules and Regulations Under the Securities Act of
1933 ("Rule 145") was "designed to make available the protection provided by
registration under the Securities Act of 1933, as amended (Act) to persons who
are OFFERED securities" in any of several business combinations specified
therein (emphasis added). See, the Preliminary Note to Rule 145 (the
<PAGE>
Jennifer Ours, Esq.
July 9, 1997
Page 3
"Preliminary Note"). The Reorganization is a business combination of the type
described in paragraph (a)(3) of Rule 145, because (i) the Reorganization
Agreement provides for the transfer of all of the assets of the Partnerships to
the Registrant in exchange for the Registrant's Convertible Preferred Stock, and
(ii) the Reorganization Agreement contemplates the subsequent dissolution of the
Partnerships and the distribution of the Underlying Shares to the Investors upon
the occurrence of a Mandatory Conversion Event. Accordingly, the Reorganization
is subject to the registration requirements of the Act.
Rule 145 applies to the Reorganization only in so far as the Reorganization
is required to be submitted for the vote or consent of the Datalinc Investors.
The Reorganization is not a transaction within the meaning of Rule 145 with
respect to Fastcom. The Preliminary Note provides, in pertinent part, "that an
'offer,' 'offer to sell,' 'offer for sale,' or 'sale' occurs when there is
submitted to security-holders a plan or agreement, pursuant to which such
holders are required to elect, ..., whether to accept a new or different
security in exchange for their securities." The Reorganization has already been
approved by Fastcom's principal shareholder, Datalinc, which has sufficient
voting power to approve the transaction without the vote or consent of the other
Fastcom Investors. Fastcom is not required, by statute or governing instrument,
to submit the Reorganization to its remaining Investors for vote or consent.
Accordingly, Fastcom's Investors and Other Equity Owners are not being offered
securities. Consequently, the Reorganization is not a transaction within the
meaning of Rule 145 with respect to Fastcom, and the requirement of Item 902 is
not applicable. The requirements of Subpart 900 apply only for the benefit of
the Datalinc Investors who are being offered securities and who are being called
upon to make an investment decision. Nevertheless, the Registrant has
voluntarily provided, in careful detail, the information sought by Subpart 900
for both Partnerships. The gratuitous provision of the information in the
Consent Statement/Prospectus to the Fastcom Investors does not however trigger
the application of Item 902.
Not only are individual partnership supplements not required by the
Reorganization, such supplements are not useful in this transaction. The purpose
of individual partnership supplements, as expressed in the Roll-Up Release, is
to enhance the quality of the information provided to investors in the principal
disclosure document. The cost of such supplements is generally outweighed by the
benefits of the additional disclosure, because roll-up documents are often
complex and the Commission is concerned that it is difficult for investors to
comprehend the effects of the roll-up on their individual partnership when the
effects of the various partnerships are discussed together in the principal
disclosure document. The Commission imposed the requirement of individual
partnership supplements to assure that investors in each partnership will be
able to understand (i) how their individual partnership is valued; (ii) the
application of a formula to allocate the securities of the successor to each
partnership; and (iii) the effects of partial roll-up combinations.
In a roll-up involving numerous entities, the process of valuing each
partnership and allocating the successor's securities to each partnership is
quite complex. Individual partnership supplements are generally helpful for
describing the method by which a particular partnership has been valued. For
<PAGE>
Jennifer Ours, Esq.
July 9, 1997
Page 4
example, information regarding an appraisal of a particular partnership's assets
would appear in its individual supplement. However, in the Reorganization there
are only two partnerships involved, and they are affiliated; Datalinc presently
holds approximately 80% of the outstanding Units of Fastcom. Because of the
close affiliation of the Partnerships, the General Partners did not undertake
the considerable expense of obtaining an appraisal of the Hub or the Radio. (As
you are aware, the Radio is in the development stage and expenses are a concern
for both Partnerships.) Moreover, the Conversion Value of Thrucomm, the Datalinc
Value and the Fastcom Value are inextricably intertwined. The Fastcom Value is
not separately calculable nor describable apart from the Datalinc Value.
Individual partnership supplements for Datalinc and Fastcom would not contain
separate appraisals, and they would contain precisely the same information with
respect to the manner in which the Partnerships were valued.
Individual partnership supplements also provide an investor with
disclosures, such as assets, liabilities, and cash flow of the successor for
partial roll-up combinations, which vary depending upon which partnerships
participate in (approve) the roll-up. The Reorganization Agreement does not
provide for a partial roll-up. Either both Partnerships will be rolled into
Registrant or the Reorganization will not occur. Disclosures of partial
combinations and their effect on a particular partnership are not applicable to
the Reorganization, and the absence of such disclosures presents another reason
negating the need for individual partnership supplements.
The material risks and effects of the Reorganization are substantially the
same for Investors in both Partnerships. Similarly, the fairness determination
of the General Partners and the Financial Advisor is the same for both
Partnerships, because the fairness is principally based upon the fact that
Datalinc owns a large percentage of Fastcom. The fairness of the Reorganization
for each individual Partnership is inherently related to the other Partnership,
and not capable of separate disclosure. Accordingly, both the fairness
discussion and the risk factor sections of any individual partnership supplement
would be nearly identical with any other supplement and with the principal
disclosure document. In addition, since there have not been any distributions to
the Investors in either Partnership, and because the compensation payable to the
General Partners is identical, individual partnership supplements would contain
virtually the same disclosures not only with respect to the risks, effects and
fairness, but also for compensation and distributions.
In summary, (i) the Reorganization itself does not present many of the
concerns which led to the adoption of the Roll-Up Rules, (ii) the Rules are
applicable to the Reorganization only with respect to Datalinc and not to
Fastcom, and (iii) individual partnership supplements would contain identical or
nearly identical disclosures with respect to each other and with respect to the
principal disclosure document; therefor they are not useful under the
circumstances. Unlike many roll-ups where partnerships have little or no
information about one another, there are only two Partnerships involved in the
Reorganization, they are closely affiliated, and their respective Investors are
familiar with the businesses of both Partnerships. While the additional cost of
individual partnership supplements is often outweighed by the benefits of
additional disclosure in most roll-up transactions, we believe that the
generation of individual partnership supplements under the circumstances of the
Reorganization is not required and would result in considerable expense, delay
<PAGE>
Jennifer Ours, Esq.
July 9, 1997
Page 5
in the registration process, and voluminous documentation, all without providing
additional information or enhancing the quality of the information provided to
Investors regarding their individual partnerships.
2. We do not presently know whether or not a Mandatory Conversion Event
could occur within one year. As is stated in our response #3 below, the timing
of such Event cannot be predicted with any accuracy. The Registrant has no
contemplated Sale or Merger nor has the Registrant retained any potential
underwriter for an IPO. Furthermore, should we register the Underlying Shares,
what kind of a filing fee would we pay under Rule 457? Under Rule 457(f) we
registered the Mandatory Convertible Preferred Stock based upon the book value
Datalinc, Ltd. The Registrant itself has no book value because the only value
coming to the Registrant would be in connection with the Reorganization. We also
have no idea as to what a bona fide estimate of the maximum number of shares of
Thrucomm Common Stock that may be issued in a Mandatory Conversion Event.
It is our opinion that in the event of a Mandatory Conversion Event, the
Underlying Shares would be exchanged by the Registrant in accordance with the
provisions of Section 3(a)(9) of the Act "with its existing security holders
exclusively where no commission or other renumeration is paid or given directly
or indirectly for soliciting such exchange."
3. The Staff has asked for a supplemental legal analysis regarding the
compliance of the proposed pricing method with the provisions of the federal
securities laws and the rules thereunder. The Staff specifically cited Paragraph
16 of Schedule A of the Act ("Schedule A") and Item 501 of Regulation S-K under
the Act ("Item 501"). In this comment, the Staff expressed its concern about the
following three aspects of the Reorganization: (i) There isn't a time limit for
the occurrence of a Mandatory Conversion Event; (ii) There isn't a minimum
consideration (Conversion Value of Thrucomm), if the Mandatory Conversion Event
is a Sale or Merger; and (iii) There isn't a limit (maximum) on the amount of
equity that may be sold in an IPO.
Before addressing the validity of Registrant's pricing method under the
federal securities law, we think it would be useful herein to highlight, explain
and/or clarify certain matters regarding the pricing method:
Timing of the Mandatory Conversion Event
The Registrant has not set a date by which a Mandatory Conversion Event
must occur; the timing of such an Event cannot be predicted with any accuracy.
However, the absence of a Mandatory Conversion date does not have an adverse
consequence on Investors because, generally speaking, the Formula is not
time-sensitive, but it is based on the consideration (Conversion Value) that the
Registrant receives in a Mandatory Conversion Event. The only aspect about the
Formula that is time-sensitive is the minimum Datalinc Value of $9 million. The
minimum Datalinc Value in the Formula is roughly equivalent to the accumulated
Preferred Returns of Datalinc's Series 100 and Series 200 Unitholders, as of May
1, 1997; the only Series entitled to a Preferred Return. This factor in the
Formula does not adjust over time. If a Mandatory Conversion Event occurs in the
near future, the minimum Datalinc Value in the Formula operates to assure that
such Datalinc Investors receive all or nearly all of their Preferred Returns
<PAGE>
Jennifer Ours, Esq.
July 9, 1997
Page 6
first, as provided for under the Datalinc Partnership Agreement. If the
Mandatory Conversion Event occurs at a much later point in time, their Preferred
Returns will have been frozen as of May 1, 1997. This aspect of the Formula
appears to need further explanation in the Risk Factor and other appropriate
sections of the Registration Statement and such revisions will be made in
Amendment No. 1. However, the Formula is not otherwise time-sensitive and the
absence of an outside date by which a Mandatory Conversion Event must occur,
does not place Investors in the position of making an investment decision
without all of the material information. In fact, convertible stock is often
issued without a conversion date, but converts upon the occurrence of certain
events, such as market price or interest rates.
Minimum Consideration and Maximum Equity
The Registrant has not established a minimum consideration that it will
accept in any of the Mandatory Conversion Events. If the Mandatory Conversion
Event is an IPO, the Conversion Value of the Registrant will be determined by
the gross proceeds and the amount of equity sold in the offering. The amount of
equity that may be sold in an IPO will be determined by the Registrant, with the
advice of its underwriters, at the time of the IPO, and the maximum amount of
equity that the Registrant could sell in an IPO cannot be presently determined
with any accuracy. However, Investors can easily compute the Datalinc and
Fastcom Values and allocations to Investors, assuming more or less than one
third of Registrant's equity is sold in an IPO. If the Mandatory Conversion
Event is a Sale or Merger, the Conversion Value of the Registrant will be equal
to the consideration to be received as a result of the proposed Sale or Merger.
Once the Conversion Value of the Registrant is established, the Conversion
Value will be split between Fastcom and Datalinc pursuant to the Formula, as
follows, for example: thirty percent (30%) to Datalinc and seventy percent (70%)
to Fastcom, assuming a Conversion Value of $30 million. The "Split" changes
depending upon the amount of the Conversion Value. See pages 30 to 39 of the
Consent Statement/Prospectus for the Split at various illustrative Conversion
Values.
If the Conversion Value is less than $30 million, the minimum Datalinc
Value will be $9 million, and the Fastcom Value will be equal to the Conversion
Value less $9 million. The minimum Datalinc Value is not a minimum consideration
(Conversion Value) that Registrant would accept in an IPO or other Mandatory
Conversion Event. The minimum Datalinc Value in the Formula does not preclude
the Registrant from entering into a Mandatory Conversion Event in which the
Conversion Value is less than $9 million. Amendment No. 1 will contain revisions
describing this possibility and the effects thereof; however, the Investors
should fully understand the unlikelihood of such an occurrence. The General
Partners have a back-end interest under the Partnership Agreements, which
subordinated interest has been retained under the Formula and the terms of the
Preferred Stock. In addition, Messrs. Kolenda and Gianinni have guaranteed a 35%
return to Blue Chip, which may be payable out of any value allocated to ICN
under the Formula. Therefore, the Conversion Value in all likelihood will be
great enough to ensure that there is sufficient value in the back-end to satisfy
ICN's obligation to Blue Chip and still have some remaining value for Messrs.
Kolenda and Gianinni. Moreover, the Registrant's officers and directors will be
<PAGE>
Jennifer Ours, Esq.
July 9, 1997
Page 7
constrained by their fiduciary duties to act in the best interests of the
shareholders in determining the Conversion Value of the Registrant in any
Mandatory Conversion Event, and must, within their business judgment, obtain the
best Conversion Value (consideration) possible for Thrucomm. Accordingly,
although there isn't a minimum consideration (Conversion Value) incorporated
into the Formula, there is no motivation on the part of the insiders to accept a
low Conversion Value in any Mandatory Conversion Event.
The absence of a minimum Conversion Value is inevitable because it cannot
be predicted, with any degree of certainty at this time, the amount of equity
the Registrant could sell or the price it could receive for its stock in an IPO.
Nor can anyone so predict the consideration the Registrant might receive in a
Sale or Merger. There are no potential Sales or Mergers on the horizon, nor has
the Registrant received any preliminary indications from a potential
underwriter. The absence of a minimum Conversion Value in the Reorganization
Agreement does not present any unnecessary risks or adverse consequences to
Investors. Investors currently possess an interest in an entity or entities that
may at sometime in the future engage in an IPO, Sale or Merger for some unknown
consideration. The Reorganization cannot be expected to render such future
events presently calculable. The Preferred Stock preserves to the best of the
General Partners' abilities all of the rights and preferences that Investors
have under the Partnership Agreements, while permitting the Partnerships to
consolidate their assets and reorganize into a corporate form.
Preliminary explanations and clarifications about the Formula aside, we
return to the Staff's comment regarding the validity of Registrant's pricing
method under the federal securities laws and rules. Item 501(b)(7) request that
a registrant disclose, in a table on the Outside Front Cover Page of the
Prospectus the price to the public, where the securities are to be offered for
cash. Instruction No. 2 to Item 501 states that if the price to the public is
"impracticable to state", the method by which it is to be determined shall be
explained. The Mandatory Convertible Preferred Stock, which is the only
securities being registered in the Registration Statement, is not being offered
for cash; the Preferred Stock is being offered in exchange for assets and
liabilities of the Partnerships. Accordingly, we believe that the Item 501(b)(7)
requirement of a table, which states the price to the public, is not applicable
in this Registration Statement. However, it is instructive that the Commission
anticipated, in Instruction No. 2, the occurrence of circumstances in which the
price of a security can only be stated in terms of a method by which the price
will be determined. In addition, while the calculation of the registration fee
is generally based on the price of the securities registered, Rule 457(f) of
Regulation C under the Act ("Rule 457(f)") permits the following alternative
method of for fee computation: "Where securities are to be offered in exchange
for other securities ... or in a reclassification or recapitalization which
involves the substitution of a security for another security, a merger, a
consolidation, or a similar plan of acquisition, the registration fee is to be
calculated as follows: ... If there is no market for the securities to be
received by the registrant or cancelled in the exchange or transaction, the book
value of such securities shall be used, ...."
<PAGE>
Jennifer Ours, Esq.
July 9, 1997
Page 8
Paragraph 16 of Schedule A requires that a registration statement include
the "price at which it is proposed that the security shall be offered to the
public or the method by which such price is computed..." (emphasis added). It is
our opinion that the requirements of Schedule A apply only to the securities
being registered, i.e., the Preferred Stock.
If however Paragraph 16 applies to the Paragraph 16 of Schedule A requires
that a registration statement include the "price at which it is proposed that
the security shall be offered to the public or the method by which such price is
computed...." (emphasis added). It is our opinion that the requirements of
Schedule A apply only to the securities being registered, i.e., the Preferred
Stock.
If however Paragraph 16 applies to the Underlying Shares, the Registrant
has provided Investors with the Formula, which is a "method by which such price
is to be computed...." It is impracticable to state the price of the Underlying
Shares, which are not being registered in the Registration Statement, because
the Conversion Value of the Registrant is not presently ascertainable. The
Formula is the best pricing information that the Registrant can provide to
Investors at this time. Our research has not located any authority suggesting
that the Registrant may not use the Formula. If the Staff is aware of any
authority prohibiting the use of the Formula, we would appreciate being advised
of such authority.
I look forward to discussing the issues that are the subject of this
Supplemental Response Letter, after you have had an opportunity to review this
correspondence. Please contact me or Lina Angelici of this office at (813)
223-1535.
Very truly yours,
/s/ Frank N. Fleischer
_______________________
Frank N. Fleischer
cc: Michael T. Williams, Esq.
Patrick M. Keller, CPA
<PAGE>
SCHIFINO & FLEISCHER, P.A.
ATTORNEYS AT LAW
WILLIAM J. SCHIFINO TELEPHONE: (813)223-1535 ONE TAMPA CITY CENTER
FRANK N. FLEISCHER TELECOPIER: (813)223-3070 201 NORTH FRANKLIN STREET
CYNTHIA C. ELLIS INTERNET: [email protected] SUITE 2700
TAMPA, FLORIDA 33602
July 31, 1997
Jennifer Ours, Esq.
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Supplemental Response to Comments Received from
the Staff of the Commission with respect to the
Registration Statement of Thrucomm, Inc.
File No. 333-27161
Dear Ms. Ours:
The following sets forth our second supplemental response on behalf our
client, Thrucomm, Inc. (the "Registrant"), to a comment of the Staff of the
Securities and Exchange Commission (the "Staff Comments") received by letter
dated June 20, 1997 (the "Comment Letter") with respect to the Registration
Statement on Form S-4 filed on May 15, 1997 by the Registrant (the "Registration
Statement"). A copy of this letter (the "Second Supplemental Response Letter")
will be filed via Edgar concurrently with the filing of Amendment No. 1. Unless
otherwise set forth herein, defined terms used herein have the meanings ascribed
to such terms in the Registration Statement.
In its Comment Letter, the Staff expressed some concern regarding
Thrucomm's pricing formula, which determines the number of Underlying Shares
that Investors will receive in a Mandatory Conversion Event. The Staff is
concerned primarily with the following three aspects of Thrucomm's proposed
Reorganization: (i) the Registrant's pricing formula does not incorporate a
minimum Conversion Value; (ii) the pricing formula does not include a cap on the
amount of equity that can be sold in an IPO, and (iii) there is no time limit
within which a Mandatory Conversion Event must occur. The Registrant has
carefully considered the Staff's concerns and amended its Reorganization
Agreement.
In its simplest terms, the Formula can be stated as follows: the Conversion
Value of Thrucomm minus the Datalinc Value equals the Fastcom Value. The Staff's
first two concerns go to the manner in which the Conversion Value of Thrucomm is
determined. The Amended Reorganization Agreement provides that a Mandatory
Conversion will not be deemed to have occurred unless the Conversion Value of
Thrucomm is at least $20 million (the "Minimum Conversion Value"). The Minimum
Conversion Value ensures that the Fastcom Investors will receive the benefit of
their Guaranteed Returns and the Datalinc Investors will at least receive their
Earned Preferred Returns as of May 31, 1997. In addition, the Amended
Reorganization Agreement provides that the Company will not sell more than 40%
of its equity if the Mandatory Conversion is an IPO. We are confident that these
revisions in the Amended Reorganization Agreement regarding the pricing formula
are responsive to the Staff's first two concerns.
<PAGE>
Jennifer Ours, Esq.
July 31, 1997
Page 2
However, we have several reservations about setting an outside date by
which a Mandatory Conversion must occur without reinitiating the approval
process. We believe that such a time limit could have significant adverse
consequences to the Registrant and the Investors. If the Reorganization
Agreement is revised to provide Investors with a right to revisit the terms of
the roll-up, in three to five years for example, we believe that such right
would create a serious impediment to the Registrant's future ability to obtain
additional funds, prior to a Mandatory Conversion, from an institutional
investor, venture capital firm or strategic partner. It is very likely that the
uncertainties associated with such a right to unwind or restructure the
Reorganization would be viewed negatively by potential investors, particularly
where the Registrant is seeking large investors who will likely make a much
greater financial contribution to the Company than its current Investors. If the
Registrant is not able to attract potential investors to finish the development
of the Network technology and begin a regional build out, it is unlikely that a
Mandatory Conversion will ever occur, and consequently Investors will never
receive a return on their investment. The purpose of the Reorganization is to
put the Partnerships in a better position to attract large investors such that
at some time in the future there will be an IPO, Sale or Merger, and the
Investors will receive some liquidity and/or return on their investment. In
addition, after the passage of time following the approval of the
Reorganization, the businesses of the Partnerships will be fully integrated and
it may be virtually impossible to unwind.
The Registrant has carefully structured the Formula and the conversion
terms of the Preferred Stock such that they continue to reward the current
Investors. The Conversion Value is not fixed in the Formula, and therefore,
Investors will participate in any increase in the value of Thrucomm after the
Reorganization. Furthermore, the terms of the Preferred Stock incorporate the
sharing provisions of the Partnership Agreements and preserve the General
Partners' subordinated, back-end interest to the benefit of the Investors. For
example, Datalinc Investors will receive an amount equal to their capital
contribution and preferred returns before any Datalinc Value is distributed to
the Other Equity Owners in Datalinc. Similarly, the Fastcom Investors will
retain the benefit of their Minimum Guaranteed Returns when the Fastcom Value is
distributed.
I would appreciate having the opportunity to discuss this issue with you
further, after you have had an opportunity to review this correspondence. Please
feel free to contact me or Lina Angelici of this office at (813) 223-1535.
Very truly yours,
/s/Frank N.Fleischer
_______________________
Frank N. Fleischer
<PAGE>
As filed with the Securities and Exchange Commission on August 11, 1997
Registration Statement No. 333-27161 Page 1 of 2
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
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 11, 1997
Registration Statement No. 333-27161 Page 2 of 2
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
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).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
Preliminary Prospectus Dated August 11, 1997
Subject to Completion
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities law of any such state.
THRUCOMM, INC.
DATALINC, LTD.
FASTCOM, LTD.
1641 COMMERCE AVENUE NORTH
ST. PETERSBURG, FL 33716
REQUEST FOR WRITTEN CONSENT
NOTICE IS HEREBY GIVEN, to the limited partners (the "Investors") of Datalinc,
Ltd., a Florida limited partnership ("Datalinc"), that in order to facilitate
the ability to obtain the additional capital needed to develop the complementary
businesses of Datalinc and Fastcom, Ltd., a Florida limited partnership
("Fastcom"), and consistent with the business plans of Datalinc and Fastcom,
Integrated Communication Networks, Inc., a Florida corporation and the General
Partner of Datalinc ("ICN"), hereby requests the execution and delivery of
written consents (the "Consents") by the Datalinc Investors to combine the
businesses of Datalinc and Fastcom into a single corporation, by consenting:
To approve and adopt the Agreement and Plan of Reorganization (the
"Reorganization Agreement"), by and among Thrucomm, Inc., a newly organized
Florida corporation ("Thrucomm"), Fastcom and Datalinc, (Fastcom and
Datalinc collectively referred to as the "Partnerships") providing for the
reorganization (the "Reorganization") of the businesses of the Partnerships
into Thrucomm by, among other things:
(A) The transfer of all of the assets and liabilities of Datalinc and
Fastcom 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.
i
<PAGE>
A copy of the Reorganization Agreement is attached as Exhibit A to the
accompanying Consent Statement/Prospectus, and is incorporated herein by
reference.
APPROVAL AND ADOPTION OF THE REORGANIZATION AGREEMENT AND REORGANIZATION
WILL RESULT IN A LOSS OF CERTAIN RIGHTS OF DATALINC'S AND FASTCOM'S INVESTORS.
SEE "RISK FACTORS."
The Consent of Datalinc's Investors holding Limited Partnership Units (the
"Units") in Datalinc with more than fifty percent (50%) of all of the voting
rights of the outstanding Units is necessary to approve and adopt the
Reorganization Agreement. The Consent of Fastcom's Investors holding at least
two-thirds of all of the outstanding Units of Fastcom is necessary for Fastcom
to approve and adopt the Reorganization Agreement. Datalinc holds approximately
80% of the outstanding Units of Fastcom. 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
August , 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"),
at which time the Preferred Stock will be converted into shares of Thrucomm's
Common Stock, no par value (the "Underlying Shares"), and distributed to the
Fastcom and Datalinc Investors.
THIS OFFER INVOLVES VARIOUS RISKS THAT SHOULD BE CONSIDERED BY THE
INVESTORS. SEE "RISK FACTORS AND MATERIAL CONSIDERATIONS," BEGINNING ON PAGE 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.
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.
iii
<PAGE>
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 73%. DATALINC
PRESENTLY OWNS APPROXIMATELY 80% OF THE OUTSTANDING UNITS OF FASTCOM. THROUGH
ITS GENERAL PARTNER, DATALINC HAS ALREADY GIVEN ITS CONSENT, WHICH IS SUFFICIENT
TO GIVE FASTCOM'S APPROVAL OF THE REORGANIZATION AGREEMENT AND NO ADDITIONAL
CONSENT OF ANY OTHER FASTCOM INVESTOR IS REQUIRED.
THE OFFER IS SCHEDULED TO EXPIRE, UNLESS EXTENDED, AT 5:00 P. M., EASTERN
STANDARD TIME ON 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 AUGUST __, 1997, WHICH IS
THE APPROXIMATE DATE ON WHICH THIS CONSENT STATEMENT/PROSPECTUS WILL FIRST BE
MAILED TO THE INVESTORS OF THE PARTNERSHIPS.
iv
<PAGE>
AVAILABLE INFORMATION
Under the rules and regulations of the Securities and Exchange Commission
(the "Commission"), the solicitation of consents from Investors to approve and
adopt the Reorganization Agreement (as defined herein) constitutes an offering
of the Thrucomm Mandatory Convertible Preferred Shares and the underlying Common
Stock to be issued in connection with a Mandatory Conversion Event (as defined
herein). Accordingly, Thrucomm has filed with the Commission a Registration
Statement on Form S-4 under the Securities Act of 1933, as amended (the
"Securities Act") with respect to this offering (the "Registration Statement").
This Consent Statement/Prospectus constitutes the prospectus of Thrucomm that is
filed as part of the Registration Statement. As permitted by the rules and
regulations of the Commission this Consent Statement/Prospectus omits certain
information, exhibits and undertakings contained in the Registration Statement.
Such additional information may be inspected, without charge, at the offices of
the Commission, 450 Fifth Street, N. W., Washington, D.C. 20549 and the
Northeast Regional Office, Midwest Regional Office and Southeast Regional Office
at the following addresses: 7 World Trade Center, Suite 1300, New York, NY
10048, Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
IL 60661-2511 and 1401 Brickell Avenue, Suite 200, Miami, Florida 33131,
respectively. Copies can be obtained at prescribed rates from the Washington,
D.C. office. The Commission also maintains a Website that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission, and the address of such site is
http://www.sec.gov.
No person is authorized to give any information or to make any
representations other than those contained in this Consent Statement/Prospectus,
and if given or made, such information or representations should not be relied
upon as having been authorized. This Consent Statement/Prospectus does not
constitute an offer to sell, or a solicitation of an offer to purchase, the
securities offered by this Consent Statement/Prospectus, or the solicitation of
a Consent in any jurisdiction to or from any person to whom or from whom it is
unlawful to make such offer, solicitation of an offer or solicitation in such
jurisdiction.
Neither the delivery of this Consent Statement/Prospectus, nor any
distribution of securities pursuant to this Consent Statement/Prospectus shall,
under any circumstances, create any implication that there has been no change in
the information set forth herein or in the affairs of the parties as of the date
of this Consent Statement/Prospectus. However, if any material change occurs
during the period that this Consent Statement/Prospectus is required to be
delivered, this Consent Statement/Prospectus will be amended and supplemented
accordingly. All information in this Consent Statement/Prospectus regarding
Thrucomm, has been supplied by Thrucomm, and all information regarding Datalinc,
and Fastcom has been supplied by Datalinc, and Fastcom, respectively.
v
<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
vi
<PAGE>
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
vii
<PAGE>
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
viii
<PAGE>
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.
1
<PAGE>
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."
2
<PAGE>
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.
3
<PAGE>
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
4
<PAGE>
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.
5
<PAGE>
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
6
<PAGE>
the assets of Thrucomm (a "Sale"), or (iii) the merger of Thrucomm into a
non-affiliated entity, whereby Thrucomm is not the surviving entity (a "Merger")
(collectively, the "Mandatory Conversion Events"). 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 an IPO,
Sale, or Merger. 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 or Merger, the Conversion Value of
Thrucomm is based upon the consideration that is received in either such
transaction. 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."
7
<PAGE>
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
July 29, 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.
8
<PAGE>
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 Investers, certain of the Series 300 Units
have been designated herein as the Series 300E1 and the Series 300E2 Limited
Partnership Units. See "Equity Ownership of the Partnerships." The agreements
with Blue Chip have been amended as of July 1997 to add Thrucomm as a party
thereto (the "Amended Blue Chip Agreements"). Also in July 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.
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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."
12
<PAGE>
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."
13
<PAGE>
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 26% of Thrucomm, and the former Datalinc Investors
and Other Equity Owners will own approximately 74% of Thrucomm, assuming a
Conversion Value of $30 million and no further sale of equity.
14
<PAGE>
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.
15
<PAGE>
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.
16
<PAGE>
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.
1. NO ASSURANCE OF MANDATORY CONVERSION EVENT
The Preferred Stock is mandatorily convertible into shares of Thruco mm'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"); or (iii) the merger of Thrucomm into a non-affiliated
entity, whereby Thrucomm is not the surviving entity (the "Merger"). 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.
2. RISK ASSOCIATED WITH A SALE OR MERGER EVENT
In order to provide Investors with an opportunity to vote for or agains t 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.
3. NUMBER OF UNDERLYING SHARES OR OTHER CONSIDERATION NOT PRESENTLY
ASCERTAINABLE
The number of Underlying Shares that will be allocated to the Invest ors
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
17
<PAGE>
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.
4. 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
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.
18
<PAGE>
5. 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."
6. 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.
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
19
<PAGE>
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."
7. 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."
8. INTEREST OF CERTAIN PERSONS IN THE REORGANIZATION
The Boards of Directors of FMI and Thrucomm are comprised of the same s ix
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 K
olenda, 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.
20
<PAGE>
9. 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.
10. 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.
11. 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.
12. 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
21
<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."
13. 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."
14. CONTROL BY CERTAIN STOCKHOLDERS
Presently and after the Effective Time of the Reorganization, all outsta
nding 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.
15. 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.
a. TECHNOLOGICAL OBSOLESCENCE
The communications industry has recently experienced significant
changes and technological developments. Such technological progress may
result in the development of techniques and equipment newer or more
advanced than that used by Fastcom. In the event of such technological
advances, the equipment and software used by Fastcom may become, to some
extent, less efficient in providing services.
b. COMPETITION
Thrucomm will compete with many providers of data 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.
22
<PAGE>
c. 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.
23
<PAGE>
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
24
<PAGE>
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."
25
<PAGE>
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.
26
<PAGE>
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.
27
<PAGE>
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 July, 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
28
<PAGE>
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
29
<PAGE>
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 o f 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").
30
<PAGE>
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
31
<PAGE>
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
32
<PAGE>
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 at the
time of an IPO, a sale of all or substantially all of the assets of Fastcom, or
a merger with a non-affiliated entity. Any adjustment in the equity interest of
the Series 100 Investors, shall result in a corresponding decrease in Datalinc's
equity interest in Fastcom. The Series 100 Investors will receive, upon
Mandatory Conversion, the Underlying Shares of Thrucomm's Mandatory Convertible
Preferred Stock, Series 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
33
<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 at the time of an IPO, a sale of all
or substantially all of the assets of Fastcom, or a merger with a non-affiliated
entity. Any adjustment in the equity interest of the Series 200 Investors, shall
result in a corresponding decrease in Datalinc's equity interest in Fastcom. The
Series 200 Investors 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
34
<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
35
<PAGE>
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").
[Balance of page intentionally left blank.]
36
<PAGE>
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 Thurcomm 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.
If Mandatory Conversion should occur as a result of a Sale or Merger, the
Conversion Value would be equal to the aggregate consideration proposed to be
received in that Sale or Merger. 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 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."
37
<PAGE>
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
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
38
<PAGE>
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 in an IPO (or cash and/or
securities in a Sale or Merger) 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 order to ensure that Fastcom's Series 100 Investors receive their
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."
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
39
<PAGE>
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 only as 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."
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
40
<PAGE>
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 Preferred Returns and
Capital Contributions, as set forth in Column D. There may be additional
adjustments as well. THESE TABLES ARE FOR ILLUSTRATION PURPOSES ONLY AND ARE NOT
TO BE CONSTRUED AS PROJECTIONS. No assurance is given that the values used in
the Tables are reflective of any possible future Conversion Values of Thrucomm.
Investors' actual equity interests in Thrucomm can only be determined at the
time of Mandatory Conversion.
[Balance of Page Intentionally Left Blank]
41
<PAGE>
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 (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 (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 (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
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.
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 (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 (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,
and any Earned Preferred Returns of Series M.
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, 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 July 29,
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.
52
<PAGE>
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 73%
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
53
<PAGE>
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
54
<PAGE>
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 Merger. 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
Fastcoms 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.
55
<PAGE>
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.
56
<PAGE>
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
57
<PAGE>
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.
58
<PAGE>
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.
59
<PAGE>
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.
60
<PAGE>
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."
61
<PAGE>
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.
62
<PAGE>
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.
63
<PAGE>
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.
[Balance of page intentionally left blank.]
64
<PAGE>
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.
77
<PAGE>
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
78
<PAGE>
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.
79
<PAGE>
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.
[Balance of page intentionally left blank.]
80
<PAGE>
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.
81
<PAGE>
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.
82
<PAGE>
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
83
<PAGE>
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
84
<PAGE>
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
85
<PAGE>
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
86
<PAGE>
developing a field ungradable component which will permit operation in the 2400
to 2483.5 MHZ frequency as well. Fastcom will install DP1000 and DP100
transceivers in urban and suburban areas with sufficient concentration to
economically justify the installation of a supporting network of cell sites. The
DP1000 is a synchronous product which will be used in full service ATM
applications and the DP100 is an asynchronous product which will be used
predominately in POS applications and in cash only ATM locations. Both products
are designed for remote monitoring and upgradability. The NCC will be capable of
deciphering problems at particular site installations, remotely.
Each transceiver provides up to four ports that can transact
simultaneously. Each port, based on the Motorola Vanguard technology, will
independently support various customer devices, protocols and speeds. Port
speeds are capable of up to 38.4Kbps, and transceivers in total will operate at
data rates in excess of 64Kbps. Additional features include network driven
software upgrade capabilities, public key encryption and the ability to measure
the integrity of a signal between a cell site and the remote transceiver in real
time.
For rural installations, Fastcom will deploy VSAT transceivers, which will
broadcast directly (via the Galaxy 7 satellite service of Hughes Communications,
Inc., a unit of Hughes Electronics Corp. ("Hughes")) back to the NCC, thus
obviating the need for a network of cell sites. Fastcom has been working with
Hughes to develop specialized VSAT transceivers. The transceivers will cost
significantly less than other commercially available equipment, and will allow
for integration with the Fastcom's standard Motorola Vanguard based
communications ports found on Fastcom's proprietary DP1000 and DP100s.
CELL SITES
Fastcom installs cell sites on existing towers and rooftops which are
leased by Fastcom. Each cell site has an effective radius of five miles and
additional cell sites can be installed to increase coverage, providing a total
by-pass of the local telephone company. A cell site is equipped with a digital
switch, a frame relay access device, a VSAT, an uninterruptable power supply and
a proprietary DP1000 transceiver. Each transceiver can support up to 200 remote
devices and additional transceivers can be added incrementally, with the
addition of radios and switches, at existing cell sites for additional capacity.
THE NETWORK CONTROL CENTER ("NCC")
The NCC is a fully redundant, digital switching center equipped to control
and monitor the Network at all levels. From the NCC, system operators fault
isolated Network problems, dispatch technicians to cell or transceiver sites on
a nationwide basis and act as a single point of contact for all customer
technical inquiries. The NCC, built by Datalinc, has been fully operational
since November 1991 and serves as the master earth station for Datalinc's VSAT
data communication service. Over the past two years, Datalinc has retrofitted
its NCC to manage the Network for Fastcom.
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).
87
<PAGE>
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.
88
<PAGE>
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
89
<PAGE>
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.
90
<PAGE>
RESEARCH AND DEVELOPMENT
Fastcom has built a core group of system and software engineers which make
up the Network development team. The development team's mission statement is
simultaneously to improve overall Network performance and decrease Network
operating costs through innovation and technology.
In an effort to enhance the effectiveness of Fastcom's development team,
Fastcom has entered into an agreement with Nova Engineering, an engineering firm
specializing in the field of spread spectrum modulation. This agreement (i)
provides Fastcom exclusive proprietary rights to all designs and algorithms that
result from the collaborative effort between the engineering firm and Fastcom.;
(ii) pays the engineering firm a royalty for each transceiver placed in service;
and (iii) pays the engineering firm a bonus royalty based on a percentage of
savings for any innovative effort on their part that results in a lower
transceiver cost. In addition, Nova will pay Fastcom a royalty on any radio that
is a derivative of the radio technology developed for Fastcom.
Fastcom believes it has become the leader in the development of spread
spectrum technology for EFT type applications. Fastcom will continue to improve
the cost/performance ratio of the DP1000 through investments in the on-going
development of the DP1000 platform and VSAT service offerings.
Fastcom is currently engaged in two major development projects which
management believes will dramatically expand Fastcom's market. The DP100 is a
less costly version of the DP1000 and is targeted at the large segment of the
POS market made up mostly of independent retailers, restaurants and convenience
stores. This is a market segment that accounts for approximately 90% of existing
POS sites, generates less than 3,000 transactions per month, per site and
currently uses low cost, dial up circuits. Fastcom believes users of dial up
circuits will adopt the Network's superior on-line service if comparably priced
to what they are currently paying for dial-up services. Fastcom is currently
conducting laboratory testing with two potential customers.
The DPX cell development is an effort that would provide a significant
increase in the current throughput of a Network cell and would enable Fastcom to
address higher bandwidth applications currently running on traditional frame
relay and switched packet networks. Monthly per site expenditures for frame
relay and switched packet solutions range between $200 and $400. The DPX
development involves an upgrade of a cell's switching capability and the
implementation of data compression. The DPX cell is anticipated to be
operational in 1998.
When these projects are completed, management believes that the combination
of the DP100, DP1000, DPX cell and VSATs will enable Fastcom to address all
market segments of the EFT industry and to offer displaceable costs ranging from
$75 to $400 per month, per site.
OPERATIONS
Fastcom sub-contracts manufacturing, installation and certain aspects of
field maintenance. Fastcom performs the remainder of the operating tasks itself.
MANUFACTURING
Being primarily a service provider, Fastcom elected to sub-contract the
manufacture of the DP1000 printed circuit boards, cables and enclosure. Fastcom
91
<PAGE>
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.
92
<PAGE>
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.
93
<PAGE>
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
94
<PAGE>
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.
95
<PAGE>
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
96
<PAGE>
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.
97
<PAGE>
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."
98
<PAGE>
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.
99
<PAGE>
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.
100
<PAGE>
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
101
<PAGE>
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."
[Balance of Page Intentionally Left Blank]
102
<PAGE>
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.
103
<PAGE>
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.
104
<PAGE>
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"), or (iii) the merger of Thrucomm into a
non-affiliated entity, whereby Thrucomm is not the surviving entity (a "Merger")
(collectively, the "Mandatory Conversion Events"). 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 an IPO, Sale
or Merger. 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
Underlying Shares equal of (i) the Earned Preferred Returns of the Series B
Preferred Stock, plus (ii) 8.642% of (a) the difference, if any, of the Datalinc
105
<PAGE>
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.
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.
106
<PAGE>
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
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.
107
<PAGE>
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 are 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. 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. 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 of 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, 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 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.
108
<PAGE>
SERIES J
The Earned Preferred Return on the Series J Preferred Stock is also
measured as a 30% discount to the Fastcom Value. 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, 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 shall
result in a corresponding decrease in the distribution to the Series L Preferred
Stock upon Mandatory Conversion.
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.
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.
109
<PAGE>
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 Thrucomm
surviving 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, landline 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>
APPENDIX "A"
EXHIBIT 2.1.1
Amended Agreement and Plan of Reorganization
of
Datalinc, Ltd.
Fastcom, Ltd.
and
Thrucomm, Inc.
August 11, 1997
A-1
<PAGE>
AMENDED AGREEMENT AND PLAN OF REORGANIZATION dated as of the 1st 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.
REORGANIZATION. The Partnerships and Thrucomm shall effect the Transfer upon the
terms and conditions described in this Agreement, and in exchange for the
Transfer, the Partnerships will receive the Reorganization Stock. The 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"
Distibutees"), 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.
A-2
<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 (the "Preferred Stock"), with such designation, rights and
preferences as may be determined from time to time by the Board of Directors of
Thrucomm, of which no shares are issued and outstanding.
2.4 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 Reorganization Stock:
TO DATALINC:
1 Preferred Share, Series A; the Underlying Shares to be distributed to the
holders of Series 100 Limited Partnership Units upon Mandatory Conversion;
1 Preferred Share, Series B; the Underlying Shares to be distributed to the
holders of Series 200 Limited Partnership Units upon Mandatory Conversion;
1 Preferred Share, Series C; the Underlying Shares to be distributed to the
holders of Series 300 Limited Partnership Units upon Mandatory Conversion;
1 Preferred Share, Series D; the Underlying Shares to be distributed to the
holders of Series 300E1 Limited Partnership Units upon Mandatory Conversion;
1 Preferred Share, Series E; the Underlying Shares to be distributed to the
holders of Series 3OOE2 Limited Partnership Units upon Mandatory Conversion;
1 Preferred Share, Series F; the Underlying Shares to be distributed to the
holder of the Managing Dealer Units upon Mandatory Conversion; and
1 Preferred Share, Series G; the Underlying Shares to be distributed
to the Datalinc General Partner upon Mandatory Conversion.
TO FASTCOM:
1 Preferred Share, Series H; the Underlying Shares to be distributed to the
holders of Series 100 Limited Partnership Units upon Mandatory Conversion;
1 Preferred Share, Series I; the Underlying Shares to be distributed to the
holders of Series 100EA Limited Partnership Units upon Mandatory Conversion;
1 Preferred Share, Series J; the Underlying Shares to be distributed to the
holders of Series 200 Limited Partnership Units upon Mandatory Conversion;
1 Preferred Share, Series K; the Underlying Shares to be distributed to the
holders of Series 300 Limited Partnership Units upon Mandatory Conversion;
1 Preferred Share, Series L; the Underlying Shares to be distributed to
Datalinc, as the holder of the Datalinc Limited Partnership Units, upon
Mandatory Conversion;
A-3
<PAGE>
1 Preferred Share, Series M; the Underlying Shares to be distributed to the
holders of MIP Special Limited Partnership Units upon Mandatory Conversion;
1 Preferred Share, Series N; the Underlying Shares to be distributed to the
holder of the Managing Dealer Units upon Mandatory Conversion;
1 Preferred Share, Series O; the Underlying Shares to be distributed to Rinaldi,
Rinaldi & Hurt upon Mandatory Conversion; and
1 Preferred Share, Series P; the Underlying Shares to be distributed to
the Fastcom General Partner upon Mandatory Conversion.
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..
VOTING RIGHTS
Except as provided by law, the holders of the Preferred Stock will not be
entitled to vote.
LIQUIDATION RIGHTS
All of the Preferred Stock will rank in equal priority to each other, but prior
to the Common Stock, upon liquidation. In the event of any liquidation,
dissolution or winding-up of Thrucomm, whether voluntary or involuntary, no
payment or distribution of the assets of Thrucomm, or proceeds thereof (whether
capital or surplus), shall be made to or set apart for the holders of any class
or series of stock of Thrucomm ranking junior to the Preferred Stock upon
liquidation. The holders of the Preferred Stock shall be entitled to receive
payments or distributions of assets, payable in the proportion determined by the
Formula. The voluntary sale, conveyance, lease, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
the property or assets of Thrucomm to, or a consolidation or merger of Thrucomm
with, one or more other corporation (whether or not Thrucomm is Thrucomm
surviving such consolidation or merger) will not be deemed to be a liquidation,
dissolution or winding-up, voluntary or involuntary.
(c) CONVERSION. 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
A-4
<PAGE>
Thrucomm's Common Stock (an "IPO"), (ii) the sale of all or substantially all of
the assets of Thrucomm (a "Sale"), or (iii) the merger of Thrucomm into a
non-affiliated entity, whereby Thrucomm is not the surviving entity (a "Merger")
(collectively, the "Mandatory Conversion Events"). 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.
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 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 Underlying
Shares equal of (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.
A-5
<PAGE>
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.
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.
A-6
<PAGE>
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. 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
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.
A-7
<PAGE>
Series H, J and K Earned Preferred Returns
The Fastcom Series 100, 200 and 300 Investors are 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.
Series H
The Earned Preferred Return on the Series H Preferred Stock is measured as a 30%
discount to the Fastcom Value. The 30% discounted Fastcom Value (the "Discounted
Fastcom Value") is determined as follows:
Fastcom Value x .70 = 30% Discounted Fastcom Value.
An adjustment to the equity interest of the Series H Preferred Stock need only
be calculated, if the Discounted Fastcom Value is less than $18,431,595 (the
Series H "Guaranteed Minimum of 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, 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 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.
Series J
The Earned Preferred Return on the Series J Preferred Stock is also measured as
a 30% discount to the Fastcom Value. 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, 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
A-8
<PAGE>
this illustration is equal to 14.66% of the Fastcom Value minus 2.013% of the
Fastcom Value. 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.
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.
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.
No fractional shares will be issued upon conversion.
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 Thurcomm 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.
A-9
<PAGE>
Determining the Values of Thrucomm, Datalinc and Fastcom
The value of Thrucomm will be established upon the occurrence of a Mandatory
Conversion Event (the "Conversion Value" of Thrucomm). The General Partners have
established percentages and equations for subsequently allocating the Conversion
Value of Thrucomm to each of the Partnerships. Set forth below is an explanation
of the manner in which the values of the Parties are determined, or estimated
for the purpose of providing examples of the operation of the Formula.
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.
If Mandatory Conversion should occur as a result of a Sale or Merger, the
Conversion Value would be equal to the aggregate consideration proposed to be
received in that Sale or Merger. 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 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
A-10
<PAGE>
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.
2.5 EFFECT OF THE REORGANIZATION. As of the Effective Date, all of the
following shall occur:
(a) The corporate identity, existence, purposes, powers, franchises, rights
and immunities of Thrucomm shall continue unaffected and unimpaired by the
Reorganization,
(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.
A-11
<PAGE>
(e) All rights of employees and creditors and all liens upon the property
of the Partnerships or Thrucomm shall be preserved unimpaired, limited hen
to the property affected by such hens at the Effective Date, and all the
debts, liabilities and duties of the Partnerships shall attach to Thrucomm
and shall be enforceable against Thrucomm to the same extent as if all such
debts, liabilities and duties had been incurred or contracted by Thrucomm.
(f) The Articles of Incorporation of Thrucomm, as in effect on the
Effective Date, shall continue to be the Articles of Incorporation of
Thrucomm without change or amendment until such time, if ever, as it is
amended thereafter in accordance with the provisions thereof and applicable
laws.
(g) The Bylaws of Thrucomm as in effect on the Effective Date, shall
continue to be the Bylaws of Thrucomm without change or amendment until
such time, if ever, as it is amended thereafter in accordance with the
provisions thereof and applicable laws.
2.6 DISCLOSURE SCHEDULES. The Consent Statement and Prospectus dated insert (the
"Disclosure Schedule") sets forth the matters required to be set forth in the
Disclosure Schedules as described elsewhere in this Agreement. The Disclosure
Schedule shall be deemed to be a part of this Agreement.
III. REPRESENTATIONS AND WARRANTIES OF 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, and all states in which
Datalinc is qualified to do business as of the date hereof, are listed in the
Disclosure Schedule. A copy of the Certificate of Limited Partnership of
Datalinc (certified by the Secretary of State of Florida), and the Agreement of
Limited Partnership, as amended to date, delivered to Fastcom and Thrucomm, are
true and complete copies of these documents as now in effect. Except as
otherwise set forth in the Disclosure Schedule, Datalinc does not own any
interest in any other corporation, business trust or similar entity. The minute
books of Datalinc contains accurate records of all meetings of its Partners
since its formation.
3.2 CAPITALIZATION. The number of Partnership Units which are issued and
outstanding are as set forth in the Disclosure Schedule.
All of such Units are duly authorized, validly issued and outstanding, fully
paid and nonassessable, and owned of record and beneficially by the Datalinc
Distributees, in such amounts as are set forth opposite their respective names
thereon, and were not issued in violation of the preemptive rights of any
person. There are no subscriptions, options, warrants, rights or calls or other
commitments or agreements to which the Datalinc Distributees, or, to the
Datalinc Distributees' knowledge, are a party or by which any of them is bound,
calling for any issuance, transfer, sale or other disposition of any class of
A-12
<PAGE>
securities of Datalinc. There are no outstanding securities convertible or
exchangeable, actually or contingently, into Partnership Units or any other
securities of Datalinc. Datalinc has no subsidiaries except Thrucomm.
3.3 AUTHORITY. This Agreement constitutes, and all other agreements contemplated
hereby will constitute, when executed and delivered by Datalinc in accordance
therewith (and assuming due execution and delivery by the other parties hereto),
the valid and binding obligation of Datalinc, enforceable in accordance with
their respective terms, subject to general principles of equity and bankruptcy
or other laws relating to or affecting the rights of creditors generally.
3.4 PROPERTIES. Except as set forth in the Disclosure Schedule, Datalinc has
good title to all of the assets and properties which it purports to own as
reflected on the balance sheet included in the Financial Statements (as
hereinafter defined), or thereafter acquired. Datalinc has a valid leasehold
interest in all material property of which it is the lessee and each such lease
is valid, binding and enforceable against Datalinc and, to the knowledge of
Datalinc, the other parties thereto in accordance with its terms. Neither
Datalinc nor the other parties thereto are in material default in the
performance of any material provisions thereunder. Neither the whole nor any
material portion of the assets of Datalinc is subject to any governmental decree
or order to be sold or is being condemned, expropriated or otherwise taken by
any public authority with or without payment of compensation therefor, nor, to
the knowledge of Datalinc, has any such condemnation, expropriation or taking
been proposed. None of the assets of Datalinc is subject to any restriction
which would prevent continuation of the use currently made thereof or materially
adversely affect the value thereof.
3.5 CONTRACTS LISTED; NO DEFAULT. All contracts, agreements, licenses, leases,
easements, permits, rights of way, commitments, and understandings, written or
oral, connected with or relating in any respect to present or proposed future
operations of Datalinc (except employment or other agreements terminable at will
and other agreements which, in the aggregate, are not material to the business,
properties or prospects of Datalinc and except governmental licenses, permits,
authorizations, approvals and other matters referred to in Section 3.16), which
would be required to be listed as exhibits to an Annual Report on Form 10-K if
Datalinc were subject to the reporting requirements of the Exchange Act
(individually, the "Datalinc Contract" and collectively, the "Datalinc
Contracts"), are listed and described in the Disclosure Schedule. Datalinc is
the holder of, or party to, all of the Datalinc Contracts. To the knowledge of
Datalinc, the Datalinc Contracts are valid, binding and enforceable by the
signatory thereto against the other parties thereto in accordance with their
terms. Neither Datalinc nor any signatory thereto is in default or breach of any
material provision of the Datalinc Contracts. Datalinc's operation of its
business has been, is, and will, between the date hereof and the Closing Date
(as hereinafter defined), continue to be, consistent with the material terms and
conditions of the Datalinc Contracts. Subsequent to the consummation of the
Reorganization, Datalinc shall use its best efforts to cause the transfer and
otherwise assign for the benefit of Thrucomm, the Datalinc Contracts.
3.6 LITIGATION. Except as disclosed in the Disclosure Schedule, there is no
claim, action, proceeding or investigation pending or threatened against or
affecting Datalinc before or by any court, arbitrator or governmental agency or
authority which, in the reasonable judgment of Datalinc, could have any
materially adverse effect on Datalinc. There are no decrees, injunctions or
orders of any court, governmental department, agency or arbitration outstanding
against Datalinc.
A-13
<PAGE>
3.7 TAXES. For purposes of this Agreement, (A) "Tax" (and, with correlative
meaning, "Taxes") shall mean any federal, state, local or foreign income,
alternative or add-on minimum business, employment franchise, occupancy,
payroll, property, sales, transfer, use, value added, withholding or other tax,
levy, impost, fee, imposition, assessment or similar charge, together with any
related addition to tax, interest, penalty or fine thereon; and (B) "Returns"
shall mean all returns (including, without limitation, information returns and
other material information), reports and forms relating to Taxes or to any
benefit plans.
Datalinc has duly filed all Returns required by any law or regulation to be
filed by it, except for extensions duly obtained. All such Returns were, when
filed, and to the knowledge of Datalinc are, accurate and complete in all
material respects and were prepared in conformity with applicable laws and
regulations in all material respects. Datalinc has paid or will pay in full or
has adequately reserved against all Taxes otherwise assessed against it through
the Closing Date (as hereinafter defined), and the assessment of any material
amount of additional Taxes in excess of those paid and reported is not
reasonably expected.
Datalinc is not a party to any pending action or proceeding by any governmental
authority for the assessment of any Tax, and no claim for assessment or
collection of any Tax has been asserted against Datalinc that has not been paid.
There are no Tax liens upon the assets (other than the lien of personal property
taxes not yet due and payable) of Datalinc. There is no valid basis, to the
knowledge of Datalinc, except as set forth in the Disclosure Schedule, for any
assessment, deficiency, notice, 30-day letter or similar intention to assess any
Tax to be issued to Datalinc by any governmental authority.
3.8 COMPLIANCE WITH LAWS AND REGULATIONS. To its knowledge, Datalinc is in
compliance, in all material respects, with all laws, rules, regulations, orders
and requirements (federal, state and local) applicable to it in all
jurisdictions where the business of Datalinc is currently conducted or to which
Datalinc is currently subject which have a material impact on Datalinc,
including, without limitation, all applicable civil rights and equal opportunity
employment laws and regulations, and all state and federal antitrust,
antimonopolies and fair trade practice laws and the Federal Occupational Health
and Safety Act. Datalinc does not know of any assertion by any party that it is
in violation of any such laws, rules, regulations, orders, restrictions or
requirements with respect to its current operations, and no notice in that
regard has been received by Datalinc. To the knowledge of Datalinc, there is not
presently pending any proceeding, hearing or investigation with respect to the
adoption of amendments or modifications to existing laws, rules, regulations,
orders, restrictions or requirements which, if adopted, would materially
adversely affect the current operations of Datalinc.
3.9 INSURANCE. Datalinc is covered by insurance policies as identified and
described in the Disclosure Schedule or Schedule 3.9, adequate, in the
reasonable opinion of Datalinc, to cover Datalinc against loss, damage and
liability and will maintain such insurance up to and including the Closing Date
(as hereinafter defined). Datalinc has not received notice from any insurer or
agent of such insurer that improvements or expenditures will have to be made in
order to continue such insurance and, so far as known to Datalinc, no such
improvements or expenditures are required (other than premium payments). There
is no liability under any insurance policy in nature of a retroactive rate
adjustment or loss sharing or similar arrangement except as set forth in the
Disclosure Schedule.
A-14
<PAGE>
3.10 CONDITION OF ASSETS. The equipment fixtures and other personal property of
Datalinc, taken as a whole, is in good operating condition and repair (ordinary
wear and tear excepted) for the conduct of the business of Datalinc as presently
being conducted.
3.11 NO BREACHES. To its knowledge, the making and performance of this Agreement
and the other agreements contemplated hereby by each of Datalinc will not (i)
conflict with or violate the Certificate of Limited Partnership or Agreement of
Limited Partnership of Datalinc; (ii) violate any material laws, ordinances,
rules or regulations, or any order, writ, injunction or decree to which Datalinc
is a party or by which Datalinc or any of its assets, business, or operations
may be bound or affected; or (iii) result in any breach or termination of, or
constitute a default under, or constitute an event which, with notice or lapse
of time, or both, would become a default under, or result in the creation of any
encumbrance upon any asset of Datalinc under, or create any rights of
termination, cancellation or acceleration in any person under, any Datalinc
Contract.
3.12 DISCLOSURE SCHEDULE COMPLETE. Datalinc shall promptly supplement the
Disclosure Schedule if events occur prior to the Closing Date that would have
been required to be disclosed had they existed at the time of executing this
Agreement. The Disclosure Schedule, as supplemented prior to the Closing Date,
will contain a true, correct and complete list and description of all items
required to be set forth therein. The Disclosure Schedule, as supplemented prior
to the Closing Date, is expressly incorporated herein by reference.
Notwithstanding the foregoing, any such supplement to the Disclosure Schedule
following the date hereof shall not in any way affect Thrucomm's right not to
consummate the transactions contemplated hereby as set forth in Section 7.1
hereof
3.13 EMPLOYEES. Except as set forth in the Disclosure Schedule, none of the
employees of Datalinc is represented by any labor union or collective bargaining
unit and, to the knowledge of Datalinc, no discussions are taking place with
respect to such representation.
3.14 FINANCIAL STATEMENTS. To its knowledge, the Disclosure Schedule contains
audited balance sheets as of December 3 1, 1996 and related statements of
operations, statements of cash flows and statements of partner' equity of
Datalinc for the one-year periods ended December 3 1, 1995, and December 31,
1996 and compiled balance sheets as of March 31, 1997, and related statements of
operations, statements of cash flows and statement of partners' equity for the
three-month period ended June 30, 1997 (collectively, the "Financial
Statements"). The Financial Statements present fairly, in all respects, the
financial position and results of operations of Datalinc as of the dates and
periods indicated, prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP"). 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.
A-15
<PAGE>
3.15 ABSENCE OF CERTAIN CHANGES OR EVENTS CHANGES OR EVENTS. Except as set forth
in the Disclosure Schedule, since December 31, 1996, there has not been:
(a) any material adverse change in the financial condition, properties,
assets, liabilities or business or a decrease in net worth of Datalinc;
(b) any material damage, destruction or loss of any material properties of
Datalinc, whether or not covered by insurance;
(c) any material change in the manner in which the business of Datalinc has
been conducted, including, without limitation, collection of accounts
receivable and payment of accounts receivable;
(d) any change in the accounting principles, methods or practices or any
change in the depreciation or amortization policies or rates utilized by
Datalinc,
(e) any voluntary or involuntary sale, assignment, abandonment, surrender,
termination, transfer, license or other disposition, of any kind or nature,
of any property or fight (including without limitation any equipment,
office equipment, accounts receivable, intangible assets, business records
or Datalinc Contracts, excepting only transfers in accordance with past
practices or collection of accounts receivable in the ordinary course of
business;
(f) any material change in the treatment and protection of trade secrets or
other confidential information of Datalinc;
(g) any material change in the business or contractual relationship of
Datalinc with any customer or supplier which might reasonably be expected
to materially and adversely affect the business or prospects of Datalinc;
(h) any strike, material grievance proceeding or other labor dispute, any
union organizational activity or other occurrence, event or condition of
any similar character which might reasonably be expected to adversely
affect the business of Datalinc;
(i) any loan or advance by Datalinc to any party other than credit extended
to clients in the ordinary course of business as previously conducted;
(j) any incurrence by Datalinc of debts, liabilities or obligations of any
nature whether accrued, absolute, contingent, direct, indirect or inchoate,
or otherwise, and whether due or to become due, except:
(i) current liabilities incurred for services rendered in the ordinary
course of Datalinc's business and entered into at arms' length;
(ii) obligations incurred in the ordinary course of Datalinc's
business entered into at arms' length;
(iii) liabilities on account of taxes and governmental charges, but
not penalties, interest or fines in respect thereof,
(iv) obligations or liabilities incurred by virtue of the execution of
this Agreement; or
A-16
<PAGE>
(v) liabilities pursuant to the litigation listed in the Disclosure
Schedule; or
(k) any agreement by Datalinc, whether written or oral, to do any of the
foregoing; and
(l) any occurrence not included in paragraphs (a) through (k) of this
Section 3.15 which has resulted, or which Datalinc have reason to believe,
in their reasonable judgment, might be expected to result, in a material
adverse change in the business or prospects of Datalinc.
3.16 GOVERNMENTAL LICENSES, PERMITS, ETC. To its knowledge, Datalinc has all
governmental licenses, permits, authorizations and approvals necessary for the
conduct of its business as currently conducted ("Licenses and Permits"). The
Disclosure Schedule includes a list of all Licenses and Permits. All Licenses
and Permits are in full force and effect, and no proceedings for the suspension
or cancellation of any thereof is pending or threatened.
3.17 EMPLOYEE AGREEMENTS.
(a) For purposes of this Agreement, the following definitions apply:
(1) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any regulations promulgated thereunder.
(2) "Multi-employer Plan" means a plan, as defined in ERISA Section
3(37), to which either Datalinc contributes or is required to
contribute.
(3) "Employee Plan" means any pension, retirement, profit sharing,
deferred compensation, vacation, bonus, incentive, medical, vision,
dental, disability, life insurance or any other employee benefit plan
as defined in Section 3(3) of ERISA other than a Multi-employer Plan
to which either Datalinc contributes, sponsors, maintains or otherwise
is bound to with regard to any benefits on behalf of the employees of
Datalinc.
(4) "Employee Pension Plan" means any Employee Plan for the provision
of retirement income to employees or which results in the deferral of
income by employees extending to the termination of covered employment
or beyond as defined in Section 3(2) of ERISA.
(5) "Employee Welfare Plan" means any Employee Plan other than an
Employee Pension Plan.
(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.
A-17
<PAGE>
(b) The Disclosure Schedule hereto lists, all
(1) employment agreements and collective bargaining agreements to
which Datalinc is a party;
(2) Compensation Arrangements of Datalinc;
(3) Employee Welfare Plans;
(4) Employee Pension Plans; and
(5) consulting agreements under which Datalinc has or may have any
monetary obligations to employees or consultants, of Datalinc or its
beneficiaries or legal representatives or under which any such persons
may have any rights. Datalinc has previously made available to
Thrucomm true and complete copies of all of the foregoing employment
contracts, collective bargaining agreements, Employee Plans and
Compensation Arrangements, including descriptions of any unwritten
contracts, agreements, Compensation Arrangements or Employee Plans, as
amended to date.
In addition, with respect to any Employee Plan which continues after the
Closing Date, Datalinc has previously delivered or made available to
Thrucomm
(1) any related trust agreements, master trust agreements, annuity
contracts or insurance contracts;
(2) certified copies of all Partners' consents adopting such plans and
trust documents and amendments thereto;
(3) current investment management agreements;
(4) custodial agreements;
(5) fiduciary liability insurance policies;
(6) indemnification agreements;
(7) the most recent determination letter (and underlying application
thereof and correspondence and supplemental material related thereto)
issued by the Internal Revenue Service with respect to the
qualification of each Employee Plan under the provisions of Section
401 (a) of the Code;
(8) copies of all "advisory opinion letters," "private letter
rulings," "no action letters," and any similar correspondence (and the
underlying applications therefor and correspondence and supplemental
material related thereto) that was issued by any governmental or
quasi-governmental agency with respect to the last plan year,
(9) Annual Reports (Form 5500 Series) and Schedules A and B thereto
for the last plan year;
(10) all actuarial reports prepared for the last plan year;
(11) all certified Financial Statements for the last plan year; and
A-18
<PAGE>
(12) all current Summary Plan Descriptions, Summaries of Material
Modifications and Summary Annual Reports. All documents delivered by
Datalinc to Thrucomm as photocopies faithfully reproduce the originals
thereof, such originals are authentic and were, to the extent
execution was required, duly executed.
(c) Except as otherwise disclosed in the Disclosure Schedule:
(1) Each Employee Plan and Compensation Arrangement, to the knowledge
of Datalinc, currently substantially complies and has substantially
complied in the past, both as to form and operation, with their terms
and with the provisions of ERISA, the Code, the Age Discrimination in
Employment Act and all other applicable federal or state laws, rules
and regulations. Each Employee Plan and Compensation Arrangement has
been administered to date in substantial compliance with the
requirements of ERISA and the Code, and all reporting and disclosure
requirements by any governmental agency have been timely filed and
substantially complied with.
(2) With respect to any Multi-employer Plan (within the meaning of
Section 3(37) of the ERISA) Datalinc (under the terms of Section
414(b) or (c) of the Code) are not required to make any contribution
thereto.
(3) To the knowledge of Datalinc, the Employee Pension Plans, to the
extent they are intended to be tax-qualified, satisfy all coverage and
minimum participation requirements, if any, imposed on such Employee
Plans by the applicable terms of the Code and ERISA.
(4) Datalinc is not aware of any failures to provide continuation
coverage, as defined in Section 498OB(l) of the Code, to any such
qualified beneficiaries.
(5) There are no actions, suits or claims pending (other than routine
claims for benefits) or, to the knowledge of Datalinc, which could
reasonably be expected to be asserted against any Employee Plan or
Compensation Arrangement or the assets of any such Plan. None of the
Employee Plans or Compensation Arrangements, to the knowledge of
Datalinc, currently is the subject of any audit, investigation or
examination by any governmental or quasi-governmental agency, nor is
Datalinc aware of the existence of any facts that would lead it to
believe that any such audit, investigation or examination is pending
or threatened.
(6) Except as described in the Disclosure Schedule, Datalinc does not
sponsor, maintain or contribute to any Employee Plan or Compensation
Arrangement that provides retiree medical or retiree life insurance
coverage to former employees of Datalinc.
(7) With respect to each Employee Plan, except as set forth in the
Disclosure Schedule:
(i) each Employee Pension Plan and each amendment thereto is
qualified under the Code and has received favorable determination
letters with regard thereto or is based on a prototype plan which
has received a favorable determination letter;
A-19
<PAGE>
(ii) the Financial Statements reflect all of the employee benefit
liabilities of Datalinc in a manner satisfying the requirements
of SFAS 87 and 88;
(iii) to the knowledge of Datalinc, Datalinc has not, with
respect to any Employee Plan, engaged in a prohibited
transaction, as such term is defined in Code Section 4975 or
ERISA Section 406, which would subject Datalinc or Thrucomm to
any taxes, penalties or other liabilities resulting from
prohibited transactions under Code Section 4975 or under ERISA
Section 409 or 502(i);
(iv) to the knowledge of Datalinc, no event has occurred and no
condition exists that would subject Datalinc or Thrucomm to any
tax under Code Section 4971, 4972, 4976, 4977 or 4979 or a fine
under ERISA Section 502(c);
(v) to the knowledge of Datalinc, Datalinc have complied in all
material respects with the reporting and disclosure requirements
of ERISA;
(vi) all insurance premiums, including PBGC premiums, required
pursuant to the Employee Plans as of the Closing Date have been
or will be paid;
(vii) Datalinc has or will have, as of the Closing Date, made all
contributions or payments (including funding for any past service
liabilities) to or under such Employee Plans required by law or
by the terms of such Plans or any contracts or agreements. To the
knowledge of Datalinc, the aggregate current value of all vested
accrued benefits under all Employee Plans does not exceed the
aggregate current value of all assets of such plans allocable to
such accrued benefits; and
(viii) to the knowledge of Datalinc, Datalinc have performed
substantially all obligations required to be performed by it
under each plan or arrangement under each Employee Plan and
Compensation Arrangement and it is not in default or in violation
of, and has no knowledge of any such default or violation by any
other party to any substantial provision of, any and all such
plans or arrangements.
(8) Notwithstanding anything contained herein to the contrary, all
obligations of Datalinc with respect to any Employee Plans of Datalinc
shall be terminated as of the date of the Closing. Further, Datalinc shall
indemnify and hold harmless Thrucomm of and from any losses or liabilities
accruing to Thrucomm arising out of or in any way related to Datalinc's
Employee Plans.
3.18 KEY MAN LIFE INSURANCE. The parties acknowledge that the insured persons
reflected on those certain key man life insurance policies reflected on Schedule
3.18 of this Agreement shall have the fight to have such policies assigned to
them at their own discretion, cost and expense.
3.19 BROKERS. Datalinc shall indemnify and hold Thrucomm harmless from any claim
by any broker or other person for commissions or other compensation for bringing
A-20
<PAGE>
about the transactions contemplated hereby, where such claim is based on the
purported employment or authorization of such broker or other person by
Datalinc.
3.20 BUSINESS LOCATIONS. Datalinc does not own or lease any real or personal
property in any state except as set forth in the Disclosure Schedule. Datalinc
have no places of business (including, without limitation Datalinc's executive
offices or places where Datalinc's books and records are kept) except as
otherwise set forth in the Disclosure Schedule.
3.21 INTELLECTUAL PROPERTY. The Disclosure Schedule lists all of the
Intellectual Property (as hereinafter defined) used by Datalinc which
constitutes a material patent, trade name, trademark, service mark or
application for any of the foregoing. "Intellectual" Property" means all of
Datalinc's right, title and interest in and to all patents, trade names, assumed
names, trademarks, service marks, and proprietary names, copyrights (including
any registration and pending applications for any such registration for any of
them), together with all the goodwill relating thereto and all other
intellectual property of Datalinc. Other than as disclosed in the Disclosure
Schedule, Datalinc does not have any licenses granted by or to it or other
agreements to which it is a party, relating in whole or in part to any
Intellectual Property, whether owned by Datalinc or otherwise. All of the
patents, trademark registrations and copyrights listed in the Disclosure
Schedule that are owned by Datalinc are valid and in full force and effect. To
the knowledge of Datalinc, it is not infringing upon, or otherwise violating,
the rights of any third party with respect to any Intellectual Property. No
proceedings have been instituted against or claims received by Datalinc, nor to
its knowledge are any proceedings threatened alleging any such vacation, nor
does Datalinc know of any valid basis for any such proceeding or claim. To the
knowledge of Datalinc, there is no infringement or other adverse claim against
any of the Intellectual Property owned or used by Datalinc. To the knowledge of
Datalinc, the use of software by Datalinc does not violate or otherwise infringe
upon the fights of any third party.
3.22 WARRANTIES. The Disclosure Schedule sets forth a true and complete list of
the forms of all express warranties and guaranties made by Datalinc to third
parties with respect to any services rendered by Datalinc.
3.23 CLIENTS AND SUPPLIERS. Except as set forth in the Disclosure Schedule
Datalinc does not know and has no reason to believe that, either as a result of
the transactions contemplated hereby or for any other reason (exclusive of
expiration of a contract upon the passage of time), any present material client
or supplier of Datalinc will not continue to conduct business with Datalinc
after the Closing Date in substantially the same manner as it has conducted
business prior thereto.
3.24 ACCOUNTS RECEIVABLE. The accounts receivable reflected on the balance
sheets included in the Financial Statements, or thereafter acquired by Datalinc,
consist, in the aggregate in all material respects and 90% of such items which
are collectible in the ordinary and usual course of business.
3.25 GOVERNMENTAL APPROVALS. To its knowledge, other than as set forth herein,
no authorization, license, permit, franchise, approval, order or consent of, and
no registration, declaration or filing by Datalinc with, any governmental
authority, federal, state or local, is required in connection with Datalinc's
execution, delivery and performance of this Agreement.
A-21
<PAGE>
3.26 NO OMISSIONS OR UNTRUE STATEMENTS. To its knowledge, no representation or
warranty made by Datalinc to Thrucomm in this Agreement or in any certificate of
the Datalinc General Partner required to be delivered to Thrucomm pursuant to
the terms of this Agreement contains or will contain any untrue statement of a
material fact, or omits or will out to state a material fact necessary to make
the statements contained herein or therein not misleading as of the date hereof
and as of the Closing Date.
IV. REPRESENTATIONS AND WARRANTIES OF FASTCOM
Fastcom represents and warrants to Thrucomm as follows, with the knowledge and
understanding that Thrucomm is relying materially upon such representations and
warranties
4.1 ORGANIZATION AND STANDING. Fastcom is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Florida.
Fastcom has all requisite power to carry on its business as it is now being
conducted and is duly qualified to do business as a foreign limited partnership
and is in good standing in each jurisdiction where such qualification is
necessary under applicable law, except where the failure to qualify
(individually or in the aggregate) does not have any material adverse effect on
the assets, business or financial condition of Fastcom, and all states in which
Fastcom is qualified to do business as of the date hereof, are listed in the
Disclosure Schedule. A copy of the Certificate of Limited Partnership of Fastcom
(certified by the Secretary of State of Florida), and the Agreement of Limited
Partnership, as amended to date, delivered to Datalinc and Thrucomm, are true
and complete copies of these documents as now in effect. Except as otherwise set
forth in the Disclosure Schedule, Fastcom does not own any interest in any other
corporation, business trust or similar entity. The minute books of Fastcom
contains accurate records of all meetings of its Partners since its formation.
4.2 CAPITALIZATION. The number of Partnership Units which are issued and
outstanding are as set forth in the Disclosure Schedule. All of such Units are
duly authorized, validly issued and outstanding, fully paid and nonassessable,
and owned of record and beneficially by the Fastcom Distributees, in such
amounts as are set forth opposite their respective names thereon, and were not
issued in violation of the preemptive rights of any person. There are no
subscriptions, options, warrants, rights or calls or other commitments or
agreements to which the Fastcom Distributees, or, to the Fastcom Distributees'
knowledge, are a party or by which any of them is bound, calling for any
issuance, transfer, sale or other disposition of any class of securities of
Fastcom. There are no outstanding securities convertible or exchangeable,
actually or contingently, into Partnership Units or any other securities of
Fastcom. Fastcom has no subsidiaries except Thrucomm.
4.3 AUTHORITY. This Agreement constitutes, and all other agreements contemplated
hereby will constitute, when executed and delivered by Fastcom in accordance
therewith (and assuming due execution and delivery by the other parties hereto),
the valid and binding obligation of Fastcom, enforceable in accordance with
their respective terms, subject to general principles of equity and bankruptcy
or other laws relating to or affecting the rights of creditors generally.
4.4 PROPERTIES. Except as set forth in the Disclosure Schedule, Fastcom has good
title to all of the assets and properties which it purports to own as reflected
on the balance sheet included in the Financial Statements (as hereinafter
defined), or thereafter acquired. Fastcom has a valid leasehold interest in all
A-22
<PAGE>
material property of which it is the lessee and each such lease is valid,
binding and enforceable against Fastcom and, to the knowledge of Fastcom, the
other parties thereto in accordance with its terms. Neither Fastcom nor the
other parties thereto are in material default in the performance of any material
provisions thereunder. Neither the whole nor any material portion of the assets
of Fastcom is subject to any governmental decree or order to be sold or is being
condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor, to the knowledge of Fastcom, has
any such condemnation, ex-propriation or taking been proposed. None of the
assets of Fastcom is subject to any restriction which would prevent continuation
of the use currently made thereof or materially adversely affect the value
thereof
4.5 CONTRACTS LISTED; NO DEFAULT. All contracts, agreements, licenses, leases,
easements, permits, rights of way, commitments, and understandings, written or
oral, connected with or relating in any respect to present or proposed future
operations of Fastcom (except employment or other agreements terminable at will
and other agreements which, in the aggregate, are not material to the business,
properties or prospects of Fastcom and except governmental licenses, permits,
authorizations, approvals and other matters referred to in Section 4.16), which
would be required to be listed as exhibits to an Annual Report on Form 10-K if
Fastcom were subject to the reporting requirements of the Exchange Act
(individually, the "Fastcom Contract" and collectively, the "Fastcom
Contracts"), are listed and described in the Disclosure Schedule. Fastcom is the
holder of, or party to, all of the Fastcom Contracts. To the knowledge of
Fastcom, the Fastcom Contracts are valid, binding and enforceable by the
signatory thereto against the other parties thereto in accordance with their
terms. Neither Fastcom nor any signatory thereto is in default or breach of any
material provision of the Fastcom Contracts. Fastcom's operation of its business
has been, is, and will, between the date hereof and the Closing Date (as
hereinafter defined), continue to be, consistent with the material terms and
conditions of the Fastcom Contracts. Subsequent to the consummation of the
Reorganization, Fastcom shall use its best efforts to cause the transfer and
otherwise assign for the benefit of Thrucomm, the Fastcom Contracts.
4.6 LITIGATION. Except as disclosed in the Disclosure Schedule, there is no
claim, action, proceeding or investigation pending or threatened against or
affecting Fastcom before or by any court, arbitrator or governmental agency or
authority which, in the reasonable judgment of Fastcom, could have any
materially adverse effect on Fastcom. There are no decrees, injunctions or
orders of any court, governmental department, agency or arbitration outstanding
against Fastcom.
4.7 TAXES. For purposes of this Agreement, (A) "Tax" (and, with correlative
meaning, "Taxes") shall mean any federal, state, local or foreign income,
alternative or add-on minimum, business, employment, franchise, occupancy,
payroll, property, sales, transfer, use, 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
A-23
<PAGE>
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 governmental
authority for the assessment of any Tax, and no claim for assessment or
collection of any Tax has been asserted against Fastcom that has not been paid.
There are no Tax liens upon the assets (other than the lien of property taxes
not yet due and payable) of Fastcom. There is no valid basis, to the knowledge
of Fastcom except as set forth in the Disclosure Schedule, for any assessment,
deficiency, notice, 30-day letter or similar intention to assess any Tax to be
issued to Fastcom by any governmental authority.
4.8 COMPLIANCE WITH LAWS AND REGULATIONS. To its knowledge, Fastcom is in
compliance, in all material respects, with all laws, rules, regulations, orders
and requirements (federal, state and local) applicable to it in all
jurisdictions where the business of Fastcom is currently conducted or to which
Fastcom is currently subject which have a material impact on Fastcom, including,
without limitation, all applicable civil rights and equal opportunity employment
laws and regulations, and all state and federal antitrust, antimonopolies and
fair trade practice laws and the Federal Occupational Health and Safety Act.
Fastcom does not know of any assertion by any party that it is in violation of
any such laws, rules, regulations, orders, restrictions or requirements with
respect to its current operations, and no notice in that regard has been
received by Fastcom. To the knowledge of Fastcom there is not presently pending
any proceeding, hearing or investigation with respect to the adoption of
amendments or modifications to existing laws, rules, regulations, orders,
restrictions or requirements which, if adopted, would materially adversely
affect the current operations of Fastcom.
4.9 INSURANCE. Fastcom is covered by insurance policies as identified and
described in the Disclosure Schedule or Schedule 4.9, adequate, in the
reasonable opinion of the Fastcom, to cover Fastcom against loss, damage and
liability and will maintain such insurance up to and including the Closing Date
(as hereinafter defined). Fastcom has not received notice from any insurer or
agent of such insurer that improvements or expenditures will have to be made in
order to continue such insurance and, so far as known to Fastcom, no such
improvements or expenditures are required (other than premium payments). There
is no liability under any insurance policy in nature of a retroactive rate
adjustment or loss sharing or similar arrangement except as set forth in the
Disclosure Schedule.
4.10 CONDITION OF ASSETS. The equipment, fixtures and other personal property of
Fastcom, taken as a whole, is in good operating condition and Repair (ordinary
wear and tear excepted) for the conduct of the business of Fastcom as presently
being conducted.
4.11 NO BREACHES. To its knowledge, the making and performance of this Agreement
and the other agreements contemplated hereby by Fastcom will not
(i) conflict with or violate the Certificate of Limited Partnership or
Agreement of Limited Partnership of Fastcom;
A-24
<PAGE>
(ii) violate any material laws, ordinances, rules or regulations, or any
order, writ, injunction or decree to which Fastcom is a party or by which
Fastcom or any of its assets, business, or operations may be bound or
affected; or
(iii) result in any breach or termination of, or constitute a default
under, or constitute an event which, with notice or lapse of time, or both,
would become a default under, or result in the creation of any encumbrance
upon any asset of Fastcom under, or create any rights of termination,
cancellation or acceleration in any person under, any Fastcom Contract.
4.12 DISCLOSURE SCHEDULE COMPLETE. Fastcom shall promptly supplement the
Disclosure Schedule if events occur prior to the Closing Date that would have
been required to be disclosed had they existed at the time of executing this
Agreement. The Disclosure Schedule, as supplemented prior to the Closing Date,
will contain a true, correct and complete list and description of all items
required to be set forth therein. The Disclosure Schedule, as supplemented prior
to the Closing Date, is expressly incorporated herein by reference.
Notwithstanding the foregoing, any such supplement to the Disclosure Schedule
following the date hereof shall not in any way affect Thrucomm's right not to
consummate the transactions contemplated hereby as set forth in Article VII
hereof
4.13 EMPLOYEES. Except as set forth in the Disclosure Schedule, none of the
employees of Fastcom is represented by any labor union or collective bargaining
unit and, to the knowledge of Fastcom, no discussions are taking place with
respect to such representation.
4.14 FINANCIAL STATEMENTS. To its knowledge, the Disclosure Schedule contains
audited balance sheets as of December 31, 1996 and related statements of
operations, statements of cash flows and statements of partner' equity of
Fastcom for the one-year periods ended December 31, 1996, and December 31, 1995
and compiled balance sheets as of March 31, 1997, and related statements of
operations, statements of cash flows and statement of partners' equity for the
three-month period ended June 30, 1997 (collectively, the "Financial
Statements"). The Financial Statements present fairly, in all respects, the
financial position and results of operations of Fastcom as of the dates and
periods indicated, prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP" 1). Without limiting the generality of
the foregoing, (i) there is no basis for any assertion against Fastcom as of the
date of the Financial Statements of any material debt, liability or obligation
of any nature not fully reflected or reserved against in the Financial
Statements; and (ii) there are no assets of Fastcom as of the date of the
Financial Statements, the value of which is overstated in the Financial
Statements. Except as disclosed in the Financial Statements, Fastcom does not
have any known contingent liabilities (including liabilities for Taxes), forward
or long-term commitments or unrealized or anticipated losses from unfavorable
commitments other than in the ordinary course of business. Fastcom is not a
party to any contract or agreement for the forward purchase or sale of any
foreign currency that is material to Fastcom taken as a whole.
4.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the disclosure
Schedule, since December 31,1996, there has not been:
(a) any material adverse change in the financial condition, properties,
assets, liabilities or business or a decrease in net worth of Fastcom;
A-25
<PAGE>
(b) any material damage, destruction or loss of any material properties of
Fastcom, whether or not covered by insurance;
(c) any material change in the manner in which the business of Fastcom has
been conducted, including, without limitation, collection of accounts
receivable and payment of accounts receivable;
(d) any change in the accounting principles, methods or practices or any
change in the depreciation or amortization policies or rates utilized by
Fastcom;
(e) any voluntary or involuntary sale, assignment, abandonment, surrender,
termination, transfer, license or other disposition, of any kind or nature,
of any property or right (including, without limitation, any equipment
office equipment, accounts receivable, intangible assets, business records
or Fastcom Contracts, excepting only transfers in accordance with past
practices or collection of accounts receivable in the ordinary course of
business;
(f) any material change in the treatment and protection of trade secrets or
other confidential information of Fastcom;
(g) any material change in the business or contractual relationship of
Fastcom with any customer or supplier which might reasonably be expected to
materially and adversely affect the business or prospects of Fastcom;
(h) any strike, material grievance proceeding or other labor dispute, any
union organizational activity or other occurrence, event or condition of
any similar character which might reasonably be expected to adversely
affect the business of Fastcom;
(i) any loan or advance by Fastcom to any party other than credit extended
to clients in the ordinary course of business as previously conducted;
(j) any incurrence by Fastcom of debts, liabilities or obligations of any
nature whether accrued, absolute, contingent, direct, indirect or inchoate,
or otherwise, and whether due or to become due, except:
(i) current liabilities incurred for services rendered in the ordinary
course of Fastcom's business and entered into at arms' length;
(ii) obligations incurred in the ordinary course of Fastcom's business
entered into at arms' length;
(iii) liabilities on account of taxes and governmental charges, but
not penalties, interest or fines in respect thereof,
(iv) obligations or liabilities incurred by virtue of the execution of
this Agreement; or
(v) liabilities pursuant to the litigation listed in the Disclosure
Schedule; or
(k) any agreement by Fastcom, whether written or oral, to do any of the
foregoing; and
A-26
<PAGE>
(l) any occurrence not included in paragraphs (a) through (k) of this
Section 4.15 which has resulted, or which Fastcom have reason to believe,
in their reasonable judgment, might be expected to result, in a material
adverse change in the business or prospects of Fastcom.
4.16 GOVERNMENTAL LICENSES, PERMITS, ETC. To its knowledge, Fastcom has all
governmental licenses, permits, authorizations and approvals necessary for the
conduct of its business as currently conducted ("Licenses and Permits"). The
Disclosure Schedule includes a list of all Licenses and Permits. All Licenses
and Permits are in full force and effect, and no proceedings for the suspension
or cancellation of any thereof is pending or threatened.
4.17 EMPLOYEE AGREEMENTS.
(a) For purposes of this Agreement, the following definitions apply:
(1) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any regulations promulgated thereunder.
(2) "Multi-employer Plan" means a plan, as defined in ERISA Section
3(37), to which either Fastcom contributes or is required to
contribute.
(3) "Employee Plan" means any pension, retirement, profit sharing,
deferred compensation, vacation, bonus, incentive, medical, vision,
dental, disability, life insurance or any other employee benefit plan
as defined in Section 3(3) of ERISA other than a Multi-employer Plan
to which either Fastcom contributes, sponsors, maintains or otherwise
is bound to with regard to any benefits on behalf of the employees of
Fastcom.
(4) "Employee Pension Plan" means any Employee Plan for the provision
of retirement income to employees or which results in the deferral of
income by employees extending to the termination of covered employment
or beyond as defined in Section 3(2) of ERISA.
(5) "Employee Welfare Plan" means any Employee Plan other than an
Employee Pension Plan.
(6) "Compensation Arrangement" means any plan or compensation
arrangement other than an Employee Plan, whether written or unwritten,
which provides to employees of Fastcom, former employees, officers,
directors or stockholders of Fastcom any compensation or other
benefits, whether deferred or not in excess of base salary or wages,
including, but not limited to, any bonus or incentive plan stock
rights plan, deferred compensation arrangement, life insurance, stock
purchase plan, severance pay plan and any other employee fringe
benefit plan.
(b) The Disclosure Schedule hereto lists, all
(1) employment agreements and collective bargaining agreements to
which Fastcom is a party;
(2) Compensation Arrangements of Fastcom;
A-27
<PAGE>
(3) Employee Welfare Plans;
(4) Employee Pension Plans; and
(5) consulting agreements under which Fastcom has or may have any
monetary obligations to employees or consultants of Fastcom or its
beneficiaries or legal representatives or under which any such persons
may have any rights. Fastcom has previously made available to Thrucomm
true and complete copies of all of the foregoing employment contracts,
collective bargaining agreements, Employee Plans and Compensation
Arrangements, including descriptions of any unwritten contracts,
agreements, Compensation Arrangements or Employee Plans, as amended to
date. In addition, with respect to any Employee Plan which continues
after the Closing Date, Fastcom has previously delivered or made
available to Thrucomm
(1) any related trust agreements, master trust agreements,
annuity contracts or insurance contracts;
(2) certified copies of all Partners' consents adopting such
plans and trust documents and amendments thereto;
(3) current investment management agreements;
(4) custodial agreements;
(5) fiduciary liability insurance policies;
(6) indemnification agreements;
(7) the most recent determination letter (and underlying
application thereof and correspondence and supplemental material
related thereto) issued by the Internal Revenue Service with
respect to the qualification of each Employee Plan under the
provisions of Section 401 (a) of the Code;
(8) copies of all "advisory opinion letters," "private letter
rulings," "no action letters," and any similar correspondence
(and the underlying applications therefor and correspondence and
supplemental material related thereto) that was issued by any
governmental or quasi-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.
A-28
<PAGE>
(c) Except as otherwise disclosed in the Disclosure Schedule:
(1) Each Employee Plan and Compensation Arrangement, to the knowledge
of Fastcom, currently substantially complies and has substantially
complied in the past, both as to form and operation, with their terms
and with the provisions of ERISA, the Code, the Age Discrimination in
Employment Act and all other applicable federal or state laws, rules
and regulations. Each Employee Plan and Compensation Arrangement has
been administered to date in substantial compliance with the
requirements of ERISA and the Code, and all reporting and disclosure
requirements by any governmental agency have been timely filed and
substantially complied with.
(2) With respect to any Multi-employer Plan (within the meaning of
Section 3(37) of the ERISA) Fastcom (under the terms of Section 414(b)
or (c) of the Code) are not required to make any contribution thereto.
(3) To the knowledge of Fastcom, the Employee Pension Plans, to the
extent they are intended to be tax-qualified, satisfy all coverage and
minimum participation requirements, if any, imposed on such Employee
Plans by the applicable terms of the Code and ERISA.
(4) Fastcom is not aware of any failures to provide continuation
coverage, as defined in Section 498OB(l) of the Code, to any such
qualified beneficiaries.
(5) There are no actions, suits or claims pending (other than routine
claims for benefits) or, to the knowledge of Fastcom, which could
reasonably be expected to be asserted against any Employee Plan or
Compensation Arrangement or the assets of any such Plan. None of the
Employee Plans or Compensation Arrangements, to the knowledge of
Fastcom, currently is the subject of any audit, investigation or
examination by any governmental or quasi-governmental agency, nor is
Fastcom aware of the existence of any facts that would lead them to
believe that any such audit, investigation or examination is pending
or threatened.
(6) Except as described in the Disclosure Schedule, Fastcom does not
sponsor, maintain or contribute to any Employee Plan or Compensation
Arrangement that provides retiree medical or retiree life insurance
coverage to former employees of Fastcom.
(7) With respect to each Employee Plan, except as set forth in the
Disclosure Schedule:
(i) each Employee Pension Plan and each amendment thereto is
qualified under the Code and has received favorable determination
letters with regard thereto or is based on a prototype plan which
has received a favorable determination letter;
(ii) the Financial Statements reflect all of the employee benefit
liabilities of Fastcom in a manner satisfying the requirements of
SFAS 87 and 88;
(iii) to the knowledge of Fastcom, Fastcom has not, with respect
to any Employee Plan, engaged in a prohibited transaction, as
A-29
<PAGE>
such term is defined in Code Section 4975 or ERISA Section 406,
which would subject Fastcom or Thrucomm to any taxes, penalties
or other liabilities resulting from prohibited transactions under
Code Section 4975 or under ERISA Section 409 or 502(i);
(iv) to the knowledge of Fastcom, no event has occurred and no
condition exists that would subject Fastcom or Thrucomm to any
tax under Code Section 4971, 4972, 4976, 4977 or 4979 or a fine
under ERISA Section 502(c)-,
(v) to the knowledge of Fastcom, Fastcom have complied in all
material respects with the reporting and disclosure requirements
of ERISA;
(vi) all insurance premiums, including PBGC premiums, required
pursuant to the Employee Plans as of the Closing Date have been
or will be paid;
(vii) Fastcom has or will have, as of the Closing Date, made all
contributions or payments (including funding for any past service
liabilities) to or under such Employee Plans required by law or
by the terms of such Plans or any contracts or agreements. To the
knowledge of Fastcom, the aggregate current value of all vested
accrued benefits under all Employee Plans does not exceed the
aggregate current value of all assets of such plans allocable to
such accrued benefits; and
(viii) to the knowledge of Fastcom, Fastcom have performed
substantially all obligations required to be performed by it
under each plan or arrangement under each Employee Plan and
Compensation Arrangement and it is not in default or in violation
of, and has no knowledge of any such default or violation by any
other party to any substantial provision of, any and all such
plans or arrangements.
(8) Notwithstanding anything contained herein to the contrary, all
obligations of Fastcom with respect to any Employee Plans of Fastcom
shall be terminated as of the date of the Closing. Further, Fastcom
shall indemnify and hold harmless Thrucomm of and from any losses or
liabilities accruing to Thrucomm arising out of or in any way related
to Fastcom's Employee Plans.
4.18 KEY MAN LIFE INSURANCE. The parties acknowledge that the insured persons
reflected on those certain key man life insurance policies reflected on Schedule
4.18 of this Agreement shall have the fight to have such policies assigned to
them, at their own discretion, cost and expense
4.19 BROKERS. Fastcom shall indemnify and hold Thrucomm harmless from any claim
by any broker or other person for commissions or other compensation for bringing
about the transactions contemplated hereby, where such claim is based on the
purported employment or authorization of such broker or other person by Fastcom.
4.20 BUSINESS LOCATIONS. Fastcom does not own or lease any real or personal
property in any state except as set forth in the Disclosure Schedule. Fastcom
have no places of business (including, without limitation Fastcom's executive
offices or places where Fastcom's books and records are kept) except as
otherwise set forth in the Disclosure Schedule.
A-30
<PAGE>
4.21 INTELLECTUAL PROPERTY. The Disclosure Schedule fists all of the
Intellectual Property (as hereinafter defined) used by Fastcom which constitutes
a material patent, trade name, trademark, service mark or application for any of
the foregoing. "Intellectual Property" means all of Fastcom's right, title and
interest in and to all patents, trade names, assumed names, trademarks, service
marks, and proprietary names, copyrights (including any registration and pending
applications for any such registration for any of them), together with all the
goodwill relating thereto and all other intellectual property of Fastcom. Other
than as disclosed in the Disclosure Schedule, Fastcom does not have any licenses
granted by or to it or other agreements to which it is a party, relating in
whole or in part to any Intellectual Property, whether owned by Fastcom or
otherwise. All of the patents, trademark registrations and copyrights listed in
the Disclosure Schedule that are owned by Fastcom are valid and in full force
and effect. To the knowledge of Fastcom, it is not infringing upon, or otherwise
violating, the rights of any third party with respect to any Intellectual
Property. No proceedings have been instituted against or claims received by
Fastcom, nor to its knowledge are any proceedings threatened alleging any such
violation, nor does Fastcom know of any valid basis for any such proceeding or
claim. To the knowledge of Fastcom, there is no infringement or other adverse
claim against any of the Intellectual Property owned or used by Fastcom. To the
knowledge of Fastcom, the use of software by Fastcom does not violate or
otherwise infringe upon the rights of any third party.
4.22 WARRANTIES. The Disclosure Schedule sets forth a true and complete estimate
of the forms of all express warranties and guaranties made by Fastcom to third
parties with respect to any services rendered by Fastcom.
4.23 CLIENTS AND SUPPLIERS. Except as set forth in the Disclosure Schedule,
Fastcom does not know and has no reason to believe that, either as a result of
the transactions contemplated hereby or for any other reason (exclusive of
expiration of a contract upon the passage of time), any present material client
or supplier of Fastcom will not continue to conduct business with Fastcom after
the Closing Date in substantially the same manner as it has conducted business
prior thereto.
4.24 ACCOUNTS RECEIVABLE. The accounts receivable reflected on the balance
sheets included in the Financial Statements, or thereafter acquired by Fastcom,
consist, in the aggregate in all material respects and 90% of such items which
are collectible in the ordinary and usual course of business.
4.25 GOVERNMENTAL APPROVALS. To its knowledge, other than as set forth herein,
no authorization, license, permit, franchise, approval, order or consent of, and
no registration, declaration or filing by Fastcom with, any governmental
authority, federal, state or local, is required in connection with Fastcom's
execution, delivery and performance of this Agreement.
4.26 NO OMISSIONS OR UNTRUE STATEMENTS. To its knowledge, no representation or
warranty made by Fastcom to Thrucomm in this Agreement or in any certificate of
the Fastcom General Partner required to be delivered to Thrucomm pursuant to the
terms of this Agreement contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading as of the date hereof
and as of the Closing Date.
A-31
<PAGE>
V. REPRESENTATIONS AND WARRANTIES OF THRUCOMM
Thrucomm represents and warrants to the Partnerships as follows, with the
knowledge and understanding that the Partnerships are each relying materially on
such representations and warranties:
5.1 ORGANIZATION AND STANDING OF THRUCOMM. Thrucomm is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida, and has the corporate power to carry on its business as now conducted
and to own its assets and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the failure to
qualify (individually or in the aggregate) does not have any material adverse
effect on the assets, business or financial condition of Thrucomm. The copies of
the articles of incorporation and bylaws of Thrucomm (certified by the Secretary
of Thrucomm), delivered to the Partnerships, are true and complete copies of
those documents as now in effect. Except as set forth in the Disclosure
Schedule, Thrucomm does not own any capital stock in any other corporation,
business trust or similar entity, and is not engaged in a partnership, joint
venture or similar arrangement with any person or entity. The minute book of
Thrucomm contains accurate records of all meetings of its incorporator,
stockholders and Board of Directors since its date of incorporation.
5.2 AUTHORITY. Thrucomm's Board of Directors has approved and adopted this
Agreement and the Reorganization. This Agreement constitutes, and all other
agreements contemplated hereby will constitute, when executed and delivered by
Thrucomm in accordance herewith (and assuming due execution and delivery by the
other parties hereto), the valid and binding obligations of Thrucomm,
enforceable in accordance with their respective terms, subject to general
principles of equity and bankruptcy or other laws relating to or affecting the
fights of creditors generally.
5.3 NO BREACHES. To its knowledge, the making and performance of this Agreement
(including, without limitation, the issuance of the Thrucomm Reorganization
Stock) by Thrucomm will not (i) conflict with the articles of incorporation or
the bylaws of Thrucomm; (ii) violate any order, writ, injunction, or decree
applicable to Thrucomm; or (iii) result in any breach or termination of, or
constitute a default under, or constitute an event which, with notice or lapse
of time, or both, would become a default under, or result in the creation of any
encumbrance, upon any asset of Thrucomm under, or create any rights of
termination, cancellation or acceleration in any person under, any agreement,
arrangement or commitment, or violate any provisions of any laws, ordinances,
rules or regulations or any order, writ, injunction or decree to which Thrucomm
is a party or by which Thrucomm or any of its assets may be bound.
5.4 CAPITALIZATION. The authorized capital stock of Thrucomm is comprised of the
following: (i) 100,000,000 shares of Common Stock, no par value (the "Common
Stock"), one share of which is issued and outstanding; and (ii) 25,000,000
shares of Preferred Stock, no par value (the "Preferred Stock'), with such
designation, fights and preferences as may be determined from time to time by
the Board of Directors of Thrucomm, of which no shares are issued and
outstanding.
All of the outstanding shares of Thrucomm Common Stock is duly authorized,
validly issued, fully paid and nonassessable, and was not issued in violation of
the preemptive rights of any person. The Reorganization Stock, to be issued upon
effectiveness of the Reorganization, when issued in accordance with the terms of
this Agreement, shall be duly authorized, validly issued, fully paid and
A-32
<PAGE>
nonassessable. Other than as stated in this Section 5.4, there are no
outstanding subscriptions, options, warrants, calls or fights of any kind issued
or granted by, or binding upon, Thrucomm, to purchase or otherwise acquire any
shares of capital stock of Thrucomm, or other equity securities or equity
interests of Thrucomm or any debt securities of Thrucomm.
5.5 GOVERNMENTAL APPROVAL; CONSENTS. To its knowledge, except for the reports
required to be filed in the future by Thrucomm as a reporting company under the
Exchange Act, no authorization, license, permit, franchise, approval, order or
consent of, and no registration, declaration or filing by Thrucomm with, any
governmental authority, federal state or local, is required in connection with
Thrucomm's execution, delivery and performance of this Agreement. No consents of
any other parties are required to be received by or on the part of Thrucomm to
enable Thrucomm to enter into and carry out this Agreement.
5.6 FINANCIAL STATEMENTS. To its knowledge, the Disclosure schedule contains
audited balance sheets as of December 31, 1996 and related statements of
operations, statements of cash flows and statements of stockholders' equity of
Thrucomm for the one-year period ended December 31, 1996 and compiled balance
sheets as of March 31, 1997, and related statements of operations, statements of
cash flows and statement of stockholder' equity for the three-month period ended
June 30, 1997 (collectively, the "Financial Statements"). The Financial
Statements present fairly, in all respects, the financial position and results
of operations of Thrucomm as of the dates and periods indicated, prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP"). Without limiting the generality of the foregoing, (i) there is no
basis for any assertion against Thrucomm as of the date of the Financial
Statements of any material debt, liability or obligation of any nature not fully
reflected or reserved against in the Financial Statements; and (ii) there are no
assets of Thrucomm as of the date of the Financial Statements, the value of
which is overstated in the Financial Statements. Except as disclosed in the
Financial Statements, Thrucomm does have any known contingent liabilities
(including liabilities for Taxes), forward or long-term commitments or
unrealized or anticipated losses from unfavorable commitments other than in the
ordinary course of business. Thrucomm is not a party to any contract or
agreement for the forward purchase or sale of any foreign currency.
5.7 ADVERSE DEVELOPMENTS. Except as expressly provided or set forth in, or
required by, this Agreement or as set forth in the Thrucomm Financial
Statements, since 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 development or threatened development of a nature
that will, or which could be reasonably expected to, have a materially adverse
effect upon Thrucomm's operations or future prospects.
5.8 CONTRACTS LISTED; NO DEFAULT. All contracts, agreements, licenses, leases,
easements, permits, rights of way, commitments, and understandings, written or
oral connected with or relating in any respect to present or proposed future
operations of Thrucomm (except employment or other agreements terminable at will
and other agreements which, in the aggregate, are not material to the business,
properties or prospects of Thrucomm and except governmental licenses, permits,
authorizations, approvals and other matters referred to in Section 5.5), which
would be required to be listed as exhibits to an Annual Report on Form 10-K if
Thrucomm were subject to the reporting requirements of the Exchange Act
A-33
<PAGE>
(individually, the "Thrucomm Contract" and collectively, the "Thrucomm
Contracts"), are listed and described in the Disclosure Schedule. Thrucomm is
the holder of, or party to, all of the Thrucomm Contracts. To the knowledge of
Thrucomm, the Thrucomm Contracts are valid, binding and enforceable by the
signatory thereto against the other parties thereto in accordance with their
terms. Neither Thrucomm nor any signatory thereto is in default or breach of any
material provision of the Thrucomm Contracts. Thrucomm's operation of its
business has been, is, and will, between the date hereof and the Closing Date
(as hereinafter defined), continue to be, consistent with the material terms and
conditions of the Thrucomm Contracts.
5.9 TAXES. Thrucomm has duly filed all Returns required by any law or regulation
to be filed by it except for extensions duly obtained. All such Returns were,
when filed, and to the best of Thrucomm's knowledge are, accurate and complete
in all material respects and were prepared in conformity with applicable laws
and regulations. Thrucomm has paid or will pay in full or has adequately
reserved against all Taxes otherwise assessed against it through the Closing
Date, and the assessment of any material amount of additional Taxes in excess of
those paid and reported is not reasonably expected.
Thrucomm is not a party to any pending action or proceeding by any governmental
authority for the assessment of any Tax, and no claim for assessment or
collection of any Tax has been asserted against Thrucomm that has not been paid.
There are no Tax liens upon the assets of Thrucomm (other than the lien of
personal property taxes not yet due and payable). There is no valid basis, to
the best of Thrucomm's knowledge, except as set forth in the Disclosure
Schedule, for any assessment, deficiency, notice, 30-day letter or similar
intention to assess any Tax to be issued to Thrucomm by any governmental
authority.
5.10 LITIGATION. Except as disclosed in the Disclosure Schedule, there is no
claim action, proceeding or investigation pending or, to Thrucomm's knowledge,
threatened against or affecting Thrucomm before or by any court, arbitrator or
governmental agency or authority which in the reasonable judgment of 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 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
A-34
<PAGE>
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. Except as listed in the Disclosure Schedule, Thrucomm has
no Employee Plans or Compensation Agreements.
5.15 NO OMISSIONS OR UNTRUE STATEMENTS. No representation or warranty made by
Thrucomm to the Partnerships in this Agreement or in any certificate of a
Thrucomm officer required to be delivered to the Partnerships pursuant to the
terms of this Agreement contains or will contain any untrue statement of a
material fact, outs or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading as of the date hereof and
as of the Closing Date.
5.16 DISCLOSURE SCHEDULE COMPLETE. Thrucomm shall promptly supplement the
Disclosure Schedule if events occur prior to the Closing Date that would have
been required to be disclosed had they existed at the time of executing this
Agreement. The Disclosure Schedule, as supplemented prior to the Closing Date,
will contain a true, correct and complete fist and description of all items
required to be set forth therein. The Disclosure Schedule, as supplemented prior
to the Closing Date, is expressly incorporated herein by reference.
Notwithstanding the foregoing, any such supplement to the Disclosure Schedule
following the date hereof shall not in any way affect Thrucomm's right not to
consummate the transactions contemplated hereby as set forth in Article VII
hereof
VI. PARTNER/STOCKHOLDER APPROVAL; CLOSING; CLOSING DELIVERIES
6.1 PARTNER/STOCKHOLDER APPROVAL.
(A) DATALINC. Pursuant to the Agreement of Limited Partnership of Datalinc,
the affirmative vote of the holders of at least two-thirds of all of the
outstanding voting rights of the Units is necessary to approve and adopt
the Reorganization. If a Limited Partner does not consent to the
Reorganization but the Reorganization is approved by the requisite vote of
other Limited Partners, such Limited Partner is bound by such approval.
(B) FASTCOM. The Board of Directors of the Fastcom General Partner, without
dissent or abstention, has approved the Reorganization. Datalinc owns
approximately 80% of all of the outstanding voting rights of the Units of
Fastcom and the Datalinc General Partner has given written consent to the
Reorganization, which consent is sufficient to give Fastcom's approval to
the Reorganization Agreement and Reorganization.
(C) THRUCOMM. The Board of Directors of Thrucomm, without dissent or
abstention, and Datalinc, the sole stockholder of Thrucomm, have approved
the Reorganization.
6.2 CLOSING. Subject to the other provisions of this Agreement, the parties
shall hold a closing (the "Closing") no later than the fifth business day (or
A-35
<PAGE>
such later date as the parties hereto may agree) following the later of (a) the
date that all of the parties hereto give their consent to the approval and
adoption of the Reorganization and this Agreement; or (b) the business day on
which the last of the conditions set forth in Articles VII and VIII is fulfilled
or waived (such later date, the "Closing Date") at 10:00 a.m. at the offices of
Thrucomm or at such other time and place as the parties may agree upon.
6.3 CLOSING DELIVERIES.
(A) DATALINC. At the Closing, Datalinc shall deliver, or cause to be
delivered to Fastcom and Thrucomm:
(1) a certificate, dated as of the Closing Date, to the effect that
the representations and warranties of Datalinc contained in this
Agreement are true and correct in all material respects at and as of
the Closing Date and that Datalinc has complied with or performed in
all material respects all terms, covenants and conditions to be
complied with or performed by Datalinc on or prior to the Closing
Date;
(2) a certificate, dated as of the Closing Date, executed by the
Datalinc General Partner, certifying the Certificate of Limited
Partnership and Agreement of Limited Partnership of Datalinc, the
incumbency and signature of the Datalinc General Partner and copies of
the Datalinc General Partner's resolutions approving and authorizing
the execution and delivery of this Agreement, and the consummation of
the transactions contemplated hereby;
(3) the books and records of Datalinc;
(4) documentation satisfactory to Thrucomm evidencing the fact that
the signatories on all relevant bank accounts of Datalinc have been
changed to signatories designated by Thrucomm;
(5) 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
(6) an opinion of Datalinc's counsel in form and substance reasonably
satisfactory to Fastcom and Thrucomm in a form mutually agreed to
prior to the Closing.
(b) FASTCOM. At the Closing, Fastcom shall deliver, or cause to be
delivered to Datalinc and Thrucomm:
(1) a certificate, dated as of the Closing Date, to the effect that
the representations and warranties of Fastcom contained in this
Agreement are true and correct in all material respects at and as of
the Closing Date and that Datalinc has complied with or performed in
all material respects all terms, covenants and conditions to be
complied with or performed by Fastcom on or prior to the Closing Date;
(2) a certificate, dated as of the Closing Date, executed by the
Fastcom General Partner, certifying the Certificate of Limited
Partnership and Agreement of Limited Partnership of Fastcom the
A-36
<PAGE>
incumbency and signature of the Fastcom General Partner and copies of
the Fastcom General Partner's resolutions approving and authorizing
the execution and delivery of this Agreement, and the consummation of
the transactions contemplated hereby;
(3) the books and records of Fastcom;
(4) documentation satisfactory to Thrucomm evidencing the fact that
the signatories on all relevant bank accounts of Fastcom have been
changed to signatories designated by Thrucomm;
(5) 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
(6) 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:
(1) a certificate of Thrucomm, dated as of the Closing Date, to the
effect that the representations and warranties of Thrucomm contained
in this Agreement are true and correct in all material respects and
that Thrucomm has complied with or performed in all material respects
all terms, covenants and conditions to be complied with or performed
by Thrucomm on or prior to the Closing Date;
(2) a certificate, dated as of the Closing Date, executed by the
Secretary of Thrucomm, certifying the Articles of Incorporation and
Bylaws of Thrucomm, the incumbency and signatures of the officers of
Thrucomm and copies of the directors' resolutions of Thrucomm
approving and authorizing the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby;
(3) certificates representing the Preferred Stock issuable upon
consummation of the Reorganization;
(4) employment agreements, in the form attached hereto as Schedule
6.3(c), with those particular officers and directors of Thrucomm as
listed therein;
(5) a written consent by any lender whether bank consent is required
as to the consummation of the Reorganization; and
(6) an opinion of Thrucomm's counsel in form and substance reasonably
satisfactory to the Partnerships in a form mutually agreed to prior to
the Closing.
VII. CONDITIONS TO OBLIGATIONS OF THRUCOMM
The obligations of Thrucomm to consummate the Closing are subject to the
following conditions, any of which may be waived by Thrucomm in its sole
discretion:
A-37
<PAGE>
7.1 DATALINC.
(a) COMPLIANCE BY DATALINC. Datalinc shall have performed and complied in
all material respects with all agreements and conditions required by this
Agreement to be performed or complied with by Datalinc prior to or on the
Closing Date.
(b) ACCURACY OF THE REPRESENTATIONS AND WARRANTIES OF DATALINC. The
representations and warranties of Datalinc contained in this Agreement
(including the Disclosure Schedule) or any schedule, certificate or other
instrument delivered pursuant to the provisions hereof or in connection
with the transactions contemplated hereby shall be true and correct in all
material respects at and as of the Closing Date (except for such changes
permitted by this Agreement) and shall be deemed to be made again as of the
Closing Date.
(c) MATERIAL ADVERSE CHANGE. No material adverse change shall have occurred
subsequent to December 31, 1996, in the financial position, results of
operations, assets, liabilities or prospects of Datalinc, nor shall any
event or circumstance have occurred which would result in a material
adverse change in the financial position, results of operations, assets,
liabilities or prospects of Datalinc within the reasonable discretion of
Thrucomm.
(d) DOCUMENTS. All documents and instruments delivered by Datalinc to
Thrucomm at the Closing shall be in form and substance reasonably
satisfactory to Thrucomm and its counsel.
(e) CAPITALIZATION. At the Closing Date, the number of Partnership Units of
Datalinc which are issued and outstanding shall be as set forth in the
Disclosure Schedule.
(f) REORGANIZATION. The Reorganization shall qualify as a reorganization
under Section 368 of the Code and further there are no material adverse tax
consequences to the Reorganization.
(g) LITIGATION. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on, account hereof
shall be pending or, to the knowledge of Datalinc, be threatened.
(h) CERTAIN CONSENTS. Other than as set forth herein, Datalinc shall have
received all applicable consents contemplated by the Disclosure Schedule in
writing, in form and substance reasonably satisfactory to Thrucomm and its
counsel, to Datalinc's entry into this Agreement and consummation of the
Reorganization.
(i) PARTNER APPROVAL. Datalinc shall have received Partner approval of the
Reorganization and this Agreement as set forth in Section 6.1 hereof.
(j) ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS. Other than as set forth
herein, Datalinc shall assign or cause to be assigned to Thrucomm all of
its right, title and interest in and to that certain intellectual property
as set forth on Schedule 7. 10).
(k) LIABILITIES DISCLOSED. Subsequent to the satisfaction of that certain
debt as set forth on Schedule 7. 1 (k) of this Agreement, at the Closing
A-38
<PAGE>
Date, the liabilities, contingent and otherwise, of Datalinc shall in the
aggregate not exceed $300,000.
(1) SATISFACTION OF DEBT. Datalinc shall contemporaneous with the
Closing, satisfy in full those certain debt obligations as set forth
on Schedule 7. I (I) of this Agreement.
7.2 FASTCOM.
(a) COMPLIANCE BY FASTCOM. Fastcom shall have performed and complied in all
material respects with all agreements and conditions required by this
Agreement to be performed or complied with by Fastcom prior to or on the
Closing Date.
(b) ACCURACY OF THE REPRESENTATIONS AND WARRANTIES OF FASTCOM. The
representations and warranties of Fastcom contained in this Agreement
(including the Disclosure Schedule) or any schedule, certificate or other
instrument delivered pursuant to the provisions hereof or in connection
with the transactions contemplated hereby shall be true and correct in all
material respects at and as of the Closing Date (except for such changes
permitted by this Agreement) and shall be deemed to be made again as of the
Closing Date.
(c) MATERIAL ADVERSE CHANGE. No material adverse change shall have occurred
subsequent to December 31, 1996, in the financial position, results of
operations, assets, liabilities or prospects of Fastcom, nor shall any
event or circumstance have occurred which would result in a material
adverse change in the financial position, results of operations, assets,
liabilities or prospects of Fastcom within the reasonable discretion of
Thrucomm.
(d) DOCUMENTS. All documents and instruments delivered by Fastcom to
Thrucomm at the Closing shall be in form and substance reasonably
satisfactory to Thrucomm and its counsel.
(e) CAPITALIZATION. At the Closing Date, the number of Partnership Units of
Fastcom which are issued and outstanding shall be as set forth in the
Disclosure Schedule.
(f) REORGANIZATION. 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.
(h) CERTAIN CONSENTS Other than as set forth herein, Fastcom shall have
received all applicable consents contemplated by the Disclosure Schedule in
writing, in form and substance reasonably satisfactory to Thrucomm and its
counsel, to Fastcom's entry into this Agreement and consummation of the
Reorganization.
(i) PARTNER APPROVAL. Fastcom shall have received Partner approval of the
Reorganization and this Agreement as set forth in Section 6.2 hereof
A-39
<PAGE>
(j) ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS. Other than as set forth
herein, Fastcom shall assign or cause to be assigned to Thrucomm all of its
right, title and interest in and to that certain intellectual property as
set forth on Schedule 7.20).
(k) LIABILITIES DISCLOSED. Subsequent to the satisfaction of that certain
debt as set forth on Schedule 7.2(k) of this Agreement, at the Closing
Date, the liabilities, contingent and otherwise, of Datalinc shall in the
aggregate not exceed $300,000.
(1) SATISFACTION OF DEBT. Datalinc shall contemporaneous with the Closing,
satisfy in full those certain debt obligations as set forth on Schedule
7.2(l) of this Agreement.
VIII. CONDITIONS TO THE PARTNERSHIPS OBLIGATIONS
The obligations of the Partnerships to consummate the Closing are subject to the
following conditions, any of which may be waived by the Partnerships in their
sole discretion:
8.1 COMPLIANCE BY THRUCOMM. Thrucomm shall have performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with prior to or on the Closing Date.
8.2 ACCURACY OF THRUCOMM'S REPRESENTATIONS. Thrucomm's representations and
warranties contained in this Agreement (including the exhibits hereto and the
Disclosure Schedule) or any schedule, certificate or other instrument delivered
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby shall be true and correct in all material respects at and as
of the Closing Date (except for such changes permitted by this Agreement) and
shall be deemed to be made again as of the Closing Date.
8.3 MATERIAL ADVERSE CHANGE. No material adverse change shall have occurred
subsequent to December 31, 1996 in the financial position, results of
operations, assets, liabilities or prospects of Thrucomm taken as a whole, nor
shall any event or circumstance have occurred which would result in a material
adverse change in the business, assets or condition, financial or otherwise, of
Thrucomm taken as a whole, within reasonable discretion of Thrucomm.
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.
8.6 DOCUMENTS. All documents and instruments delivered by Thrucomm to the
Partnerships at the Closing shall be in form and substance reasonably
satisfactory to the Partnerships and their counsel.
III. INDEMNIFICATION
9.1 BY THE PARTNERSHIPS. Subject to Section 9.4, the Partnerships shall
indemnify, defend and hold Thrucomm, its directors, officers, shareholders,
attorneys, agents and affiliates, harmless from and against any and all losses,
A-40
<PAGE>
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 fight to
assume the defense thereof without prejudice to its rights to indemnification
hereunder.
9.4 LIMITATIONS ON LIABILITIES. Neither Datalinc nor Fastcom nor Thrucomm shall
be liable hereunder as a result of any misrepresentation or breach of such
party's representations, warranties or covenants contained in this Agreement
unless and until the Losses incurred by Datalinc, Fastcom or Thrucomm, as the
case may be, as a result of such misrepresentations or breaches under this
Agreement shall exceed, in the aggregate, $50,000 (in which case the party
liable therefor shall be liable for the entire amount of such claims, including
the first $50,000).
X. TERMINATION
10.1 TERMINATION PRIOR TO CLOSING.
(a) If the Closing has not occurred by 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
A-41
<PAGE>
Articles VI, VII or VIII shall become incapable of fulfillment and shall
not have been waived by the party for whose benefit the condition was
established, then either Datalinc, Fastcom or Thrucomm may terminate this
Agreement.
10.2 CONSEQUENCES OF TERMINATION. Upon termination of this Agreement pursuant to
this Article X or any other express right of termination provided elsewhere in
this Agreement, the parties shall be relieved of any further obligation to the
others except as specified in Section 12.3. No termination of this Agreement,
however, whether pursuant to this Article X hereof or under any other express
fight of termination provided elsewhere in this Agreement, shall operate to
release any party from any liability to any other party incurred before the date
of such termination or from any liability resulting from any willful
misrepresentation made in connection with this Agreement or willful breach
hereof
XI. ADDITIONAL COVENANTS
11.1 MUTUAL COOPERATION. The parties hereto will cooperate with each other, and
will use all reasonable efforts to cause the fulfillment of the conditions to
the parties' obligations hereunder and to obtain as promptly as possible all
consents, authorizations, orders or approvals from each and every third party,
whether private or governmental, required in connection with the transactions
contemplated by this Agreement.
11.2 CHANGES IN REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIPS. Between the
date of this Agreement and the Closing Date, neither Datalinc nor Fastcom shall,
directly or indirectly, enter into any transaction, take any action, or by
inaction permit an event to occur, which would result in any of the
representations and warranties of Datalinc or Fastcom herein contained not being
true and correct at and as of (a) the time immediately following the occurrence
of such transaction or event- or (b) the Closing Date. The Partnerships shall
promptly give written notice to Thrucomm upon becoming aware of (i) any fact
which, if known on the date hereof, would have been required to be set forth or
disclosed pursuant to this Agreement; and (ii) any impending or threatened
breach in any material respect of any of the representations and warranties of
the Partnerships contained in this Agreement and with respect to the latter
shall use all reasonable efforts to remedy same.
11.3 CHANGES IN REPRESENTATIONS AND WARRANTIES OF THRUCOMM. Between the date of
this Agreement and the Closing Date, Thrucomm shall not, directly or indirectly,
enter into any transaction, take any action, or by inaction permit an event to
occur, which would result in any of the representations and warranties of
Thrucomm herein contained not being true and correct at and as of (a) the time
immediately following the occurrence of such transaction or event; or (b) the
Closing Date. Thrucomm shall promptly give written notice to the Partnerships
upon becoming aware of (i) any fact which, if known on the date hereof, would
have been required to be set forth or disclosed pursuant to this Agreement; and
(ii) any impending or threatened breach in any material respect of any of the
representations and warranties of Thrucomm contained in this Agreement and with
respect to the latter shall use all reasonable efforts to remedy same.
XII. MISCELLANEOUS
12.1 EXPENSES. Datalinc, Fastcom and Thrucomm shall each pay its own expenses
incident to the negotiation, preparation and carrying out of this Agreement,
A-42
<PAGE>
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 NONDISCLOSURE. Neither Datalinc nor Fastcom will at any time after the date
of this Agreement, without Thrucomm's consent, divulge, furnish to or make
accessible to anyone (other than to its representatives as part of its due
diligence or corporate investigation) any knowledge or information with respect
to confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable or
not, with respect to any confidential or secret aspects (including, without
limitation, customers or suppliers) ("Confidential Information") of Thrucomm.
Thrucomm will not at any time after the date of this Agreement, without the
consent of the Partnerships (except as may be required by law), use, divulge,
furnish to or make accessible to anyone any Confidential Information (other than
to its representatives as part of its due diligence or corporate investigation)
with respect to Datalinc or Fastcom.
The undertakings set forth in the preceding two paragraphs of this Section 12.3
shall lapse if the Closing takes place.
Any information, which (i) at or prior to the time of disclosure by either of
Datalinc, Fastcom or Thrucomm was generally available to the public through no
breach of this covenant; (ii) was available to the public on a nonconfidential
basis prior to its disclosure by Datalinc, Fastcom or Thrucomm; or (iii) was
made available to the public from a third party, provided that such third party
did not obtain or disseminate such information in breach of any legal obligation
to Datalinc, Fastcom or Thrucomm, shall not be deemed Confidential Information
for purposes hereof, and the undertakings in this covenant with respect to
Confidential Information shall not apply thereto.
12.4 SUCCESSION AND ASSIGNMENTS; THIRD PARTY BENEFICIARIES. This Agreement may
not be assigned (either voluntarily or involuntarily) by any party hereto
without the express written consent of the other party. Any attempted assignment
in violation of this Section shall be void and ineffective for all purposes. In
the event of an assignment permitted by this Section, this Agreement shall be
binding upon the heirs, successors and assigns of the parties hereto. Except as
expressly set forth in this Section, there shall be no third party beneficiaries
of this Agreement.
12.5 NOTICES. All notices, requests, demands or other communications with
respect to this Agreement shall be in writing and shall be (i) sent by facsimile
transmission; (ii) sent by the United States Postal Service, registered or
certified mail, return receipt requested; or (iii) personally delivered by a
A-43
<PAGE>
nationally recognized express overnight courier service, charges prepaid, to the
following addresses (or such other addresses as the parties may specify from
time to time in accordance with this Section):
If to Datalinc:
1641 Commerce Avenue North
St. Petersburg, FL 33716
Attn: John F. Kolenda,
Chairman of the Board of Integrated Communication Networks, Inc.,
the General Partner
If to Fastcom:
1641 Commerce Avenue North
St. Petersburg, FL 33716
Attn: John F. Kolenda,
Chairman of the Board of Fastcom Management, Inc., the General Partner
If to Thrucomm:
Thrucomm, Inc.
1641 Commerce Avenue North
St. Petersburg, FL 33716
Attn: Mark J. Gianinni
President
Any such notice shall, when sent in accordance with the preceding sentence, be
deemed to have been given and received on the earliest of (i) the day delivered
to such address or sent by facsimile transmission, (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.
12.6 CONSTRUCTION. This Agreement shall be construed and enforced in accordance
with the internal laws of the State of Florida without giving effect to the
principles of conflicts of law thereof
12.7 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which shall together
constitute one and the same Agreement.
12.8 NO IMPLIED WAIVER; REMEDIES. No failure or delay on the part of the parties
hereto to exercise any right, power or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. All rights, powers and privileges granted herein shall be in addition
to other rights and remedies to which the parties may be entitled at law or in
equity.
12.9 ENTIRE AGREEMENT. This Agreement, including the Exhibits and Schedules
attached hereto, sets forth the entire understandings of the parties with
respect to the subject matter hereof, and it incorporates and merges any and all
previous communications, understandings, oral or written, as to the subject
matter hereof, and cannot be amended or changed except in writing, signed by the
A-44
<PAGE>
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year first above written.
DATALINC, LTD., a Florida limited partnership
By: Integrated Communication Networks, Inc.,
a Florida corporation General Partner
___________________________
By: John F. Kolenda
Chairman of the Board
FASTCOM, LTD., a Florida limited partnership
___________________________
By: Fastcom Management, Inc.,
a Florida corporation General Partner
THRUCOMM, INC.
___________________________
By: Mark J. Gianinni
Chairman of the Board
A-45
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this consent
statement/prospectus and, if given or made, such information or representation
must not be relied upon as having been authorized by thrucomm. This consent
statement/prospectus does not constitute an offer to sell or a solicitation of
any offer to buy any security other than the preferred stock offered hereby, nor
does it constitute an offer to sell or a solicitation to any person in any
jurisdiction or under any circumstances in which such offering would be
unlawful. Neither the delivery of this consent statement/prospectus nor any sale
made hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION..................V
SUMMARY................................ 1 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 August ___, 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 FCBA provides that any indemnification made
under the above provisions, unless pursuant to a court determination, may be
made only after a determination that the person to be indemnified has met the
standard of conduct described above. This determination is to be made by a
majority vote of a quorum consisting of the disinterested directors of the board
of directors, by independent legal counsel, or by a majority vote of the
disinterested shareholders. The board of directors also may designate a special
committee of disinterested directors to make this determination.
Section 607.0850(3), however, provides that a Florida corporation must
indemnify any director or officer of a corporation that has been successful in
the defense of any proceeding referred to in Section 607.0850(1) or (2), or in
the defense of any claim, issue or matter therein, against expenses actually and
reasonably incurred by him in connection therewith.
Expenses incurred by a director or officer in defending a civil or criminal
proceeding may be paid by the corporation in advance of the final disposition
thereof upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it is ultimately determined that such director
or officer is not entitled to indemnification under Section 607.0850.
Section 607.0850 of the FBCA further provides that the indemnification
provisions contained therein are not exclusive and it specifically empowers a
corporation to make any other further indemnification or advancement of expenses
under any bylaw, agreement, vote of shareholders or disinterested directors or
otherwise, for actions in an official capacity and in other capacities while
holding an office. However, a corporation cannot indemnify or advance expenses
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 -
Included as Appendix A to the Consent Statement/Prospectus.*
3.1 Articles of Incorporation of Thruco, Inc.**
3.1.1 Articles of Amendment to Articles of Incorporation of Thruco, Inc.
changing the corporate name to Thrucomm, Inc.*
3.1.2 Designation of Class, Series, Preferences and Right of Preferred
Shares by Thrucomm, Inc.***
3.2 By-laws of Thruco, Inc.**
5.1 Opinion of Michael T. Williams, P.A.*
8.1 Opinion of Schifino & Fleischer, P.A.*
10.1 Purchase Agreement by and between Blue Chip/Datalinc
Corporation, Integrated Communication Networks, Inc., John F. Kolenda,
Mark J. Gianinni and Datalinc, Ltd., dated as of September 1,
1993.*
10.1.1 Amendment to Purchase Agreement, dated September 1, 1993.*
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 __, 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 7, 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 July 29, 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 July 29, 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.
*** To be filed by Amendment
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any consent statement/prospectus required by
Section 10(a)(3) of the Securities Act.
(ii) To reflect in the consent statement/prospectus any
facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change in such information
in the Registration Statement.
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. 1 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON
AUGUST 1, 1997.
THRUCOMM, INC.
BY: ______________________________
Mark J. Gianinni
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS PRE-EFFECTIVE
AMENDMENT NO. 1 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 1, 1997
___________________________ (Principal Executive Officer)
Mark J. Gianinni
* Chairman of the Board and August 1, 1997
___________________________ Chief Financial Officer and
John F. Kolenda Director (Principal Financial
and Accounting Officer)
*
___________________________ Director August 1, 1997
Joseph F. Bert
* Director August 1, 1997
___________________________
R. Brandon Harrison, Jr.
*
___________________________ Director August 1, 1997
Z. David Patterson
*
___________________________ Director August 1, 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.
/S/JOHN F. KOLENDA
________________________
John F. Kolenda
Attorney-in-Fact
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 7 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 - Included as Appendix A to the Consent Statement/Prospectus.*
3.1 Articles of Incorporation of Thruco, Inc.**
3.1.1 Articles of Amendment to Articles of Incorporation of Thruco, Inc.
changing the corporate name to Thrucomm, Inc.*
3.1.2 Designation of Class, Series, Preferences and Right of Preferred
Shares by Thrucomm, Inc.***
3.2 By-laws of Thruco, Inc.**
5.1 Opinion of Michael T. Williams, P.A.*
8.1 Opinion of Schifino & Fleischer, P.A.*
10.1 Purchase Agreement by and between Blue Chip/Datalinc Corporation,
Integrated Communication Networks, Inc., John F. Kolenda, Mark J.
Gianinni and Datalinc, Ltd., dated as of September 1, 1993.*
10.1.1 Amendment to Purchase Agreement, dated September 1, 1993.*
10.1.2 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.***
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 7, 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 July 29, 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 July 29, 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.
*** To be filed by Amendment
II-10
<PAGE>
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.
July 29, 1997
B-1
<PAGE>
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 July 29, 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;
B-2
<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.
July 29, 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.
July 29, 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
B-4
<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.
July 29, 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
B-6
<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.
B-7
<PAGE>
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.
3.1.1
Articles of Amendment to Articles of Incorporation of Thruco, Inc.
changing the corporate name to Thrucomm, Inc.
<PAGE>
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
THRUCO, INC.
Pursuant to the provisions of Section 607.1006 of the Florida General
Corporation Act, the undersigned Corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
1. The name of this Corporation is Thruco, Inc.
2. The following amendment of the Articles of Incorporation was
adopted by Datalinc, Ltd., a Florida limited partnership and the
sole shareholder of this Corporation on August 1, 1997, in the
manner prescribed by the Florida General Corporation Act. Article
I, of the Articles of Incorporation is amended to read as
follows:
ARTICLE I - NAME AND MAILING ADDRESS
The name of this corporation is Thrucomm, Inc., and the
mailing address of this corporation is 1641 Commerce
Avenue North, St. Petersburg, Florida 33716
3. The number of shares of the corporation outstanding at the time
of adoption was one (1) share of common stock, and the number of
shares entitled to vote thereon was one (1).
4. The number of shares voted in favor of such amendment was 1, and
the number of shares voted against such amendment was zero (0).
Dated: August 1, 1997.
/S/JOHN F. KOLENDA
___________________________
John F. Kolenda
Chairman of the Board of
Directors
<PAGE>
EXHIBIT NO.
5.1
Opinion of Michael T. Williams, P.A.
<PAGE>
EXHIBIT NO.
8.1
Opinion of Schifino & Fleischer, P.A.
<PAGE>
SCHIFINO & FLEISCHER, P.A.
ATTORNEYS AT LAW
WILLIAM J. SCHIFINO TELEPHONE: (813)223-1535 ONE TAMPA CITY CENTER
FRANK N. FLEISCHER TELECOPIER: (813)223-3070 201 NORTH FRANKLIN STREET
CYNTHIA C. ELLIS INTERNET: [email protected] SUITE 2700
TAMPA, FLORIDA 33602
August 4, 1997
Thrucomm, Inc.
1641 Commerce Avenue, North
St. Petersburg, Florida 33716
Re: Federal Income Tax Consequences of Transfer of all Assets
and Liabilities of Datalinc, Ltd.
and Fastcom, Ltd. in Exchange for Shares of Mandatory
Convertible Preferred Stock of
Thrucomm, Inc.
Gentlemen:
As special counsel to Thrucomm, Inc., a Florida corporation ("Thrucomm"),
we have been asked to advise you concerning the anticipated federal income tax
consequences of the transfer of all of the right, title and interest in assets
and liabilities of Datalinc, Ltd., a Florida limited partnership ("Datalinc")
and Fastcom, Ltd., a Florida limited partnership ("Fastcom") pursuant to the
Agreement and Plan of Reorganization dated May 5, 1997 (the "Reorganization
Agreement") into Thrucomm in exchange for shares of Thrucomm's Mandatory
Convertible Preferred Stock (the "Preferred Stock"). The transfer of the assets
and liabilities in exchange for the Preferred Stock (the "Reorganization") will
be carried out pursuant to the Reorganization Agreement, as described in the
Registration Statement on Form S-4, as amended, filed by Thrucomm, File No.
333-27161 (the "Registration Statement"). Unless otherwise specified, all
capitalized terms have the meaning assigned to them in the Registration
Statement.
In connection with the preparation of this opinion, we have examined such
documents concerning the Reorganization, including the Reorganization Agreement,
as we deemed necessary (the "Examined Documents"). In our review and examination
we have assumed, without independent investigation or examination, (a) the
genuineness of all signatures, the authenticity of all documents submitted to
us, the conformity to all original documents of all documents submitted to us as
certified or photostatic copies, and the authenticity of all such originals of
such latter documents; (b) the due execution, completion, acknowledgment and
public filing, where applicable, of any of the Examined Documents, as indicated
in such documents, and the delivery of all documents and instruments and the
consideration recited in such documents by all parties; (c) that all parties
have the necessary power and authority, corporate or otherwise, to execute and
deliver the Examined Documents, and documents attendant therewith, to which they
are a party and to perform their obligations under such documents, and that all
such actions have been duly and validly authorized by all necessary proceedings;
(d) that the Examined Documents and the documents attendant therewith,
constitute legal, valid and binding obligations to each party thereto
<PAGE>
enforceable against each party in accordance with their respective terms, except
(i) as enforcement of such documents may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, moratorium, and other similar laws,
both state and federal, affecting the enforcement of creditors' rights or
remedies in general, from time to time in effect; (ii) subject to general
principles of equity, regardless of whether such enforceability is considered in
a proceeding in equity or at law and the availability of equitable remedies; and
(iii) subject to implied covenants of good faith, fair dealing and commercially
reasonable conduct, judicial discretion and instances of multiple or equitable
remedies and applicable public policies and laws.
In rendering our opinion, we have made the following factual assumptions:
1. The factual representations and warranties of the parties contained in
the Reorganization Agreement, which we may deem material to our opinion, are all
true in all respects as of the date of our opinion, except as may otherwise be
set forth in or contemplated by, any of the Examined Documents.
2. The factual representations and warranties, other than those matters
about which we specifically opine, of the parties contained in the Examined
Documents, which we may deem material to our opinion, are all true in all
respects as of the date hereof, except as may be otherwise set forth in or
contemplated by the Examined Documents.
3. The transaction contemplated by the Examined Documents and all the
transactions related thereto or contemplated thereby shall be consummated in
accordance with the terms and conditions of such documents, except as may be set
forth in and or contemplated by any closing document delivered by the parties at
the closing of the Reorganization.
4. Each document derived from a public authority is accurate, complete and
authentic and all official records (including their proper indexing and filing)
are accurate and complete.
5. There are no agreements or understandings among the parties, written or
oral, and there is no usage of trade or course of prior dealings among any of
the foregoing which would, in any case, define, supplement or qualify the terms
of the Examined Documents.
LIMITATIONS ON OUR OPINION
The following limitations shall apply with respect to our opinion:
1. Our opinion is based upon the various provisions of the Internal Revenue
Code of 1986, as amended, the Treasury Regulations promulgated thereunder and
the interpretations thereof by the Internal Revenue Service and the courts
having jurisdiction over such matters as of the date hereof, all of which are
subject to change either prospectively or retroactively. No opinion is rendered
with respect to the effect, if any, of any pending or future legislation,
judicial or administrative regulations or rulings, which may have a bearing on
any of the foregoing. We have not been asked to render an opinion with respect
to any federal income tax matters except those set forth below. Likewise, we
have not been asked to render any opinion with respect to any foreign, local or
state income tax consequences of the Reorganization. By rendering our opinion,
we undertake no responsibility to advise you of any new developments in the
<PAGE>
application or interpretation of the federal income tax laws. Accordingly, our
opinion should not be construed as applying in any manner to any aspect of the
transactions contemplated by the Examined Documents, other than as set forth
below.
2. Our opinion does not consider the tax consequences to the General and
Limited Partners of Datalinc and Fastcom of other transactions effected prior to
or after the Reorganization (whether or not such transactions are consummated in
connection with the Reorganization).
3. We have not discussed this opinion with representatives of the Internal
Revenue Service, and it is not binding on the Service. The Service is not bound
by and may not concur in the conclusions we have reached.
OPINION
Based upon, and subject to the foregoing, and with due regard to such legal
consideration as we deemed necessary, we are of the opinion that, for Federal
income tax purposes:
1. Under Code Sections 351 and 357, no gain or loss will be recognized by
Datalinc nor Fastcom or any of its partners as a result of the exchange of all
of their assets for the (i) Preferred Stock of Thrucomm and (ii) Thrucomm's
assumption of all of the liabilities of Datalinc and Fastcom.
2. Under Code Section 731(a), no gain or loss will be recognized by the
partners of Datalinc nor Fastcom upon the receipt of the Preferred Stock by the
Partnerships and, other than recapture of negative capital accounts, the
eventual distribution of the Underlying Shares to the partners of Datalinc and
Fastcom in liquidation of the Partnerships pursuant to the proposed
Reorganization.
3. Under Code Section 732(b), the basis of the Underlying Shares to be
eventually received by the partners of Datalinc and Fastcom upon the liquidation
of Datalinc and Fastcom will be equal to the adjusted basis of the partners in
their respective interests in Datalinc and Fastcom.
We hereby consent to this opinion being filed as an Exhibit to the
Registration Statement and we further consent to the use of our name in the
Registration Statement under the caption "Legal Matters."
Very truly yours,
/s/Frank N. Fleischer, for the Firm
_____________________________
Schifino & Fleischer, P.A.
<PAGE>
EXHIBIT 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
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as of
this 1st day of September, 1993 by and among BLUE CHIP/DATALINC CORPORATION, an
Ohio 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, pursuant to a Purchase Agreement dated as of April 30, 1993 among
the Purchaser, the Partnership, ICN and the Shareholders (the "First Purchase
Agreement"), the Purchaser purchased from the Partnership one hundred eighty
(180) of the Partnership's Series 300 Limited Partnership Units (the "First
Purchaser Units") as described in the Partnership's Confidential Private
Placement Memorandum dated as of January 1, 1993 (the "Offering Memorandum");
and
WHEREAS, the Partnership now desires to sell to the Purchaser certain
additional Series 300 Limited Partnership Units; and
WHEREAS, ICN is the sole general partner of the Partnership, and the
Shareholders together own all of the capital stock of ICN; and
WHEREAS, the Purchaser is willing to purchase such additional Series 300
Limited Partnership Units from the Partnership, upon certain terms and
conditions, including the condition that the Partnership, ICN and the
Shareholders enter into this Agreement with the Purchaser.
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. PURCHASE OF UNITS.
(a) Purchaser Units. The Partnership has agreed to sell to the
Purchaser, and the Purchaser has agreed to purchase from the
Partnership, two hundred (200) Series 300 Limited Partnership Units of
the Partnership (the "Additional Purchaser Units," and together with
the First Purchaser Units, the "Purchaser Units"), pursuant to the
Subscription Agreement between the Purchaser and the Partnership of
even date herewith (the "Subscription Agreement"), and subject to the
terms and conditions set forth herein.
(b) Certificates. Upon payment by the Purchaser by check or wire
transfer to the Partnership of the purchase price for the Additional
Purchaser Units hereunder, the Partnership shall provide the Purchaser
with certificates representing the Units thereby purchased as provided
under Section 13.22 of the Partnership's Amended Agreement of Limited
Partnership dated as of January 1, 1993 (the "Partnership Agreement").
1
<PAGE>
2. ESCROW OF DISTRIBUTIONS.
(a) ESCROW ACCOUNT. The Partnership shall deposit in an escrow account
(the "Escrow Account") with Star Bank, National Association (the "Escrow
Agent") the amount of all Distributions (as defined in the Partnership
Agreement) which ICN would otherwise be entitled to receive from the
Partnership, less the amount estimated by the Shareholders to be necessary
to be paid in dividends to the Shareholders in order to meet the
Shareholders' income tax liabilities with respect to earnings of ICN being
attributed to the Shareholders as a result of ICN's election to be treated
as a Subchapter S Corporation including without limitation interest on
funds in the Escrow Account (the "Tax Amount") for the year during which
the applicable deposit is being made, and ICN shall deposit in the Escrow
Account all amounts which it is entitled to receive from the sale of any
portion of its interest in the Partnership ("ICN's Partnership Interest").
The Escrow Account shall be established pursuant to an Escrow Agreement in
substantially the form of Exhibit A attached hereto (the "Escrow
Agreement") executed prior to or simultaneously with the execution of this
Agreement.
(b) CERTAIN CONDITIONS. Within thirty (30) days after the earliest to
occur of (I) December 31, 1996, (II) the date on which all of the Units of
the Partnership have been sold pursuant to a sale of the business of the
Partnership, and (III) the date on which the Partnership's assets have been
liquidated (the "Target Date"), the Purchaser shall provide to the Escrow
Agent, ICN and the Partnership a certification as to whether or not any of
the following conditions has been satisfied on or prior to the Target Date:
(i) The Purchaser has received cash Distributions from the
Partnership with respect to the Purchaser Units and/or cash proceeds
from the sale of Purchaser Units in an amount equal to at least three
(3) times the amount of cash paid by the Purchaser for the Purchaser
Units (the "Purchaser's Investment");
(ii) Either all or substantially all of the Partnership's assets
or all Units in the Partnership have been sold and the Purchaser has
received in exchange for the Purchaser Units (net of any Partnership
liabilities retained by the Purchaser and any reasonable costs of sale
incurred by the Purchaser) either (A) cash in an amount equal to at
least three (3) times the amount of the Purchaser's Investment or (B)
securities for which there is a liquid market, and which may be freely
sold by the Purchaser without restriction on the amount or manner of
sale under applicable securities laws or agreement, with a market
value as determined in good faith, and assuming sale within a period
of not more than four (4) weeks, by the majority vote of the Board of
Directors of ICN (excluding the vote of the Director nominated by the
Purchaser) equal to at least three (3) times the amount of the
Purchaser's Investment; or
(iii) The Purchaser has received cash Distributions from the
Partnership with respect to the Purchaser Units and/or net cash
proceeds from the sale of Purchaser Units in an amount equal to at
least two (2) times the amount of the Purchaser's Investment and
either (A) the Partnership (or any successor thereto) has completed a
public offering of its equity securities and the total market value of
the equity securities of the Partnership (or such successor) owned by
the Purchaser as of the Target Date, and which may be freely sold by
2
<PAGE>
the Purchaser without restriction on the amount or manner of sale
under applicable securities laws or agreement, as determined in good
faith by the Purchaser, is at least equal to the amount of the
Purchaser's Investment or (B) the Purchaser Units then owned by the
Purchaser are, in the Purchaser's sole opinion exercised in a
reasonable manner, readily salable (subject to compliance with
applicable securities law) in a transaction in which the net proceeds
of such sale would equal at least the amount of the Purchaser's
Investment.
(c) SATISFACTION OF CONDITIONS. In the event that the Purchaser has
certified that a condition set forth in Paragraph 2(b) above has been
satisfied on or prior to the Target Date, the Escrow Agent shall release
all amounts in the Escrow Account (the "Escrowed Funds") to ICN, and the
Escrow Account shall be closed.
(d) FAILURE TO SATISFY CONDITIONS. In the event that the Purchaser has
certified to the Escrow Agent that none of the conditions set forth in
Paragraph 2(b) above have been satisfied on or prior to the Target Date,
the Escrow Agent shall, as soon as possible after receipt of the
Purchaser's certification, notify the Purchaser, ICN and the Partnership of
the balance of the Escrow Account as of the Target Date (the "Target Date
Balance Notice"), and:
(i) TARGET DATE ESCROWED FUNDS SUFFICIENT TO PROVIDE RATE OF
RETURN. In the event that the Escrowed Funds as reflected in the
Target Date Balance Notice are in an amount sufficient, when added to
the amount of cash Distributions received by the Purchaser with
respect to the Purchaser Units and the amount of net cash proceeds
received by the Purchaser from the sale of Purchaser Units (the
"Receipts"), to provide the Purchaser with a weighted average
thirty-five percent (35%) per annum internal rate of return as
calculated by the Purchaser (the "Rate of Return") on its investment
in all of the First Purchaser Units and the Rate of Return on its
investment in all of the Additional Purchaser Units ("Rate of Return"
for purposes of this Agreement shall be calculated in the case of each
Purchaser Unit from the date of purchase thereof to the date of
transfer thereof, whether to ICN as hereinafter provided or to any
other transferee thereof), the Purchaser, at its option, may direct
the Escrow Agent to release to the Purchaser the amount of the
Escrowed Funds which is sufficient, when added to the Receipts, to
provide the Purchaser with the Rate of Return on its investment in all
of the First Purchaser Units and the Rate of Return on its investment
in all of the Additional Purchaser Units. The Escrow Agent shall
thereupon release such amount of the Escrowed Funds to the Purchaser
and release all remaining Escrowed Funds, if any, to ICN, the
Purchaser shall thereupon transfer any Purchaser Units owned by the
Purchaser to ICN, and the Escrow Account shall be closed; provided,
however, that if the Purchaser does not elect within thirty (30) days
after receipt of the Target Date Balance Notice to direct the Escrow
Agent to release the Escrowed Funds to the Purchaser as provided
above, then all Escrowed Funds shall be released by the Escrow Agent
to ICN, the Purchaser shall have no obligation to transfer any
Purchaser Units to ICN, and the Escrow Account shall be closed.
3
<PAGE>
(ii) TARGET DATE ESCROWED FUNDS INSUFFICIENT TO PROVIDE RATE OF
RETURN. In the event that the Escrowed Funds as reflected in the
Target Date Balance Notice are not in an amount sufficient, when added
to the Receipts, to provide the Purchaser with the Rate of Return on
its investment in all of the First Purchaser Units and the Rate of
Return on its investment in all of the Additional Purchaser Units, if
the Target Date resulted from the sale of all of the Units in the
Partnership pursuant to a sale of the business of the Partnership or
the liquidation of the Partnership's assets, then the Purchaser shall
direct the Escrow Agent to release all of the Escrowed Funds to the
Purchaser, the Escrow Agent shall release all of the Escrowed Funds to
'the Purchaser, and 'the Escrow Account shall be closed. If the Target
Date did not result from either of those events, the Purchaser shall
determine the number of Purchaser Units, considered in the order of
purchase, with respect to which there are Escrowed Funds sufficient in
amount, when added to the Receipts, to provide the Purchaser with the
Rate of Return (the "Original Number"). If the Original Number is less
than ten (10), the Escrowed Funds shall remain in the Escrow Account,
and if the Original Number is ten (10) or more, the Purchaser, at its
option, may direct the Escrow Agent to release to the Purchaser such
amount of the Escrowed Funds as are sufficient, when added to the
Receipts, to provide the Purchaser with the Rate of Return on the
number of Purchaser Units, considered in the order of purchase, which
is a multiple of ten (10) and is closest to, but not greater than, the
Original Number (the "Original Satisfied Units"), and the Escrow Agent
shall thereupon release such Escrowed Funds to the Purchaser, the
Purchaser shall thereupon transfer to ICN the Original Satisfied Units
which have not previously been sold, and any Escrowed Funds then
remaining in the Escrow Account shall continue to be held in the
Escrow Account; provided, however, that if the Original Number is at
least ten (10) and the Purchaser does not elect within thirty (30)
days after receipt of the Target Date Balance Notice to direct the
Escrow Agent to release the Escrowed Funds to the Purchaser as
provided above, then all Escrowed Funds shall be released by the
Escrow Agent to ICN, the Purchaser shall have no obligation to
transfer any Purchaser Units to ICN, and the Escrow Account shall be
closed.
(iii) CONTINUANCE OF ESCROW. Unless the Escrow Account has been
closed as described in Paragraphs 2(d)(i) or 2(d)(ii) above, the
Partnership shall continue to deposit in the Escrow Account all
Distributions which ICN would otherwise be entitled to receive as a
partner in the Partnership, less the Tax Amount as estimated by the
Shareholders for the year during which the applicable deposit is being
made, and ICN shall continue to deposit in the Escrow Account all
amounts which it is entitled to receive from the sale of any portion
of ICN's Partnership Interest, until such time as the Purchaser has
received the Rate of Return on its investment in all of the First
Purchaser Units and the Rate of Return on its investment in all of the
Additional Purchaser Units or the Escrow Account has been closed in
accordance with this Paragraph 2(d)(iii), whichever first occurs. As
soon as possible after the end of each month after the Target Date,
the Escrow Agent shall notify the Purchaser, the Partnership and ICN
of the balance of the Escrow Account as of the end of such month (the
"Monthly Balance Notice"), and after receipt of each Monthly Balance
4
<PAGE>
Notice, the Purchaser shall determine the number of Purchaser Units,
considered in the order of purchase, with respect to which there are
Escrowed Funds sufficient in amount, when added to the Receipts, to
provide the Purchaser with the Rate of Return (the "Monthly Number").
Each month until such time as the Purchaser owns less than ten (10)
Purchaser Units, if the Monthly Number is less than ten (10), the
Escrowed Funds shall remain in the Escrow Account, and if the Monthly
Number is ten (10) or more, the Purchaser, at its option, may direct
the Escrow Agent to release to the Purchaser such amount of the
Escrowed Funds as is sufficient, when added to the Receipts, to
provide the Purchaser with the Rate of Return on the number of
Purchaser Units, considered in the order of purchase, which is a
multiple of ten (10) and is closest to, but not greater than, the
Monthly Number (the "Monthly Satisfied Units"), and the Escrow Agent
shall thereupon release such Escrowed Funds to the Purchaser, the
Purchaser shall thereupon transfer to ICN the Monthly Satisfied Units
which have not previously been sold, and any Escrowed Funds then
remaining in the Escrow Account shall continue to be held in the
Escrow Account; provided, however, that if any Monthly Number is ten
(10) or more and the Purchaser does not elect within thirty (30) days
after receipt of the Monthly Balance Notice applicable thereto to
direct the Escrow Agent to release the Escrowed Funds to the Purchaser
as provided above, then all Escrowed Funds shall be released by the
Escrow Agent to ICN, the Purchaser shall have no obligation to
transfer any Purchaser Units to ICN, and the Escrow Account shall be
closed. Each month after the Purchaser owns less than ten (10)
Purchaser Units, if the Monthly Number is less than one (1), the
Escrowed Funds shall remain in the Escrow Account, and if the Monthly
Number is one (1) or more, the Purchaser, at its option, may direct
the Escrow Agent to release such amount of the Escrowed Funds as is
sufficient, when added to the Receipts, to provide the Purchaser with
the Rate of Return on the number of Purchaser Units, considered in the
order of purchase, which is the largest whole number that is not
greater than the Monthly Number (the "Additional Monthly Satisfied
Units"), and the Escrow Agent shall thereupon release such Escrowed
Funds to the Purchaser, the Purchaser shall thereupon transfer to ICN
the Additional Monthly Satisfied Units which have not previously been
sold, and any Escrowed Funds then remaining in the Escrow Account
shall continue to be held in the Escrow Account; provided, however,
that if any Monthly Number is one (1) or more and the Purchaser does
not elect within thirty (30) days after receipt of the Monthly Notice
applicable thereto to direct the Escrow Agent to release the Escrowed
Funds to the Purchaser as provided above, then all Escrowed Funds
shall be released by the Escrow Agent to ICN, the Purchaser shall have
no obligation to transfer any Purchaser Units to ICN, and the Escrow
Account shall be closed. In any event, the Escrow Account shall be
closed at such time as the Purchaser has been provided with the Rate
of Return on its investment in all of the First Purchaser Units and
the Rate of Return on its investment in all of the Additional
Purchaser Units, and the Escrow Agent shall release any amounts
remaining therein to ICN.
(e) COMPLIANCE WITH PARTNERSHIP AGREEMENT. In the event of any
transfer by the Purchaser of any of the Purchaser Units to ICN under
Paragraph 2(d) above, ICN, in its capacity as General Partner of the
Partnership and in its capacity as transferee of the Purchaser Units, shall
5
<PAGE>
comply with all requirements set forth in the Partnership Agreement for the
transfer by a Limited Partner of its Units in the Partnership, including
without limitation those set forth in Sections 7.4 and 7.7 therein.
(f) NOTIFICATION OF DEPOSITS. Simultaneously with the making of each
deposit into the Escrow Account pursuant to Paragraph 2(a) or 2(d)(iii)
above, the Partnership or ICN, as the case may be, shall notify the
Purchaser in writing of the amount thereof, and shall also notify the
Purchaser in writing of the estimated Tax Amount subtracted from the amount
of the applicable Distribution prior to making each such deposit.
(g) TAX AMOUNT ADJUSTMENTS. On or prior to April 15 of each year, (i)
if the actual Tax Amount for the preceding year is less than the estimated
Tax Amount subtracted from the amount of the applicable Distributions
pursuant to Paragraphs 2(a) and/or 2(d)(iii) above during the preceding
year, ICN and the Shareholders shall certify to the Purchaser the amount of
such difference (and attach to such certification a copy of ICN's Form
1120S and Schedule K thereto for such year) and shall deposit the amount of
such difference into the Escrow Account, and (ii) if the actual Tax Amount
for the preceding year is greater than the estimated Tax Amount subtracted
from the amount of the applicable Distributions pursuant to Paragraphs 2(a)
and/or 2(d)(iii) above during the preceding year, ICN and the Shareholders
may certify to the Purchaser and the Escrow Agent the amount of such
difference (and attach to such certification to the Purchaser a copy of
ICN's Form 1120S and Schedule K thereto for such year) and direct the
Escrow Agent to release to ICN the amount of such difference.
(h) CESSATION OF ESCROW DEPOSITS. The Partnership may cease making
deposits into the Escrow Account at such time, if any, as (i) on or prior
to December 31, 1994, the sum of the balance of the Escrow Account plus the
amount of the Receipts is equal to or greater than Five Million Dollars
($5,000,000), (ii) on or prior to December 31, 1995, the sum of the balance
of the Escrow Account plus the amount of the Receipts is equal to or
greater than Five Million Two Hundred Thousand Dollars ($5,200,000), or
(iii) on or prior to December 31, 1996, the sum of the balance of the
Escrow Account plus the amount of the Receipts is equal to or greater than
Five Million Four Hundred Thousand Dollars ($5,400,000).
(i) TRANSFER OF UNITS. When any Purchaser Units are required to be
transferred by the Purchaser to ICN pursuant to this Paragraph 2, the
Purchaser shall have the option of transferring either First Purchaser
Units or Additional Purchaser Units, or any combination thereof.
3. ICN BOARD OF DIRECTORS.
(a) ELECTION. Prior to the execution hereof the Shareholders shall
have voted their shares to elect, and hereafter shall continue to maintain,
a five (5) person Board of Directors of ICN, consisting of (i) Kolenda, so
long as he owns at least thirty-seven and one-half percent (37.5%) of the
outstanding voting shares of ICN, and if he no longer owns such shares of
ICN, an individual nominated by the majority of the remaining members of
ICN's Board of Directors, (ii) Gianinni, so long as he owns at least
thirty-seven and one-half percent (37.5%) of the outstanding voting shares
of ICN, and if he no longer owns such shares of ICN, an individual
nominated by the majority of the remaining members of ICN's Board of
Directors, (iii) an individual nominated by the Purchaser, (iv) an
6
<PAGE>
individual nominated by a majority-in-interest of the Limited Partners of
the Partnership other than the Purchaser and (v) 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.
(b) EXPANSION OF BOARD. In the event that the Board of Directors of
ICN is increased to more than five (5) persons, at least one of such
additional Directors shall be an individual nominated by the Purchaser.
(c) FURTHER ASSURANCES. In connection with the election of the Board
of Directors of ICN as provided in this Paragraph 3, the Shareholders
shall: (i) cause all certificates representing shares of stock of ICN to
reflect that the Shareholders have agreed to elect members of the Board of
Directors as required under Paragraph 3 of this Agreement and that a copy
of this Agreement may be obtained from ICN; (ii) not amend, or permit or
suffer to exist the amendment of, the Articles of Incorporation or By-Laws
of ICN in any way which would contravene or otherwise be inconsistent with
the provisions of this Paragraph 3; (iii) 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 3; and (iv) amend the Articles of Incorporation of ICN to provide
for the election of the Board of Directors of ICN as required under
Paragraphs 3(a) and 3(b) above.
4. PRESENCE OF KOLENDA AND GIANINNI AT OPERATIONS CENTER. If deemed
important to the survival and/or success of the Partnership, as determined by a
majority vote of the Board of Directors of ICN, Kolenda or Gianinni, or both, as
determined by such vote, shall spend at least four (4) days per week at the
Partnership's operations center in Fairfield, Ohio managing the operations of
the Partnership.
5. TRANSFERS OF INTERESTS.
(a) Transfer by ICN. ICN may not transfer any portion of ICN's
Partnership Interest to any person or entity other than the Purchaser (a
"Third Party"), unless the Third Party shall offer in writing to purchase
from the Purchaser the number of Purchaser Units which bears the same ratio
to the total number of Purchaser Units then owned by the Purchaser as the
amount of ICN's Partnership Interest to be transferred to such Third Party
bears to the total amount of ICN's Partnership Interest, for a purchase
price no less than the amount to be paid by such Third Party for ICN's
Partnership Interest and on terms otherwise no less favorable to the
Purchaser than the terms of the transfer of ICN's Partnership Interest (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 the Partnership).
(b) TRANSFER BY THE SHAREHOLDERS. Neither Shareholder may transfer any
portion of his shares of stock in ICN (the "ICN Stock"), other than
pursuant to the options referred to in Paragraph 5(d) below and except for
transfers not to exceed an aggregate of $100,000 in value for each
Shareholder provided that after such transfers each Shareholder continues
to own at least thirty-seven and one-half percent (37.5%) of the
outstanding voting shares of ICN, to any Third Party, unless the Third
Party shall offer in writing to purchase from the Purchaser the number of
7
<PAGE>
Purchaser Units which bears the same ratio to the total number of Purchaser
Units then owned by the Purchaser as the number of such Shareholder's
shares of ICN Stock to be transferred to such Third Party bears to the
total number of outstanding shares of ICN Stock (the Purchaser Units for
which an offer is required are herein called the "Offer Units") for a
purchase price (i) in the event that the Purchaser has theretofore received
Distributions in an amount at least equal to the Purchaser's Investment
plus the aggregate Preferred Return applicable to the Purchaser as
described in Section 8.1 of the Partnership Agreement (the "Investment Plus
Return"), in an amount no less than the product of (A) the number of Offer
Units multiplied by (B) the quotient of (x) the amount to be paid by such
Third Party for such Shareholder's ICN Stock divided by (y) the product of
(I) the total number of Units in the Partnership times (ii) one-half of the
quotient of (aa) the number of shares of ICN Stock to be purchased by such
Third Party divided by (bb) the total number of outstanding shares of ICN
Stock (the resulting purchase price is herein called "Base Purchase
Price"), and (ii) in the event that the Purchaser has not theretofore
received Distributions in an amount at least equal to the Investment Plus
Return, in an amount no less than the sum of (A) the Base Purchase Price
plus (B) the difference between (x) the Investment Plus Return and (y) the
amount of Distributions which the Purchaser has theretofore received, and
on terms otherwise no less favorable to the Purchaser than the terms of the
transfer of such ICN Stock (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 the Partnership).
(c) CONSUMMATION OF TRANSFER. No transfer of any portion of ICN's
Partnership Interest to any Third Party, and no transfer by either
Shareholder of any portion of his ICN Stock to any Third Party, other than
pursuant to the options referred to in Paragraph 5(d) below, or as
permitted in Paragraph 5(b), shall be consummated prior to thirty (30) days
after the date the Purchaser receives the offer described in Paragraph 5(a)
or 5(b) above, as applicable, 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 of the Purchaser Units
by the Third Party shall be consummated simultaneously with or immediately
after the transfer of ICN's Partnership Interest or the ICN Stock, as
applicable, to such Third Party.
(d) PROHIBITION AGAINST TRANSFER. ICN shall not transfer any portion
of ICN's Partnership Interest to any Third Party except in compliance with
Paragraphs 5(a) and 5(c) above, and neither of the Shareholders shall
transfer any portion of his ICN Stock to any Third Party, except (i)
pursuant to any option existing as of April 30, 1993 in favor of R. Brandon
Harrison, Jr., Denny Hurt, Vince Rinaldi, Dominic Palazolla, Dave Jones,
Dave Gauge, Dave Kalen and Marion Simpson or (ii) in compliance with
Paragraphs 5(b) and 5(c) above, and in no event shall either Shareholder
transfer any portion of his ICN Stock to any Third Party if such transfer
would cause the Shareholders to own, in the aggregate, less than
seventy-five percent (75%) of the ICN Stock or the economic interest in
ICN.
(e) COMPLIANCE WITH PARTNERSHIP AGREEMENT. In the event of any
transfer by the Purchaser of any of the Purchaser Units to a Third Party
under this Paragraph 5, ICN, in its capacity as General Partner of the
8
<PAGE>
Partnership and in its capacity as transferee of the Purchaser Units, if
applicable, and such Shareholder, in its capacity as transferee of the
Purchaser Units, if applicable, shall comply with all requirements set
forth in the Partnership Agreement for the transfer by a Limited Partner of
its Units in the Partnership, including without limitation those set forth
in Sections 7.4 and 7.7 therein.
(f) TRANSFER OF UNITS TO THIRD PARTIES. When any Purchaser Units are
to be transferred by the Purchaser to a Third Party pursuant to this
Paragraph 5, the Purchaser shall have the option of transferring either
First Purchaser Units or Additional Purchaser Units, or any combination
thereof.
6. LIFE INSURANCE. The Partnership represents to the Purchaser that the
Partnership is the owner and beneficiary of a policy of insurance on the life of
Kolenda in the amount of One Million Dollars ($1,000,000) and a policy of
insurance on the life of Gianinni in the amount of Two Million Dollars
($2,000,000), and further agrees to pay all premiums with respect to such
policies on or prior to the due date thereof. The Partnership and the
Shareholders agree to take any such other actions as may be necessary or
appropriate to maintain such policies in full force and effect, to provide
copies of such insurance policies to the Purchaser prior to or simultaneously
with the execution of this Agreement, and to provide to the Purchaser evidence
of the payment of premiums thereon and such other information with respect
thereto as the Purchaser may reasonably request from time to time. Without
limitation on the generality of the foregoing, prior to the execution hereof,
the Shareholders shall cause the Board of Directors of ICN to adopt a
resolution, as general partner of the Partnership, to the effect that the
Partnership shall not, without the prior written consent of the Purchaser, cause
or permit such policies to be cancelled or revoked, the amount of such policies
to be reduced, or the beneficiaries of such policies to be any person or entity
other than the Partnership.
7. REGISTRATION.
(a) PROPOSED REGISTRATION. If the Partnership should propose to
register any of the Units of the Partnership or any other equity securities
issued by the Partnership or any successor thereto for sale under the
Securities Act of 1933 (the "Act"), the Partnership 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, the
Partnership shall use its best efforts to cause the Purchaser Units or any
other equity securities issued by the Partnership or any successor thereto
which are owned by the Purchaser 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 the Partnership may, in lieu of including any or
all of the Purchaser Units or such other 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 the Purchaser
Units or such other securities under such registration, and provided
further, that the Partnership shall not be required to cause the Purchaser
Units or such other securities to be included under the proposed
registration if a majority of the Board of Directors of ICN (excluding the
Director nominated by the Purchaser) determines that such registration of
9
<PAGE>
the Purchaser Units or such other securities would have a materially
detrimental effect on the proposed registration. In the event that the
Partnership shall elect to effect a separate registration in accordance
with the provisions of the preceding sentence, the Partnership shall use
its best efforts to cause such separate registration to become effective
not later than ninety (90) days after the effectiveness of the originally
proposed registration. If the Partnership determines, prior to the
effectiveness of its originally proposed registration, not to proceed with
such registration, the Partnership shall have no further obligation under
this Paragraph 7(a) to register any Partnership units or other equity
securities under that registration statement.
(b) REGISTRATION PROCEDURES. If and whenever the Partnership is
required by the provisions of this Paragraph 7 to effect the registration
of any Purchaser Units or other securities under the Act, the Partnership
shall, as expeditiously as possible:
(i) Prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement with respect to such
Purchaser Units or other 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;
(iv) Use its best efforts to register or qualify the Purchaser
Units or other 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 to
consummate the disposition of the Purchaser Units or such other
securities during the period provided in Paragraph 7(b)(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 request 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.
(c) EXPENSES. All expenses incurred by the Partnership in complying
with this Paragraph 7, 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 the Partnership and
10
<PAGE>
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 the Partnership to the maximum extent permitted by law. All underwriting
fees and commissions incurred by the Purchaser and all fees and
disbursements of any counsel retained by the Purchaser shall be borne by
the Purchaser.
(d) INDEMNIFICATION.
(i) In the event of any registration of Purchaser Units or other
securities under this Paragraph 7, the Partnership, ICN and the
Shareholders shall defend, indemnify and hold harmless the Purchaser,
its officers and directors, each underwriter thereof and each person
which controls the Purchaser 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 or
any such officer, director, underwriter or controlling person may
become subject under the Act or otherwise, and the Partnership, ICN
and the Shareholders shall reimburse each of the Purchaser 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 the Partnership,
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 the Partnership by the
Purchaser or any such officer, director, underwriter or controlling
person. This indemnity shall be in addition to any liability which the
Partnership, ICN and the Shareholders may otherwise have.
(ii) In the event of any registration of Purchaser Units or other
securities under this Paragraph 7, the Purchaser shall indemnify ICN
and the Shareholders against any losses, claims, damages or
liabilities and any action in respect thereof, joint or several, to
which 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,
and the Purchaser shall reimburse ICN and the Shareholders for any
legal or other expenses reasonably incurred by ICN or the Shareholders
in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Purchaser
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 the Partnership by ICN or either of the
Shareholders. This indemnity shall be in addition to any liability
which the Purchaser may otherwise have.
(iii) If for any reason any indemnification described in
Paragraph 7(d)(i) or 7(d)(ii) above may not be provided by the party
or parties required therein to provide such indemnification (the
11
<PAGE>
"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 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.
8. EMPLOYMENT MATTERS.
(a) PERIOD OF EMPLOYMENT. Each of the Shareholders agrees that for so
long as he is employed by the Partnership or ICN, he shall not, directly or
indirectly, engage in any "Data Transfer Business" (as hereinafter defined)
anywhere in the world except through or on behalf of the Partnership or
ICN, and, without limiting the generality of the foregoing, he shall not do
any of the following (each, a "Related Activity"): (i) directly or
indirectly, on such Shareholder's own account or as an employee, officer,
director, shareholder, investor, independent contractor, consultant or
agent for any other person or entity, engage in or have any interest in any
business which is competitive with or substantially similar to the business
of the Partnership or any of its affiliates; (ii) solicit or attempt to
divert business from the Partnership or any of its affiliates; or (iii)
assist any other person or entity in doing any of the foregoing.
(b) POST-EMPLOYMENT.
(i) VOLUNTARY TERMINATION OR INVOLUNTARY TERMINATION WITH CAUSE.
In the event that either of the Shareholders voluntarily terminates
his employment with the Partnership or ICN or the employment of either
of the Shareholders with the Partnership or ICN is involuntarily
terminated by the Partnership or ICN "with cause" (as hereinafter
defined), such Shareholder shall not be entitled to, and shall not
receive, any monetary settlement, and (A) if such termination occurs
prior to April 30, 1995, such Shareholder shall not, prior to April
30, 1996, except with the prior written consent of the Purchaser,
engage, directly or indirectly, in any Data Transfer Business in the
United States or engage in any Related Activity, or (B) if such
12
<PAGE>
termination occurs on or after April 30, 1995, such Shareholder shall
not, for a period of one (1) year after the date of such termination,
except with the prior written consent of the Purchaser, engage,
directly or indirectly, in any Data Transfer Business in the United
States or engage in any Related Activity.
(ii) INVOLUNTARY TERMINATION WITHOUT CAUSE. In the event that the
employment of either of the Shareholders with the Partnership or ICN
is involuntarily terminated other than with cause:
(A) If such termination occurs prior to April 30, 1995, the
Partnership shall pay such Shareholder an amount equal to (I)
Three Hundred Thousand Dollars ($300,000) minus (II)(x) Two
Hundred Seventy-Four Dollars ($274) times (y) the number of days
from April 30, 1993 through the date of termination, and such
Shareholder shall not, prior to April 30, 1996, except with the
prior written consent of the Purchaser, engage, directly or
indirectly, in any Data Transfer Business in the United States or
engage in any Related Activity;
(B) If such termination occurs on or after April 30, 1995
but prior to April 30, 1996, (I) the Partnership shall pay such
Shareholder an amount equal to (x) One Hundred Thousand Dollars
($100,000) minus (y)(aa) Two Hundred Seventy-Four Dollars ($274)
times (bb) the number of days from April 30, 1995 through the
date of termination (the "Third Year Payment"), and such
Shareholder shall not, prior to April 30, 1996, except with the
prior written consent of the Purchaser, engage, directly or
indirectly, in any Data Transfer Business in the United States or
engage in any Related Activity, and (II) at the option of the
Partnership, the Partnership may pay such Shareholder an amount
which, when added to the amount of the Third Year Payment, will
cause the total amount paid by the Partnership to such
Shareholder pursuant to this Paragraph 8(b)(ii)(B) to equal One
Hundred Thousand Dollars ($100,000), in which event such
Shareholder shall not, prior to the first anniversary of the date
of termination, except with the prior written consent of the
Purchaser, engage, directly or indirectly, in any Data Transfer
Business in the United States or engage in any Related Activity;
or
(C) If such termination occurs on or after April 30, 1996,
the Partnership, at its option, may pay such Shareholder the sum
of One Hundred Thousand Dollars ($100,000), in which event such
Shareholder shall not, for a period of one (1) year after the
date of such termination, except with the prior written consent
of the Purchaser, engage, directly or indirectly, in any Data
Transfer Business in the United States or engage in any Related
Activity.
(c) "DATA TRANSFER BUSINESS" DEFINED. The term "Data Transfer
Business" as used herein means any business primarily involving the
transfer of data on behalf of third parties, but does not include any
business involving the transfer of data in which the applicable Shareholder
13
<PAGE>
has a substantial proprietary interest to third parties whose primary
purpose is acquiring the content of such data from such Shareholder rather
than obtaining from such Shareholder the means of transferring such data.
(d) "WITH CAUSE" DEFINED. If the Partnership or ICN shall have
terminated the employment of either of the Shareholders by reason of such
Shareholder at any time materially neglecting or refusing to perform the
duties of his employment, failing to devote his full employment time, in
the case of Gianinni, and approximately seventy-five percent (75%) of his
employment time, in the case of Kolenda, and best efforts to the business
of the Partnership or ICN, as the case may be, being guilty of misconduct
in connection with the business of the Partnership or ICN, as the case may
be, or becoming physically or mentally incapable of reasonably performing
the duties of his employment for a continuous period of ninety (90) days,
then such termination shall be deemed "with cause."
(e) ACKNOWLEDGMENT. Each of the Shareholders acknowledges that the
expertise of the Shareholders in the type of business in which the
Partnership is engaged is important to the Purchaser's decision to invest
in the Additional Purchaser Units, that the Purchaser's decision to invest
in the Additional Purchaser Units was made in reliance on such expertise
and the agreements of the Shareholders contained in this Paragraph 8, and
that the investment by the Purchaser in the Additional Purchaser Units will
be in the best interests of and beneficial to the Partnership and the
Shareholders.
(f) REFORMATION. In the event that any provision of this Paragraph 8
is held or declared to be void or illegal for any reason, the offending
provision shall, if possible, be reformed to most nearly implement the
intention of the parties hereto without such illegality, or if reformation
is not possible, the offending provision shall be stricken and all other
provisions of this Paragraph 8 which can be effected without such illegal
provision shall nevertheless remain in full force and effect.
9. RIGHTS OF FIRST REFUSAL.
(a) PARTNERSHIP INTERESTS. At any time that the Partnership proposes
to sell any additional Units or other interests in the Partnership, other
than any Units with respect to which CFG Securities Corp. ("CFG") has an
option to purchase as described in the Offering Memorandum and existing on
April 30, 1993, the Partnership agrees to notify the Purchaser of such
proposed sale and to provide the Purchaser with the right of first refusal
to purchase such Units or other interests in the Partnership, or any
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 the Partnership
otherwise proposes to sell such Units or other interests in the
Partnership, provided that any such purchase by the Purchaser shall be on a
pro rata basis with the other Limited Partners of the Partnership to the
extent that the other Limited Partners have the right and desire to
purchase such Units or other interests in the Partnership.
(b) RELATED ENTITY INTERESTS. At any time that ICN, or any entity
controlled by ICN or any of its affiliates which is engaged in any Data
Transfer Business, proposes to sell any stock or other equity interest
therein, ICN agrees to notify the Purchaser of such proposed sale and to
provide the Purchaser, or cause the Purchaser to be provided, with the
14
<PAGE>
right of first refusal to purchase such stock or other equity interests, or
any 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 ICN 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, ICN and any entity
controlled by ICN or any of its affiliates, to the extent that the other
Limited Partners, ICN and any entity controlled by ICN 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 Paragraphs 9(a) and 9(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. The Partnership agrees to use its best efforts
to provide, or cause to be provided, to the Purchaser the right of first
refusal to purchase any Units or other interests in the Partnership 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 Units or other interests are otherwise proposed to be resold,
provided that such right of first refusal need only be provided to the
Purchaser with respect to any Units or other interests which are not
purchased by the Partnership pursuant to any right of first refusal which
the Partnership may hold with respect to such Units or other interests, and
provided further, that in no event shall the Purchaser acquire more than
forty percent (40%) of the Limited Partner interests in the Partnership
without the consent of ICN.
10. LEGAL FEES AND EXPENSES. The Partnership 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 and the Subscription Agreement up to a maximum
of Five Thousand Dollars ($5,000), such fees and expenses to be paid within
thirty (30) days after the date hereof, or, in the case of fees and expenses
incurred after the date hereof, within thirty (30) days after presentation of a
statement therefor.
11. REPRESENTATIONS AND WARRANTIES. The Partnership, ICN and the
Shareholders jointly and severally represent and warrant to the Purchaser that:
(a) NO MISREPRESENTATIONS. Except as described in Exhibit B attached
hereto, the information contained in the Offering Memorandum, as well as in
the Partnership's audited financial statements for its year ended December
31, 1992 which have been provided to the Purchaser, is true and correct in
all material respects and the Offering Statement does not omit any facts
necessary to make any statements contained therein not misleading in any
material respect in light of the circumstances under which made ' and
neither the Partnership, ICN nor either of the Shareholders has made any
material misrepresentation to the Purchaser hereunder or otherwise in
connection with the offering or sale of the Additional Purchaser Units nor
omitted to state any facts necessary to make any statements made to the
Purchaser or any affiliate of the Purchaser hereunder or otherwise in
connection with the offering or sale of the Additional Purchaser Units not
misleading in any material respect in light of the circumstances under
15
<PAGE>
which made. No equity interest in ICN or the Partnership has been offered
for sale or sold in violation of any state or federal securities law.
(b) DUE EXECUTION. Each of this Agreement, the Subscription Agreement
and the Partnership Agreement has been duly executed and delivered by 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 constitutes the legal,
valid and binding obligation of each such party, enforceable against such
party in accordance with its terms.
(c) NO VIOLATION. The execution and delivery of this Agreement and the
Subscription Agreement by the Partnership, ICN and the Shareholders, as
applicable, and the performance by them of their obligations hereunder and
thereunder, 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 any other
agreement or governmental restriction to which any of them is a party 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.
12. AMENDMENT OF FIRST PURCHASE AGREEMENT. Prior to or simultaneously with
entering into this Agreement, the Purchaser, ICN, the Shareholders and the
Partnership shall amend the First Purchase Agreement to the extent reasonably
deemed necessary or appropriate by the Purchaser to insure that the provisions
of the First Purchase Agreement are not inconsistent with the provisions of this
Agreement.
13. 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 under the Subscription Agreement, 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 and under the Subscription Agreement. The
Partnership, ICN and the Shareholders represent to the Purchaser that 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.
16
<PAGE>
(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 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 any 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 and the Shareholders acknowledge
and agree that in the event of breach of any of the provisions of
Paragraphs 3(a), 3(b), 5, 8 and 9 above, the Purchaser would sustain
irreparable injury, and the Partnership, ICN and the Shareholders recognize
that money damages for such breach would be difficult or impossible to
ascertain. The Partnership, ICN and the Shareholders therefore agree that
the Purchaser shall be entitled, in addition 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 Paragraphs 9(a) and 9(b) hereof.
17
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
BLUE CHIP/DATALINC CORPORATION
By: /s/ Z. D. Patterson
_______________________
Title: President
INTEGRATED COMMUNICATION NETWORKS, INC.
By: /s/ Mark Gianinni
________________________
Title: President
/s/ John F. KOLENDA
_________________________
/s/ Mark Gianinni
__________________________
DATALINC, LTD.
By: Integrated Communication
Networks, Inc.,
its General Partner
By: /s/ John F. Kolenda
________________________
Title: CEO
bluechp9.pur
18
<PAGE>
EXHIBIT 10.1.1
AMENDMENT TO PURCHASE AGREEMENT
BY AND AMONG BLUE CHIP/DATALINC CORPORATION, ICN,
JOHN KOLENDA, MARK GIANINNI AND DATALINC, LTD.
dated September 1, 1993
1
<PAGE>
AMENDMENT TO PURCHASE AGREEMENT
THIS AMENDMENT TO PURCHASE AGREEMENT (this "Amendment") is made and entered
into as of this lst day of September, 1993 by and among BLUE CHIP/DATALINC
CORPORATION, an Ohio corporation (the "Purchaser"), INTEGRATED COMMUNICATION
NETWORKS, INC., a Florida corporation ("ICN"), JOHN F. KOLENDA, an individual
("Kolenda"), MARK J. GIANINNI, an individual ("Gianinni," and together with
Kolenda, the "Shareholders"), and DATALINC, LTD., a Florida limited partnership
(the "Partnership"), under the following circumstances:
WHEREAS, pursuant to a Purchase Agreement dated as of April 30, 1993 among
the Purchaser, the Partnership, ICN and the Shareholders (the "Agreement"), the
Purchaser purchased from the Partnership one hundred eighty (180) of the
Partnership's Series 300 Limited Partnership Units (the "First Purchaser
Units"); and
WHEREAS, pursuant to a Purchase Agreement of even date herewith among the
Purchaser, the Partnership, ICN and the Shareholders (the "Additional
Agreement"), the Purchaser is purchasing from the Partnership an additional two
hundred (200) of the Partnership's Series 300 Limited Partnership Units (the
"Additional Purchaser Units"); and
WHEREAS, it is a condition to the entering into of the Additional Agreement
that the parties shall have entered into this Amendment.
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 agent and escrow agreement. The "Escrow Agent" under the
Agreement shall be Star Bank, National Association, and Exhibit A to the
Agreement is hereby deleted and replaced with Exhibit A attached hereto, which
hereupon shall be deemed Exhibit A to the Agreement.
2. Purchaser units. The term "Purchaser Units" as used in Paragraphs 2(b),
2(d), 2(e), 5(a), 5(b), 5(c), 5(e), 7(a), 7(b) and 7(d) of the Agreement shall
hereupon be deemed to refer to the First Purchaser Units and the Additional
Purchaser Units.
3. Rate of return. The phrases "Rate of Return on its investment in all of
the Purchaser Units" and "Rate of Return on its investment in all of the
Partnership Units" as used in Paragraph 2(d) of the Agreement shall be deemed to
refer to the Rate of Return on the Purchaser's investment in all of the First
Purchaser Units and the Rate of Return on the Purchaser's investment in all of
the Additional Purchaser Units. "Rate of Return" for purposes of the Agreement
shall be calculated in the case of each Purchaser Unit from the date of purchase
thereof to the date of transfer thereof, whether to ICN as provided in the
Agreement or to any other transferee thereof.
4. Cessation of Escrow Deposits. Paragraph 2(h) of the Agreement is hereby
deleted in its entirety and replaced with the following, which hereupon shall be
deemed Paragraph 2(h) of the Agreement:
2
<PAGE>
(h) Cessation of Escrow Deposits. The Partnership may cease making
deposits into the Escrow Account at such time, if any, as (i) on or prior
to December 31, 1994, the sum of the balance of the Escrow Account plus the
amount of the Receipts is equal to or greater than Five Million Dollars
($5,000,000), (ii) on or prior to December 31, 1995, the sum of the balance
of the Escrow Account plus the amount of the Receipts is equal to or
greater than Five Million Two Hundred Thousand Dollars ($5,200,000), or
(iii) on or prior to December 31, 1996, the sum of the balance of the
Escrow Account plus the amount of the Receipts is equal to or greater than
Five Million Four Hundred Thousand Dollars ($5,400,000).
5. Transfer of Units. The following paragraph is hereby added to the
Agreement as Paragraph 2(i) thereof:
(i) Transfer of Units. When any Purchaser Units are required to be
transferred by the Purchaser to ICN pursuant to this Paragraph 2, the
Purchaser shall have the option of transferring either First Purchaser
Units or Additional Purchaser Units, or any combination thereof.
6. Timing of Election of ICN Board. Paragraph 3(a) of the Agreement is
hereby amended to provide that the five (5) person Board of Directors of ICN
required thereunder shall have been elected prior to the execution of the
Additional Agreement rather than within the time periods provided in the second
sentence of Paragraph 3(a) of the Agreement, and to that end the second sentence
of Paragraph 3(a) of the Agreement is hereby deleted in its entirety.
7. Expansion of ICN Board. The following paragraph is hereby added to the
Agreement as Paragraph 3(b) thereof:
(b) Expansion of Board. In the event that the Board of Directors of
ICN is increased to more than five (5) persons, at least one of such
additional Directors shall be an individual nominated by the Purchaser.
In connection therewith, subparagraph 11(b)" of Paragraph 3 of the
Agreement entitled "Further Assurances" is hereby re-lettered to become
subparagraph 11(c)", the references therein to "Paragraph 3(a)" shall be deemed
references to "Paragraph 311, and clause (iv) therein is hereby deleted in its
entirety and replaced with the following, which hereupon shall be deemed clause
(iv) therein:
(iv) amend the Articles of Incorporation of ICN to provide for the
election of the Board of Directors of ICN as required under Paragraphs 3(a)
and 3(b) above.
8. Compliance With Partnership Agreement. The phrase "to ICN or either of
the Shareholders" contained in Paragraph 5(e) of the Agreement is hereby deleted
and replaced with the phrase "to a Third Party".
9. Transfer of Units to Third Parties. The following paragraph is hereby
added to the Agreement as Paragraph 5(f) thereof:(f) Transfer of Units to Third
Parties. When any Purchaser Units are to be transferred by the Purchaser to a
Third Party pursuant to this Paragraph 5, the Purchaser shall have the option of
transferring either First Purchaser Units or Additional Purchaser Units, or any
combination thereof.
3
<PAGE>
10. Insurance. Without limitation on the generality of anything contained
in Paragraph 6 of the Agreement, prior to the execution of the Additional
Agreement, the Shareholders shall cause the Board of Directors of ICN to adopt a
resolution, as general partner of the Partnership, to the effect that the
Partnership shall not, without the prior written consent of the Purchaser, cause
or permit such policies to be cancelled or revoked, the amount of such policies
to be reduced, or the beneficiaries of such policies to be any person or entity
other than the Partnership.
11. Related Activity. The term "Related Business" as used in Paragraphs
8(b)(ii)(A) and 8(b)(ii)(B)of the Agreement is hereby deleted and replaced with
the term "Related Activity".
12. "With Cause" Defined. Paragraph 8(d) of the Agreement is hereby deleted
in its entirety and replaced with the following, which hereupon shall be deemed
Paragraph 8(d) of the Agreement:
(d) "With Cause" Defined. If the Partnership or ICN shall have
terminated the employment of either of the Shareholders by reason of such
Shareholder at any time materially neglecting or refusing to perform the
duties of his employment, failing to devote his full employment time, in
the case of Gianinni, and approximately seventy-five percent (75%) of his
employment time, in the case of Kolenda, and best efforts to the business
of the Partnership or ICN, as the case may be, being guilty of misconduct
in connection with the business of the Partnership or ICN, as the case may
be, or becoming physically or mentally incapable of reasonably performing
the duties of his employment for a continuous period of ninety (90) days,
then such termination shall be deemed "with cause."
13. Remedies. The first sentence of Paragraph 12(i) of the Agreement is
hereby amended to include Paragraph 3(b) among the Paragraphs listed therein.
14. Full Force and Effect. The Agreement shall remain in full force and
effect as amended hereby.
15. 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.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date first above written.
BLUE CHIP/DATALINC CORPORATION
s/s Z. Del Patterson
By: _____________________________
Title: President
4
<PAGE>
INTEGRATED COMMUNICATION NETWORKS, INC.
s/s Mark Gianinni
By: ______________________________
Title: President
s/s John F. Kolenda
_______________________________
JOHN F. KOLENDA
s/s Mark J. Gianinni
________________________________
MARK J. GIANINNI
DATALINC, LTD.
By: Integrated Communication Networks, Inc., its General Partner
s/s John F. Kolenda
By: _______________________
Title: Chairman
Amend(2).Pur
5
<PAGE>
EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of
this ist day of September, 1993, by and among BLUE CHIP/DATALINC CORPORATION, an
Ohio corporation 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 ("ICNII), DATALINC, LTD., a Florida limited partnership whose address is
1641 Commerce Avenue North, St. Petersburg, Florida 33716 (the "Partnership"),
JOHN F. KOLENDA, an individual with a mailing address at 1641 Commerce Avenue
North, St. Petersburg, Florida 33716 ("Kolendall), 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
STAR BANK, NATIONAL ASSOCIATION, a national banking association whose address is
425 Walnut Street, Cincinnati, Ohio 45202 (the "Escrow Agent"), under the
following circumstances:
WHEREAS, the Partnership has agreed to sell certain of its limited
partnership units to the Purchaser pursuant to and subject to the terms and
conditions set forth in the Purchage Agreement dated as of April 30, 1993 among
the Purchaser, the Partnership, ICN and the Shareholders (the "First Purchase
Agreement") and the Subscription Agreement dated as of April 30, 1993 between
the Purchaser and the Partnership (the "First Subscription Agreement"); and
WHEREAS, the Partnership has agreed to sell certain additional limited
partnership units to the Purchaser pursuant to and subject to the terms and
conditions set forth in the Purchase Agreement dated as of September 1, 1993
among the Purchaser, the Partnership, ICN and the Shareholders (the "Additional
Purchase Agreement," and together with the First Purchase Agreement, the
"Purchase Agreements") and the Subscription Agreement dated as of September 1,
1993 between the Purchaser and the Partnership (the "Additional Subscription
Agreement," and together with the First Subscription Agreement, the
"Subscription Agreements"); and
WHEREAS, pursuant to Paragraph 2 of each of the Purchase Agreements,
certain funds are required to be deposited into an escrow account; and
WHEREAS, the Purchaser, ICN, the Partnership and the Shareholders desire to
enter into this Agreement with the Escrow Agent in order to establish the escrow
account required under Paragraph 2 of each of the Purchase Agreements.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged by the parties hereto, the parties hereby
agree as follows:
1. Deposits With Escrow Agent. Immediately upon receipt thereof, the
Partnership shall deposit with the Escrow Agent all Distributions (as defined in
the Partnership's Amended Agreement of Limited Partnership dated as of January
1, 1993) which ICN would otherwise be entitled to receive from the Partnership,
less the amount estimated by the Shareholders to be necessary to be paid in
dividends to the Shareholders in order to meet the Shareholders' income tax
liabilities with respect to earnings of ICN being attributed to the Shareholders
as a result of ICN's election to be treated as a Subchapter S Corporation
including without limitation interest on funds deposited with the Escrow Agent
6
<PAGE>
(the "Tax Amount") for the year during which the applicable deposit is being
made, and ICN shall deposit with the Escrow Agent all amounts which it is
entitled to receive from the sale of any portion of its interest in the
Partnership.
2. Escrow Account. The Escrow Agent shall hold all funds deposited with it
pursuant to this Agreement (the "Escrowed Funds") in an interest-bearing account
(the "Escrow Account"). All interest accumulated thereon shall be added to the
Escrowed Funds and be deemed Escrowed Funds for purposes of this Agreement. Any
and all income or other tax liabilities with respect to the Escrow Account shall
be the responsibility of ICN, and the Purchaser shall have no responsibility or
liability. therefor.
3. Certain Conditions. Within thirty (30) days after the earliest to occur
of (I) December 31, 1996, (II) the date on which all of the Units of the
Partnership have been sold pursuant to a sale of the business of the
Partnership, or (III) the date on which the Partnership's assets have been
liquidated (the "Target Date"), the Purchaser shall provide to the Escrow Agent,
ICN and the Partnership a certification as to whether or not any of the
following conditions have been satisfied on or prior to the Target Date:
(i) The Purchaser has received cash Distributions from the Partnership
with respect to the Series 300 Limited Partnership Units of the Partnership
which the Purchaser has purchased pursuant to the First Purchase Agreement
and the First Subscription Agreement (the "First Purchaser Units"), cash
Distributions from the Partnership with respect to the Series 300 Limited
Partnership Units of the Partnership which the Purchaser has purchased
pursuant to the Additional Purchase Agreement and the Additional
Subscription Agreement (the "Additional Purchaser Units," and together with
the First Purchaser Units, the "Purchaser Units"), and/or cash proceeds
from the sale of Purchaser Units in an amount equal to at least three (3)
times the amount of cash paid by the Purchaser for the Purchaser Units (the
"Purchaser's Investment");
(ii) Either all or substantially all of the Partnership's assets or
all Units in the Partnership have beensold and the Purchaser has received
in exchange for the Purchaser Units (net of any Partnership liabilities
retained by the Purchaser and any reasonable costs of sale incurred by the
Purchaser) either (A) cash in an amount equal to at least three (3) times
the amount of the Purchaser's Investment or (B) securities for which there
is a liquid market, and which may be freely sold by the Purchaser without
restriction on the amount or manner of sale under applicable securities
laws or agreement, with a market value as determined in good faith, and
assuming sale within a period of not more than four (4) weeks, by the
majority vote of the Board of Directors of ICN (excluding the vote of the
Director nominated by the Purchaser) equal to at least three (3) times the
amount of the Purchaser's Investment; or
(iii) The Purchaser has received cash Distributions from the
Partnership with respect to the Purchaser Units and/or net cash proceeds
from the sale of Purchaser Units in an amount equal to at least two (2)
times the amount of the Purchaser's Investment and either (A) the
Partnership (or any successor thereto) has completed a public offering of
its equity securities and the total market value of the equity securities
of the Partnership (or such successor) owned by the Purchaser as of the
Target Date, and which may be freely sold by the Purchaser without
7
<PAGE>
restriction on the amount or manner of sale under applicable securities
laws or agreement, as determined in good faith by the Purchaser, is at
least equal to the amount of the Purchaser's Investment or (B) the
Purchaser Units then owned by the Purchaser are, in the Purchaser's sole
opinion exercised in a reasonable manner, readily salable (subject to
compliance with applicable securities laws) in a transaction in which the
net proceeds of such sale would equal at least the amount of the
Purchaser's Investment.
4. Satisfaction of Conditions. In the event that the Purchaser has
certified to the Escrow Agent that a condition set forth in Paragraph 3 above
has been satisfied on or prior to the Target Date, the Escrow Agent shall
release all of the Escrowed Funds to ICN, and the Escrow Account shall be
closed.
5. Failure to Satisfy Conditions. In the event that the Purchaser has
certified to the Escrow Agent that none of the conditions set forth in Paragraph
3 above have been satisfied on or prior to the Target Date, the Escrow Agent
shall, as soon as possible after receipt of the Purchaser's certification,
notify the Purchaser, ICN and the Partnership of the balance of the Escrow
Account as of the Target Date (the "Target Date Balance Notice"), and:
(a) Target Date Escrowed Funds Sufficient to Provide Rate of Return.
In the event that the Escrowed Funds as reflected in the Target Date
Balance Notice are in an amount sufficient, when added to the amount of
cash Distributions received by the Purchaser with respect to the Purchaser
Units and the amount of net cash proceeds received by the Purchaser from
the sale of Purchaser Units (the "Receipts"), to provide the Purchaser with
a weighted average thirty-five percent (35%) per annum internal rate of
return as calculated by the Purchaser (the "Rate of Return") on its
investment in all of the First Purchaser Units and the Rate of Return on
its investment in all of the Additional Purchaser Units ("Rate of Return"
for purposes of this Agreement shall be calculated in the case of each
Purchaser Unit from the date of purchase thereof to the date of transfer
thereof, whether to ICN as hereinafter provided or to any other transferee
thereof), the Purchaser, at its option, may certify to the Escrow Agent,
the Partnership and ICN the amount which is sufficient, when added to the
Receipts, to provide the Purchaser with the Rate of Return on its
investment in all of the First Purchaser Units and the Rate of Return on
its investment in all of the Additional Purchaser Units, and direct the
Escrow Agent to release such amount to the Purchaser from the Escrowed
Funds. Upon receipt from the Purchaser of such certification and direction,
the Escrow Agent shall release such amount of the Escrowed Funds to the
Purchaser and release all remaining Escrowed Funds, if any, to ICN, and the
Escrow Account shall be closed; provided, however, that if the Purchaser
does not provide such certification and direction to the Escrow Agent
within thirty (30) days after receipt of the Target Date Balance Notice,
then the Escrow Agent shall release all Escrowed Funds to ICN, and the
Escrow Account shall be closed.
(b) Target Date Escrowed Funds Insufficient to Provide Rate of Return.
In the event that the Escrowed Funds as reflected in the Target Date
Balance Notice are not in an amount sufficient, when added to the Receipts,
to provide the Purchaser with the Rate of Return on its investment in all
of the First Purchaser Units and the Rate of Return on its investment in
all of the Additional Purchaser Units, if the Target Date resulted from the
8
<PAGE>
sale of all of the Units in the Partnership pursuant to a sale of the
business of the Partnership or liquidation of the Partnership's assets,
then the Purchaser shall direct the Escrow Agent to release all of the
Escrowed Funds to the Purchaser. Upon receipt of such direction from the
Purchaser, the Escrow Agent shall release all of the Escrowed Funds to the
Purchaser, and the Escrow Account shall be closed. If the Target Date did
not result from either of those events, the Purchaser shall determine the
number of Purchaser Units, considered in the order of purchase, with
respect to which there are Escrowed Funds sufficient in amount, when added
to the Receipts, to provide the Purchaser with the Rate of Return (the
"Original Number"). If the original Number is less than ten (10), the
Escrowed Funds shall remain in the Escrow Account. If the Original Number
is ten (10) or more, the Purchaser shall so certify to the Escrow Agent,
ICN and the Partnership and the Purchaser, at its option, may certify to
the Escrow Agent, the Partnership and ICN the amount of the Escrowed Funds
which are sufficient, when added to the Receipts, to provide the Purchaser
with the Rate of Return on the number of Purchaser Units, considered in the
order of purchase, which is a multiple of ten (10) and is closest to, but
not greater than, the original Number (the "Original Satisfied Units") and
direct the Escrow Agent to release such amount to the Purchaser. Upon
receipt of such certification and direction from the Purchaser, the Escrow
Agent shall release such amount of the Escrowed Funds to the Purchaser, and
any Escrowed Funds then remaining in the Escrow Account shall continue to
be held in the Escrow Account; provided, however, that if the Original
Number is ten (10) or more and the Purchaser does not provide such
certification and direction to the Escrow Agent within thirty (30) days
after receipt of the Target Date Balance Notice, then the Escrow Agent
shall release all of the Escrowed Funds to ICN, and the Escrow Account
shall be closed.
(c) Continuance of Escrow. Unless the Escrow Account has been closed
as described in Paragraphs 5(a) and (b) above, the Partnership shall
continue to deposit with the Escrow Agent all Distributions which ICN would
otherwise be entitled to receive from the Partnership, less the Tax Amount
as estimated by the Shareholders for the year during which the applicable
deposit is being made, and ICN shall continue to deposit with the Escrow
Agent any amounts which it is entitled to receive from the sale of any
portion of its interest in the Partnership, until such time as the
Purchaser has received the Rate of Return on its investment in all of the
First Purchaser Units and the Rate of Return on its investment in all of
the Additional Purchaser Units or the Escrow Account has been closed in
accordance with this Paragraph 5(c), whichever first occurs. As soon as
possible after the end of each month after the Target Date, the Escrow
Agent shall notify the Purchaser, the Partnership and ICN of the balance of
the Escrow Account as of the end of such month (the "Monthly Balance
Notice"), and after receipt of each Monthly Balance Notice, the Purchaser
shall determine the number of Purchaser Units, considered in the order of
purchase, with respect to which there are Escrowed Funds sufficient in
amount, when added to the Receipts, to provide the Purchaser with the Rate
of Return (the "Monthly Number"). Each month until such time as the
Purchaser owns less than ten (10) Purchaser Units, if the Monthly Number is
less than ten (10), the Escrowed Funds shall remain in the Escrow Account.
If the Monthly Number is ten (10) or more, the Purchaser shall so certify
to the Escrow Agent, ICN and the Partnership, and the Purchaser, at its
option, may certify to the Escrow Agent, ICN and the Partnership, the
amount of the Escrowed Funds which is sufficient, when added to the
9
<PAGE>
Receipts, to provide the Purchaser with the Rate of Return on the number of
Purchaser Units, considered in the order of purchase, which is a multiple
of ten (10) and is closest to, but not greater than, the Monthly Number
(the "Monthly Satisfied Units") and direct the Escrow Agent to release such
amount to the Purchaser. Upon receipt of such certification and direction
from the Purchaser, the Escrow Agent shall release such amount of the
Escrowed Funds to the Purchaser, and any Escrowed Funds then remaining in
the Escrow Account shall continue to be held in the Escrow Account;
provided, however, that if any Monthly Number is ten (10) or more and the
Purchaser does not provide such certification and direction to the Escrow
Agent within thirty (30) days after receipt of the Monthly Balance Notice
applicable thereto, then the Escrow Agent shall release all of the Escrowed
Funds to ICN, and the Escrow Account shall be closed. Each month after the
Purchaser owns less than ten (10) Purchaser Units, if the Monthly Number is
less than one (1), the Escrowed Funds shall remain in the Escrow Account.
If the Monthly Number is one (1) or more, the Purchaser shall so certify to
the Escrow Agent, ICN and the Partnership, and the Purchaser, at its
option, may certify to the Escrow Agent, ICN and the Partnership, the
amount of the Escrowed Funds which is sufficient, when added to the
Receipts, to provide the Purchaser with the Rate of Return on the number of
Purchaser Units, considered in the order of purchase, which is the largest
whole number that is not greater than the Monthly Number (the "Additional
Monthly Satisfied Units") and direct the Escrow Agent to release such
amount to the Purchaser. Upon receipt of such certification and direction
from the Purchaser, the Escrow Agent shall release such amount of the
Escrowed Funds to the Purchaser, and any Escrowed Funds then remaining in
the Escrow Account shall continue to be held in the Escrow Account;
provided, however, that if any Monthly Number is one (1) or more and the
Purchaser does not provide such certification and direction to the Escrow
Agent within thirty (30) days after receipt of the Monthly Notice
applicable thereto, then the Escrow Agent shall release all Escrowed Funds
to ICN, and the Escrow Account shall be closed.
(d) Rate of Return Provided. The Purchaser shall notify the Escrow
Agent at such time as the Purchaser has been provided with the Rate of
Return on its investment in all of the First Purchaser Units and the Rate
of Return on its investment in all of the Additional Purchaser Units, and
upon receipt of such notification the Escrow Agent shall release any
amounts remaining in the Escrow Account to ICN, and shall close the Escrow
Account.
(e) Notification of Deposits. Simultaneously with the making of each
deposit into the Escrow Account pursuant to Paragraphs 1 or 5(c) above, the
Partnership or ICN, as the case may be, shall notify the Purchaser in
writing of the amount thereof, and shall also notify the Purchaser in
writing of the estimated Tax Amount subtracted from the amount of the
applicable Distribution prior to making each such deposit.
(f) Tax Amount Adjustments. On or prior to April 15 of each year, (i)
if the actual Tax Amount for the preceding year is less than the estimated
Tax Amount subtracted from the amount of the applicable Distributions
pursuant to Paragraphs 1 and/or 5(c) above during the preceding year, ICN
and the Shareholders shall certify to the Purchaser the amount of such
difference (and attach to such certification a copy of ICN's Form 1120S and
Schedule K thereto for such year) and shall deposit the amount of such
difference into the Escrow Account, and (ii) if the actual Tax Amount for
10
<PAGE>
the preceding year is greater than the estimated Tax Amount subtracted from
the amount of the applicable Distributions pursuant to Paragraphs 1 and/or
5(c) above during the preceding year, ICN and the Shareholders may certify
to the Purchaser and the Escrow Agent the amount of such difference (and
attach to such certification to the Purchaser a copy of ICN's Form 1120S
and Schedule K thereto for such year) and direct the Escrow Agent to
release to ICN the amount of such difference. Upon receipt of such
certification and direction from ICN and the Shareholders, the Escrow Agent
shall release such amount to ICN.
(g) Cessation of Escrow Deposits. The Partnership may cease making
deposits into the Escrow Account at such time, if any, as (i) on or prior
to December 31, 1994, the sum of the balance of the Escrow Account plus the
amount of the Receipts is equal to or greater than Five Million Dollars
($5,000,000), (ii) on or prior to December 31, 1995, the sum of the balance
of the Escrow Account plus the amount of the Receipts is equal to or
greater than Five Million Two Hundred Thousand Dollars ($5,200,000), or
(iii) on or prior to December 31, 1996, the sum of the balance of the
Escrow Account plus the amount of the Receipts is equal to or greater than
Five Million Four Hundred Thousand Dollars ($5,400,000).
6. Escrow Agent.
(a) The Escrow Agent agrees to act as escrow agent hereunder and to
hold, safeguard and disburse the Escrow Funds in accordance with the terms
hereof, but the Escrow Agent does not undertake hereby to perform any
duties which are not expressly set forth herein.
(b) The Escrow Agent may rely and shall be protected in acting upon
any written notice, certification or direction furnished to it in
accordance with this Agreement and reasonably believed by it to be genuine
and to have been signed or presented by the proper party.
(c) The Escrow Agent shall not be liable for any action taken by it in
good faith and reasonably believed by it to be authorized or within the
rights or powers conferred upon it by this Agreement, and may consult with
counsel of its own choice and shall be protected with respect to any action
taken or suffered by it hereunder in good faith and in accordance with the
opinion of such counsel.
(d) The Escrow Agent may resign and be discharged from its duties or
obligations hereunder by giving notice in writing of such resignation
specifying a date not less than thirty (30) days from the date of such
notice upon which such resignation shall take effect, whereupon a successor
Escrow Agent shall be appointed by the Purchaser.
(e) In the event of a dispute among the parties as to the proper
disposition of the Escrowed Funds, the Escrow Agent, at its option, shall
have the right to do either or both of the following: (i) decline to
release any of the Escrowed Funds until it is satisfied, in its discretion,
that such dispute has been resolved or (ii) deliver the Escrowed Funds into
the Court of Common Pleas for Hamilton County, Ohio or the Federal District
Court located in Hamilton County, Ohio and thereupon be relieved of further
responsibility with respect to the Escrowed Funds.
11
<PAGE>
(f) The Escrow Agent shall be entitled to a fee in the amount of Two
Hundred Fifty Dollars ($250.00) per year and Fifty Dollars ($50.00) per
release by the Escrow Agent of Funds from the Escrow Account as
compensation for the services to be rendered by it hereunder and shall also
be entitled to reimbursement for all losses, liabilities or expenses,
including reasonable attorneys' fees, incurred by it without gross
negligence or bad faith on its part, arising out of or in connection with
its entering into this Agreement or carrying out its duties hereunder. Any
such compensation and reimbursement to which the Escrow Agent is entitled
shall be the responsibility of ICN, and the Purchaser shall have no
responsibility or liability therefor.
(g) This Agreement expressly sets forth all of the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. The
Escrow Agent shall not be bound by the provisions of any agreement among
the parties hereto except this Agreement.
7. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio.
(c) This Agreement cannot be modified or amended except by a writing
signed by all of the parties hereto.
(d) All notices and other communications 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 to a
nationally recognized overnight courier service with arrangements made by
the sender for payment thereof, addressed to the parties at the following
addresses or such other address as any party has notified the others as
provided herein:
In case of the Purchaser:
Blue Chip/Datalinc Corporation
221 East Fourth Street
Cincinnati, Ohio 45202
Attention: Z. David Patterson
with a copy to:
Blue Chip Capital Fund
Limited Partnership
221 East Fourth Street
Cincinnati, Ohio 45202
Attention: Z. David Patterson
In case of ICN:
Integrated Communication Networks, Inc.
1641 Commerce Avenue North
St. Petersburg, Florida 33716
Attention: John F. Kolenda
12
<PAGE>
In case of the Partnership:
Datalinc, Ltd.
1641 Commerce Avenue North
St. Petersburg, Florida 33716
Attention: John F. Kolenda
In case of Kolenda:
John F. Kolenda
1641 Commerce Avenue North
St. Petersburg, Florida 33716
In case of Gianinni:
Mark J. Gianinni
1641 Commerce Avenue North
St. Petersburg, Florida 33716
In case of the Escrow Agent:
Star Bank, National Association
Mail Location 5125
425 Walnut Street
Cincinnati, Ohio 45202
Attention: Susan Spiess
(e) 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.
(f) 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.
(g) 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.
13
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.
BLUE CHIP/DATALINC CORPORATION
By:_____________________________
Title:
INTEGRATED COMMUNICATIONS NETWORKS, INC.
By:_____________________________
Title:
DATALINC, LTD.
By: Integrated Communications Networks, Inc.
By: ____________________________
Title:
STAR BANK, NATIONAL ASSOCIATION
By: ____________________________
Title:
14
<PAGE>
EXHIBIT 10.1.3
Terms Sheet, Blue Chip Guarantee to Datalinc, Ltd., dated
July 9, 1997
<PAGE>
BLUE CHIP LOAN TO DATALINC
July 9, 1997
In response to Datalinc's request for a $3000,OOO bridge loan, Blue Chip is
willing to provide the following:
1. Loans of up to $300,000 to Datalinc to be advanced by end of July, l997.
2. Blue Chip will provide a guarantee to Datalinc's bank
- Blue Chip's $300,000 guaranteed loan will be in addition to
Datalinc's $900,000 - $1 million outstanding bank loans/ credit line
- The bank loans supported by Blue Chip's guarantee are "last in
first out" loans at the bank.
3. Blue Chip's guarantee is counter-guaranteed by, John Kolenda and Mark
Gianinni on joint and several basis.
4. Blue Chip's guarantee is to be released on or before October 31, 1997.
5. Use of proceeds:
- Monthly operating expenses
- Reduction of Hughes' obligations
- Not pay off bank debt
6. In exchange for the $300,000 guaranteed advance, Blue Chip Venture
Company, will receive an $8,000 Consulting Fee payable October 31, 1997.
7. If Blue Chip's guarantee is NOT fully discharged on or before October
31, 1997, Blue Chip will receive the following for each full or
fraction of a month the guarantee remains outstanding:
- Monthly Consulting Fees of $3,000 per month to be paid the last day,
of each month beginning the last day of November 1997.
- Warrant to purchase 1/2 of 1% of Thrucomm, Inc. ownership (as Thrucomm
Inc. is capitalized pre-new 5-4 financing) for a nominal exercise
price exercisable within three vears.
8. Datalinc/Thrucomm will pay all of Blue Chip's legal expenses
associated with the guarantee/loans outlined herein, as well as
legal expenses associated with the review and modification of Blue
Chip's documents related to the S-4.
<PAGE>
EXHIBIT 10.1.4
$100,000 Demand Note
between Datalinc Ltd. and Blue Chip Capital Fund Limited
dated June 27, 1997
<PAGE>
DEMAND NOTE
$100,0000 Cincinnati, Ohio
June 27, 1997
For value received, the undersigned, Datalinc, Ltd., a Florida limited
partnership (the "Borrower"), promises to pay to the order of BLUE CHIP CAPITAL
FUND LIMITED PARTNERSHIP (the "Investor") the principal sum of $100,000. The
unpaid principal amount of this note shall bear interest at the rate of ten
percent (10%) per annum.
PAYMENT. The unpaid principal amount together with the interest accrued
thereon, shall be payable upon demand, in lawful money of the United States of
America and in immediately available funds, at 2000 PNC Center, 201 East Fifth
Street, Cincinnati, Ohio 45202, or at such other place as hereafter may be
designated by written notice from the holder of the Borrower. Interest shall be
calculated on the basis of a 360-day year for the actual number of days
principal is unpaid.
PRE-PAYMENT. The Borrower shall have the privilege of pre-paying this note,
in part or in full, at any time without penalty; payment shall be applied first
to the payment of interest and the balance to principal.
MISCELLANEOUS. Demand, presentment, protest and notice of nonpayment and
protest are hereby waived by the Borrower.
Whenever in this note reference is made to the "Borrower" or the
"Investor", such reference shall be deemed to include, as applicable, a
reference to their respective successors and assigns. The provisions of this
note shall be binding upon and shall inure to the benefit of such successors and
assigns. The Borrower's successors and assigns shall include, without
limitation, a receiver, trustee or debtor in possession of or for the Borrower.
This note shall be governed by and construed in accordance with the laws of
the State of Ohio.
COGNOVIT NOTE. The Borrower hereby irrevocably authorizes and empowers any
attorney-at-law to appear for the Borrower in any action upon or in connection
with this note at any time after any obligation under this note becomes due, as
herein provided, in any court in or of the State of Ohio or elsewhere, and
waives the issuance and service or process with respect thereto, and irrevocably
authorizes and empowers any such attorney-at-law to confess judgment in favor of
the Investor against the Borrower, the amount due hereon, plus interest as
herein provided, and all costs of collection, and waives and releases all errors
in any said proceedings and judgments and all rights of appeal from the judgment
rendered. The Borrower agrees and consents that the attorney confessing judgment
on behalf of the Borrower hereunder may also be counsel to the Investor and the
Borrower hereby further waives any conflict of interest which might otherwise
arise and consents to the Investor paying such confessing attorney a legal fee
or allowing such attorneys' fees to be paid from proceeds of collection of this
note.
1
<PAGE>
********************************************************************************
WARNING -- BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWER OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CASE.
********************************************************************************
DATALINC, LTD.
By: Integrated Communications Network, Inc.
its General Partner
/s/John F. Kolenda
By: _____________________
John F. Kolenda, Chairman of the Board
/s/Mark J. Gianinni
By: ______________________
Mark J. Gianinni, President
2
<PAGE>
GUARANTY
For value received and in consideration of a loan (the "Loan") of $100,000
made to Datalinc, Ltd. ("Borrower") by Blue Chip Capital Fund Limited
Partnership ("Lender") on the date hereof pursuant to that certain Demand Note
of even date herewith evidencing the Loan, as the same may be amended from time
to time (the "Note"), John F. Kolenda ("Guarantor") hereby unconditionally the
full and prompt payment of the principal and interest payable under the Note and
of all of the indebtedness, liabilities and obligations of every kind and nature
of Borrower to Lender, howsoever created, arising out of or evidenced by the
Note, whether direct or indirect, absolute or contingent, joint or several, now
or hereafter existing, or due or to become due, and howsoever owned, held or
acquired by Lender (the "Obligations"), when due, whether at maturity or earlier
by reason of demand, acceleration or otherwise, and at all times thereafter.
Guarantor further agrees to pay all costs and expenses, including, without
limitation, all court costs and attorneys' and paralegals' fees and expenses,
paid or incurred by Lender in endeavoring to collect or enforce all or any part
of the Obligations from, or in prosecuting any action against, Borrower,
Guarantor or any other guarantor of all or any part of the Obligations.
Guarantor hereby agrees that, except as hereinafter provided, Guarantor's
obligations under this Guaranty shall be unconditional, irrespective of (i) the
validity or enforceability of the Obligations or of any promissory note or other
document evidencing all or any part of the Obligations, (ii) the absence of any
attempt to collect the Obligations from Borrower or any other guarantor or other
action to enforce the same, (iii) the waiver or consent by Lender with respect
to any provision of any instrument evidencing the Obligations, or any part
thereof, or any other agreement now or hereafter executed by Borrower and
delivered to Lender, (iv) failure by Lender to take any steps to perfect and
maintain its security interest in, or to preserve its rights to, any security or
collateral for the Obligations, (v) Lender's election, in any proceeding
instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C.
para. 101 et seq.) (the "Bankruptcy Code"), of the application of Section
1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security
interest by Borrower, as debtor-in-possession, under Section 364 of the
Bankruptcy code, (vii) the disallowance of all or any portion of Lender's
claim(s) for repayment of the Obligations under Section 502 of the Bankruptcy
code, or (viii) any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of a guarantor.
Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of receivership or bankruptcy of Borrower,
protest or notice with respect to the Obligations and all demands whatsoever and
convenants that this Guaranty will not be discharged, except by complete
performance of the obligations contained herein. Upon any default by Borrower,
Lender may, at its sole election, proceed directly and at once, without notice,
against Guarantor to collect and recover the full amount or any portion of the
Obligations, without first proceeding against Borrower or any other person, firm
or corporation, or against any security or collateral for the Obligations.
Lender shall have the exclusive right to determine the application of payments
and credits, if any, from Guarantor, Borrower or from any other person, firm or
corporation, on account of the Obligations or of any other liability of
Guarantor to Lender.
3
<PAGE>
Lender is hereby authorized, without notice or demand and without affecting
the liability of Guarantor hereunder, to, from time to time, (i) renew, extend,
accelerate or otherwise change the time for payment of, or other terms relating
to, the Obligations, or otherwise modify, amend or change the terms of any
promissory note or other agreement, document or instrument now or hereafter
executed by Borrower and delivered to Lender; (ii) accept partial payments on
the Obligations; (iii) take and hold security or collateral for the payment of
this Guaranty, any other guarantees of the Obligations or other liabilities of
Borrower and the Obligations guaranteed hereby, and exchange, enforce, waive and
release any such security or collateral; (iv) apply such security or collateral
and direct the order or manner of sale thereof as in its sole discretion it may
determine; and (v) settle, release, compromise, collect or otherwise liquidate
the Obligations and any security or collateral therefore an any manner, without
affecting or impairing the obligations of the Guarantor hereunder.
At any time after maturity of the Obligations, Lender may, in its sole
discretion, without notice to guarantor and regardless of the acceptance of any
security or collateral for the payment hereof, appropriate and apply toward the
payment of the Obligations (i) any indebtedness due or to become due from Lender
to Guarantor, and (ii) any moneys, credits, deposits, account balances or other
property belonging to Guarantor, now existing or at any time held by or coming
into the possession Lender or any affiliate of Lender.
Guarantor hereby assumes responsibility for keeping itself informed of the
financial condition of Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the
Obligations and of all other circumstances bearing upon the risk of nonpayment
of the Obligations or any part thereof that diligent inquiry would reveal and
Guarantor hereby agrees that Lender shall have no duty to advise Guarantor of
information known to Lender regarding such condition or any such circumstances.
In the event Lender, in its sole discretion, undertakes at any time or from time
to time to provide any such information to Guarantor, Lender shall be under no
obligation (i) to undertake any investigation not a part of its regular business
routine, (11) to disclose any information which, pursuant to accepted or
reasonable commercial finance practices, Lender wishes to maintain confidential,
or (111) to make any other or future disclosures of such information or any
other information to Guarantor. The Guarantor hereby represents and warrants
that any personal financial statements which the Guarantor has delivered to
Lender fairly present the Guarantor's assets and liabilities as of the date
thereof.
Guarantor hereby further agrees not to sell, lease, convey, transfer or
shift any of his property or assets (i) with the intent or effect of sheltering
such property or assets from Guarantor's obligations under this Guaranty and
(ii) unless such transaction is on fair and reasonable terms.
Guarantor consents and agrees that Lender shall be under no obligation to
marshall any assets in favor of Guarantor or against or in payment of any or all
of the Obligations. Guarantor further agrees that, to the extent that Borrower
makes a payment or payments to Lender, or Lender receives any proceeds of
collateral, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to Borrower, its estate, trustee, receiver or any other
party, including, without limitation, Guarantor, under any bankruptcy law, state
or federal law, common law or equitable cause, then to the extent of such
4
<PAGE>
payment or repayment, the Obligations or part thereof which has been paid,
reduced or satisfied by such amount shall be reinstated and continued in full
force and effect as of the date such initial payment, reduction or satisfaction
occurred.
Guarantor irrevocably and permanently waives, and will not attempt to
exercise in any way, any rights which Guarantor might otherwise have had or
acquired against Lender or Borrower or any other party by way of subrogation or
otherwise because of any payment made by Borrower or Guarantor hereunder or
otherwise, Guarantor waives any right to enforce any remedy which Lender now has
or may hereafter have against Borrower, any endorser or any other guarantor of
all or any part of the Obligations, and Guarantor waives any benefit of, and any
right to participate in, any security or collateral given to Lender to secure
payment of the Obligations or any other liability of Borrower to Lender.
Guarantor also hereby waives any claim, right or remedy which Guarantor may now
have or hereafter acquire against the performance by Guarantor hereunder,
including, without limitation, any claim, remedy or right to subrogation,
reimbursement, exoneration, contribution, indemnification, or participation in
any claim, right or remedy of Lender against borrower or any security which
Lender now has or hereafter acquires, whether or not such claim, right or remedy
arises in equity, under contract, by statute, under common law, or otherwise.
Guarantor further agrees that any and all claims of Guarantor against Borrower,
any endorser or any other guarantor of all or any part of the Obligations, or
against any of their respective properties, for whatever reason arising, shall
be subordinate and subject in right of payment to the prior payment, in full, of
all principal and interest, all reasonable costs of collection and any other
liabilities or obligations owing to Lender by Borrower which may arise either
with respect to or on any note, instrument, document, item, agreement or other
writing heretofore, now or hereafter delivered to Lender. Guarantor also waives
all setoffs and counterclaims and all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
and notices of acceptance of this Guaranty. Guarantor further waives all notices
of the existence, creation or incurring of new or additional indebtedness,
arising either from additional loans extended to Borrower or otherwise, and also
waives all notices that the principal amount, or any portion thereof, and/or any
interest on any instrument or document evidencing all or any part of the
Obligations is due, notices of any and all proceedings to collect from the
maker, any endorser or any other guarantor of all or any part of the
Obligations, or from anyone else, and, to the extent permitted by law, notices
of exchange, sale, surrender or other handling of any security or collateral
given to Lender to secure payment of the Obligations.
No delay on the part of Lender in the exercise of any right or remedy shall
operate as a waiver thereof, and no single or partial exercise by Lender of any
right or remedy shall preclude any further exercise thereof, nor shall any
modification or waiver of any of the provisions of this Guaranty be binding upon
Lender, except as expressly set forth in a writing duly signed and delivered on
Lender's behalf by an authorized officer or agent of Lender. Lender's failure at
any time or times hereafter to require strict performance by Borrower or
Guarantor of any of the provisions, warranties, terms and conditions contained
in any promissory note, security agreement, agreement, guaranty, instrument or
document now or at any time or times hereafter executed by Borrower or Guarantor
and delivered to Lender shall not waive, affect or diminish any right of Lender
at any time or times hereafter to demand strict performance thereof and such
right shall not be deemed to have been waived by any act or knowledge of Lender,
its agents, officers or employees, unless such waiver is contained in an
5
<PAGE>
instrument in writing signed by an officer or agent of Lender and directed to
Borrower specifying such waiver. No waiver by Lender of any default shall
operate as a waiver of any other default or the same default on a future
occasion, and no action by Lender permitted hereunder shall in any way affect or
impair Lender's rights or the obligations of Guarantor under this Guaranty. Any
determination by a court of competent jurisdiction of the amount of any
principal and/or interest owing by Borrower to Lender shall be conclusive and
binding on Guarantor irrespective of whether Guarantor was a party to the suit
or action in which such determination was made. Guarantor agrees, consents to
and confirms that any extension of any statute of limitations resulting from any
payment of the obligations by Borrower, any guarantor or any other person and
affecting enforcement or collection of the obligations of Borrower, or of the
liabilities of Guarantor under this Guaranty shall to the same degree also
extend any Statute of Limitations affecting enforcement and collection of the
liabilities under this Guaranty.
This Guaranty shall be binding upon Guarantor and upon his successors and
assigns, heirs and legal representatives of Guarantor and shall inure to the
benefit of Lender and its successors and assigns. All references herein to
Borrower shall be deemed to include its successors and assigns, including,
without limitation, a receiver, trustee or debtor in possession of or for
Borrower. All references to the singular shall be deemed to 'include the plural
where the context so requires.
This Guaranty has been delivered and accepted at and shall be deemed to
have been made at Cincinnati, Ohio. This Guaranty shall be interpreted, and the
rights and liabilities of the parties hereto determined, in accordance with the
local laws of the State of Ohio and all other laws of mandatory application.
Wherever possible each provision of this Guaranty shall be Interpreted in
such manner as to be effective and valid under applicable laws, but if any
provision of this Guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Guaranty.
AS A SPECIFICALLY BARGAINED INDUCEMENT FOR LENDER TO ACCEPT THIS GUARANTY AND TO
EXTEND CREDIT TO BORROWER, GUARANTOR AGREES THAT ANY ACTION, SUIT OR PROCEEDING
IN RESPECT OF OR ARISING OUT OF THIS GUARANTY, IT'S VALIDITY OR PERFORMANCE, AT
THE SOLE OPTION OF LENDER, ITS SUCCESSORS AND ASSIGNEES, SHALL BE INITIATED AND
PROSECUTED AS TO ALL PARTIES AND THEIR HEIRS, SUCCESSORS AND ASSIGNS AT
CINCINNATI, OHIO. LENDER AND GUARANTOR EACH CONSENTS TO AND SUBMITS TO THE
EXERCISE OF JURISDICTION OVER ITS PERSON BY ANY COURT SITUATED AT CINCINNATI,
OHIO HAVING JURISDICTION OVER THE SUBJECT MATTER, WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
CERTIFIED MAIL DIRECTED TO GUARANTOR AND LENDER AT THEIR RESPECTIVE ADDRESSES AS
SET FORTH BELOW (OR SUCH OTHER ADDRESS AS A PARTY MAY FROM TIME TO TIME
DESIGNATE FOR ITSELF BY NOTICE TO THE OTHER PARTY) OR AS OTHERWISE PROVIDED
UNDER THE LAWS OF THE STATE OF OHIO. GUARANTOR AND LENDER EACH WAIVES TRIAL BY
JURY, ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF
ANY ACTION INSTITUTED HEREUNDER, AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
6
<PAGE>
Guarantor hereby irrevocably authorizes and empowers any attorney-at-law to
appear for Guarantor in any action upon or in connection with this Guaranty at
any time after the Obligations guaranteed hereby become due, as herein provided,
in any court in or of the State of Ohio or elsewhere, and waives the issuance of
service of process in connection therewith, and irrevocably authorizes and
empowers any such attorney-at-law to confess judgment in favor of Lender against
Guarantor for the amount of such Obligations and costs of collection, and waives
and releases all errors in said proceedings and judgments and waives all right
of appeal from the judgment rendered. Guarantor agrees and consents that the
attorney confessing judgment on behalf of Guarantor hereunder may also be
counsel to Lender and/or affiliates of Lender, and Guarantor hereby further
waives any conflict of interest which might otherwise arise and consents to
Lender paying such confessing attorney a legal fee or allowing such attorneys'
fees to be paid from proceeds of collection of this Guaranty and/or any and all
collateral and security for the Obligations.
IN WITNESS WHEREOF, this Guaranty has been duly executed by Guarantor as of
the 27th day of June, 1997.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Guarantor:
/s/John F. Kolenda
___________________________
John F. Kolenda
Address: 700 Apalachee Drive
St. Petersburg, Florida 33702
Accepted in Cincinnati, Ohio, as of the
27th day of June, 1997
BLUE CHIP CAPITAL FUND LIMITED PARTNERSHIP
c/o Blue Chip Venture Company
201 East Fifth Street, Suite 2000
Cincinnati, Ohio 45202
By: BLUE CHIP VENTURE COMPANY
its General Partner
By:_____________________________
Name:___________________________
Title:__________________________
7
<PAGE>
GUARANTY
For value received and in consideration of a loan (the "Loan") of $100,000
made to Datalinc, Ltd. ("Borrower") by Blue Chip Capital Fund Limited
Partnership ("Lender") on the date hereof pursuant to that certain Demand Note
of even date herewith evidencing the Loan, as the same may be amended from time
to time (the "Note"), Mark J. Gianinni ("Guarantor") hereby unconditionally
guarantees the full and prompt payment of the principal and interest payable
under the Note and of all of the indebtedness, liabilities and obligations of
every kind and nature of Borrower to Lender, howsoever created, arising out of
or evidenced by the Note, whether direct or indirect, absolute or contingent,
joint or several, now or hereafter existing, or due or to become due, and
howsoever owned, held or acquired by Lender (the "Obligations"), when due,
whether at maturity or earlier by reason of demand, acceleration or otherwise,
and at all times thereafter. Guarantor further agrees to pay all costs and
expenses, including, without limitation, all court costs and attorneys' and
paralegals' fees and expenses, paid or incurred by Lender in endeavoring to
collect or enforce all or any part of the Obligations from, or in prosecuting
any action against, Borrower, Guarantor or any other guarantor of all or any
part of the Obligations.
Guarantor hereby agrees that, except as hereinafter provided, Guarantor's
obligations under this Guaranty shall be unconditional, irrespective of (i) the
validity or enforceability of the Obligations or of any promissory note or other
document evidencing all or any part of the Obligations, (ii) the absence of any
attempt to collect the Obligations from Borrower or any other guarantor or other
action to enforce the same, (iii) the waiver or consent by Lender with respect
to any provision of any instrument evidencing the Obligations, or any part
thereof, or any other agreement now or hereafter executed by Borrower and
delivered to Lender, (iv) failure by Lender to take any steps to perfect and
maintain its security interest in, or to preserve its rights to, any security or
collateral for the Obligations, (v) Lender's election, in any proceeding
instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C.
para. 101 et seq.) (the "Bankruptcy Code"), of the application of Section
1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a security
interest by Borrower, as debtor-inpossession, under Section 364 of the
Bankruptcy code, (vii) the disallowance of all or any portion of Lender's
claim(s) for repayment of the Obligations under Section 502 of the Bankruptcy
code, or (viii) any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of a guarantor.
Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of receivership or bankruptcy of Borrower,
protest or notice with respect to the Obligations and all demands whatsoever and
convenants that this Guaranty will not be discharged, except by complete
performance of the obligations contained herein. Upon any default by Borrower,
Lender may, at its sole election, proceed directly and at once, without notice,
against Guarantor to collect and recover the full amount or any portion of the
Obligations, without first proceeding against Borrower or any other person, firm
or corporation, or against any security or collateral for the Obligations.
Lender shall have the exclusive right to determine the application of payments
and credits, if any, from Guarantor, Borrower or from ally other person, firm or
corporation, on account of the Obligations or of any other liability of
Guarantor to Lender.
8
<PAGE>
Lender is hereby authorized, without notice or demand and without affecting
the liability of Guarantor hereunder, to, from time to time, (1) renew, extend,
accelerate or otherwise change the time for payment of, or other terms relating
to, the Obligations, or otherwise modify, amend or change the terms of any
promissory note or other agreement, document or instrument now or hereafter
executed by Borrower and delivered to Lender; (ii) accept partial payments on
the Obligations; (iii) take and hold security or collateral for the payment of
this Guaranty, any other guarantees of the Obligations or other liabilities of
Borrower and the Obligations guaranteed hereby, and exchange, enforce, waive and
release any such security or collateral; (iv) apply such security or collateral
and direct the order or manner of sale thereof as in its sole discretion it may
determine; and (v) settle, release, compromise, collect or otherwise liquidate
the Obligations and any security or collateral therefore an any manner, without
affecting or impairing the obligations of the Guarantor hereunder.
At any time after maturity of the Obligations, Lender may, in its sole
discretion, without notice to guarantor and regardless of the acceptance of any
security or collateral for the payment hereof, appropriate and apply toward the
payment of the Obligations (i) any indebtedness due or to become due from Lender
to Guarantor, and (ii) any moneys, credits, deposits, account balances or other
property belonging to Guarantor, now existing or at any time held by or coming
into the possession Lender or any affiliate of Lender.
Guarantor hereby assumes responsibility for keeping itself informed of the
financial condition of Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the
Obligations and of all other circumstances bearing upon the risk of nonpayment
of the Obligations or any part thereof that diligent inquiry would reveal and
Guarantor hereby agrees that Lender shall have no duty to advise Guarantor of
information known to Lender regarding such condition or any such circumstances.
In the event Lender, in its sole discretion, undertakes at any time or from time
to time to provide any such information to Guarantor, Lender shall be under no
obligation (i) to undertake any investigation not a part of its regular business
routine, (ii) to disclose any information which, pursuant to accepted or
reasonable commercial finance practices, Lender wishes to maintain confidential,
or (iii) to make any other or future disclosures of such information or any
other information to Guarantor. The Guarantor hereby represents and warrants
that any personal financial statements which the Guarantor has delivered to
Lender fairly present the Guarantor's assets and liabilities as of the date
thereof.
Guarantor hereby further agrees not to sell, lease, convey, transfer or
shift any of his property or assets (i) with the intent or effect of sheltering
such property or assets from Guarantor's obligations under this Guaranty and
(ii) unless such transaction is on fair and reasonable terms.
Guarantor consents and agrees that Lender shall be under no obligation to
marshall any assets in favor of Guarantor or against or in payment of any or all
of the Obligations. Guarantor further agrees that, to the extent that Borrower
makes a payment or payments to Lender, or Lender receives any proceeds of
collateral, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to Borrower, its estate, trustee, receiver or any other
party, including, without limitation, Guarantor, under any bankruptcy law, state
or federal law, common law or equitable cause, then to the extent of such
payment or repayment, the Obligations or part thereof which has been paid,
9
<PAGE>
reduced or satisfied by such amount shall be reinstated and continued in full
force and effect as of the date such initial payment, reduction or satisfaction
occurred.
Guarantor irrevocably and permanently waives, and will not attempt to
exercise in any way, any rights which Guarantor might otherwise have had or
acquired against Lender or Borrower or any other party by way of subrogation or
otherwise because of any payment made by Borrower or Guarantor hereunder or
otherwise, Guarantor waives any right to enforce any remedy which Lender now has
or may hereafter have against Borrower, any endorser or any other guarantor of
all or any part of the Obligations, and Guarantor waives any benefit of, and any
right to participate in, any security or collateral given to Lender to secure
payment of the Obligations or any other liability of Borrower to Lender.
Guarantor also hereby waives any claim, right or remedy which Guarantor may now
have or hereafter acquire against the performance by Guarantor hereunder,
including, without limitation, any claim, remedy or right to subrogation,
reimbursement, exoneration, contribution, indemnification, or participation in
any claim, right or remedy of Lender against borrower or any security which
Lender now has or hereafter acquires, whether or not such claim, right or remedy
arises in equity, under contract, by statute, under common law, or otherwise.
Guarantor further agrees that any and all claims of Guarantor against Borrower,
any endorser or any other guarantor of all or any part of the Obligations, or
against any of their respective properties, for whatever reason arising, shall
be subordinate and subject in right of payment to the prior payment, in full, of
all principal and interest, all reasonable costs of collection and any other
liabilities or obligations owing to Lender by Borrower which may arise either
with respect to or on any note, instrument, document, item, agreement or other
writing heretofore, now or hereafter delivered to Lender. Guarantor also waives
all setoffs and counterclaims and all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
and notices of acceptance of this Guaranty. Guarantor further waives all notices
of the existence, creation or incurring of new or additional indebtedness,
arising either from additional loans extended to Borrower or otherwise, and also
waives all notices that the principal amount, or any portion thereof, and/or any
interest on any instrument or document evidencing all or any part of the
Obligations is due, notices of any and all proceedings to collect from the
maker, any endorser or any other guarantor of all or any part of the
Obligations, or from anyone else, and, to the extent permitted by law, notices
of exchange, sale, surrender or other handling of any security or collateral
given to Lender to secure payment of the Obligations.
No delay on the part of Lender in the exercise of any right or remedy shall
operate as a waiver thereof, and no single or partial exercise by Lender of any
right or remedy shall preclude any further exercise thereof, nor shall any
modification or waiver of any of the provisions of this Guaranty be binding upon
Lender, except as expressly set forth in a writing duly signed and delivered on
Lender's behalf by an authorized officer or agent of Lender. Lender's failure at
any time or times hereafter to require strict performance by Borrower or
Guarantor of any of the provisions, warranties, terms and conditions contained
in any promissory note, security agreement, agreement, guaranty, instrument or
document now or at any time or times hereafter executed by Borrower or Guarantor
and delivered to Lender shall not waive, affect or diminish any right of Lender
at any time or times hereafter to demand strict performance thereof and such
right shall not be deemed to have been waived by any act or knowledge of Lender,
its agents, officers or employees, unless such waiver is contained in an
instrument in writing signed by an officer or agent of Lender and directed to
10
<PAGE>
Borrower specifying such waiver. No waiver by Lender of any default shall
operate as a waiver of any other default or the same default on a future
occasion, and no action by Lender permitted hereunder shall in any way affect or
impair Lender's rights or the obligations of Guarantor under this Guaranty. Any
determination by a court of competent jurisdiction of the amount of any
principal and/or interest owing by Borrower to Lender shall be conclusive and
binding on Guarantor irrespective of whether Guarantor was a party to the suit
or action in which such determination was made. Guarantor agrees, consents to
and confirms that any extension of any statute of limitations resulting from any
payment of the obligations by Borrower, any guarantor or any other person and
affecting enforcement or collection of the obligations of Borrower, or of the
liabilities of Guarantor under this Guaranty shall to the same degree also
extend any Statute of Limitations affecting enforcement and collection of the
liabilities under this Guaranty.
This Guaranty shall be binding upon Guarantor and upon his successors and
assigns, heirs and legal representatives of Guarantor and shall inure to the
benefit of Lender and its successors and assigns. All references herein to
Borrower shall be deemed to include its successors and assigns, including,
without limitation, a receiver, trustee or debtor in possession of or for
Borrower. All references to the singular shall be deemed to include the plural
where the context so requires.
This Guaranty has been delivered and accepted at and shall be deemed to
have been made at Cincinnati, Ohio. This Guaranty shall be interpreted, and the
rights and liabilities of the parties hereto determined, in accordance with the
local laws of the State of Ohio and all other laws of mandatory application.
Wherever possible each provision of this Guaranty shall be interpreted in
such manner as to be effective and valid under applicable laws, but if any
provision of this Guaranty shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Guaranty.
AS A SPECIFICALLY BARGAINED INDUCEMENT FOR LENDER TO ACCEPT THIS GUARANTY
AND TO EXTEND CREDIT TO BORROWER, GUARANTOR AGREES THAT ANY ACTION, SUIT OR
PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS GUARANTY, ITS VALIDITY OR
PERFORMANCE, AT THE SOLE OPTION OF LENDER, ITS SUCCESSORS AND ASSIGNEES, SHALL
BE INITIATED AND PROSECUTED AS TO ALL PARTIES AND THEIR HEIRS, SUCCESSORS AND
ASSIGNS AT CINCINNATI, OHIO. LENDER AND GUARANTOR EACH CONSENTS TO AND SUBMITS
TO THE EXERCISE OF JURISDICTION OVER ITS PERSON BY ANY COURT SITUATED AT
CINCINNATI, OHIO HAVING JURISDICTION OVER THE SUBJECT MATTER, WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY CERTIFIED MAIL DIRECTED TO GUARANTOR AND LENDER AT THEIR
RESPECTIVE ADDRESSES AS SET FORTH BELOW (OR SUCH OTHER ADDRESS AS A PARTY MAY
FROM TIME TO TIME DESIGNATE FOR ITSELF BY NOTICE TO THE OTHER PARTY) OR AS
OTHERWISE PROVIDED UNDER THE LAWS OF THE STATE OF OHIO. GUARANTOR AND LENDER
EACH WAIVES TRIAL BY JURY, ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY
OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER, AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT.
11
<PAGE>
Guarantor hereby irrevocably authorizes and empowers any attorney-at-law to
appear for Guarantor in any action upon or in connection with this Guaranty at
any time after the Obligations guaranteed hereby become due, as herein provided,
in any court in or of the State of Ohio or elsewhere, and waives the issuance of
service of process in connection therewith, and irrevocably authorizes and
empowers any such attorney-at-law to confess judgment in favor of Lender against
Guarantor for the amount of such Obligations and costs of collection, and waives
and releases all errors in said proceedings and judgments and waives all right
of appeal from the judgment rendered. Guarantor agrees and consents that the
attorney confessing judgment on behalf of Guarantor hereunder may also be
counsel to Lender, and Guarantor hereby and/or affiliates of Lender, and
Guarantor further waives any conflict of interest which might otherwise arise
and consents to Lender paying such confessing attorney a legal fee or allowing
such attorneys' fees to be paid from proceeds of collection of this Guaranty
and/or any and all collateral and security for the Obligations.
IN WITNESS WHEREOF, this Guaranty has been duly executed by Guarantor as of the
27th day of June, 1997.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Guarantor
/s/_______________________
By: Mark J. Gianinni
Address: 807 2nd Avenue South
Tierra Verde, Florida 33715
Accepted in Cincinnati, Ohio, as of the
27th day of June, 1997
BLUE CHIP CAPITAL FUND LIMITED PARTNERSHIP
c/o Blue Chip Venture Company
201 East Fifth Street, Suite 2000
Cincinnati, Ohio 45202
By: BLUE CHIP VENTURE COMPANY
its General Partner
By: ___________________________
Name: _________________________
Title: ________________________
12
<PAGE>
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 ( ) 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.
<PAGE>
Payment Agreement
Page 2
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
<PAGE>
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
<PAGE>
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
<PAGE>
EXHIBIT 10.6
Form of Employment Agreement to be entered into by and among Thrucomm, Inc.
and Messrs.Kolenda and Gianinni
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of this day of 1997 (the "Agreement"), by
and between Thrucomm, Inc., a Florida corporation ("Employer"), and
("Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee and Employee desires to be
employed by Employer as Chairman of the Board of Employer; and
WHEREAS, Employer recognizes the need of the knowledge, talents and
assistance of Employee and desires to enter into this Agreement to secure the
foregoing.
NOW, THEREFORE, in consideration of the promises herein contained, the
parties covenant and agree as follows:
1. EMPLOYMENT. Employer agrees to employ Employee and Employee agrees to be
employed by Employer and to perform work as determined by Employer, as Chairman
of the Board of Employer, on the terms and conditions set forth in this
Agreement. This Agreement shall be effective as of the date hereof (the
"Effective Date").
2. COMPENSATION. Employer agrees to employ Employee at the base rate of
compensation of per year. Compensation is to be paid on the
15th and last day of each month.
In addition to the base compensation, Employer agrees to pay or provide
Employee with the following:
A. Other Benefits. Employer shall provide Employee with other benefits
as are set forth on Exhibit A attached hereto and incorporated herein by
reference.
B. EXPENSES. Reimbursement for reasonable expenses actually incurred
by Employeee in the furtherance of Employer's business, including, but not
limited to, telephone calls (including business related calls on Employee's
cellular phone and business related long distance calls), entertainment,
attendance at conferences, conventions and institutes, provided proper
itemization of said expenses is furnished Employer by Employee. All such
expenditures shall be subject to the reasonable control of Employer.
C. MEDICAL AND DISABILITY BENEFITS. Employee shall be entitled to
participate in Employer's medical program, Employer-paid disability and
other benefit programs as other executives of Employer are entitled to
participate in, as is in place from time to time. If Employee desires to
include any family members in the medical plan, Employee shall be
responsible for all additional costs.
D. ADDITIONAL BENEFITS. Employee shall be entitled to participate in
and receive such additional benefits as Employer shall from time to time
make available to its executive employees including, without limitation,
profit sharing, stock purchase, stock option and other incentive plans.
1
<PAGE>
3. DUTIES. Employee agrees to perform work as determined by Employer,
subject to the direction of Employer and agrees to subject himself at all times
during the Term (as hereinafter defined) to the direction and control of
Employer in respect to the work to be performed. Employee shall devote his full
business time and attention to the furtherance of Employer's best interests. In
that regard, and as further consideration for this Agreement, Employee agrees to
comply with, and abide by, such rules and directives of Employer as may be
reasonably established from time to time, and recognizes the right of Employer,
in its reasonable discretion, to change, modify or adopt new policies and
practices affecting the employment relationship, not inconsistent with this
Agreement, as deemed appropriate by Employer. During the term of Employee's
employment, Employee will not undertake any new business ventures, partnerships
consulting arrangements or other enterprise or business other than those on
behalf of Employer, without Employer's prior written consent.
Employee's typical responsibilities include, but are not limited to, those
set forth on Exhibit B attached hereto and incorporated by reference herein.
4. WORKING FACILITIES. Employee shall be furnished with office space,
secretarial services, and such other facilities and services suitable to
Employee's position and adequate for the performance of Employee's duties.
5. AGENCY. Employee shall have no authority to enter into any contracts
binding upon Employer, except as authorized in writing, in advance, by Employer.
6. TERM OF EMPLOYMENT; SEVERANCE.
A. Employee's employment hereunder shall commence as of the Effective
Date hereof and continue for a period of five (5) years thereafter (the
"Term").
B. Anything herein to the contrary notwithstanding, Employee's
employment hereunder may be termninated at any time and for any reason by
either party upon not less than one hundred twenty (120) days' prior
written notice to the other party. It is understood and acknowledged that
Employer shall have the right to effectuate such termination at will, with
or without Reasonable Cause (as hereinafter defined). Any such termination
shall be effective as of the end of such one hundred twenty (120) day
period (the "Final Date").
C. If Employee's employment hereunder shall be terminated by Employer
without Reasonable Cause pursuant to paragraph 6.B. or because of
Employee's disability, as determined by Employer in good faith, or if
Employee voluntarily terminates employment hereunder for Good Reason or if
this Agreement is not renewed by Employer for any reason at the end of the
Tenn, then Employee shall be entitled to (i) severance compensation equal
to Employee's then-current base salary and benefits (which for purposes
hereof shall include all compensation payable hereunder, of any type) for a
period equal to the Severance Period (as defined below) and (ii)
outplacement services at Employer's expense if Employee actually utilizes
such services (collectively, the "Severance Benefits"). Such severance
compensation payments consisting of cash shall be paid in a lump sum on or
before the Final Date. The Severance Benefits are intended to be in lieu of
all other payments to which Employee might otherwise be entitled in respect
of termination of Employee's employment without Reasonable Cause or in
respect of any action by Employer constituting Good Reason for voluntary
termination.
2
<PAGE>
D. If Employee's employment hereunder shall be terminated for
Reasonable Cause pursuant to paragraph 6.C., or if Employee voluntarily
terminates Employee's employment without Good Reason, Employee shall be
entitled to receive Employee's base salary as accrued through the effective
date of such termination, but shall not be entitled to any Severance
Benefits or other amounts in respect of such termination.
E. "Reasonable Cause," as used herein, shall mean Employee's
involvement in any action or inaction involving fraud resulting in a
personal benefit in excess of any payments to which Employee is entitled
hereunder, dishonesty, or material violation of Corporation policy and
procedures. Employee shall vacate the offices of Employer on such effective
date.
F. "Good Reason," as used herein, means the occurrence of any of the
following events without Employee's consent:
i. a material diminution in Employee's duties and
responsibilities;
ii. a reduction in Employee's base salary;
iii. a forced relocation; or
iv. a Change of Control (as defined below) if Successor Employer
(as defined in paragraph 21 below) fails to assume this Agreement in
its entirety.
G. "Severance Period," as used herein, means twenty four (24) months.
H. "Change of Control" means a sale outside the ordinary course of
business of more than fifty percent (50%) of the assets of or equity
interests in Employer to any person or entity.
7. COMPLIANCE WITH LAWS. Employee will comply with all federal and state
laws, rules and regulations relating to any of Employee's responsibilities and
duties with Employer and will not violate any such laws, rules and regulations.
8. COVENANT NOT TO COMPETE. Employee agrees to conform to the following
concerning non-competition.
A. Employer undertakes to train Employee and to give Employee
confidential information and knowledge about Employer's business policies,
accounts procedures and methods. For the purposes of this Agreement, the
term "confidential information" shall include but is not limited to any
list of suppliers, customers, investors, stockholders, including their
names, addresses, phone numbers, amount of investments and similar
information. In addition, any operational information of Employer,
including but not limited to information on Employer's methods of
conducting business, profits and/or losses of Employer, marketing material
and any information that would reasonably be considered proprietary or
confidential in nature. Employer has established a valuable and extensive
trade in its products and services, which business has been developed at a
considerable expense to Employer. The nature of the business is such that
the relationship of its customers with Employer must be maintained through
the close personal contact of its employees.
3
<PAGE>
B. Employee desires to enter into or continue in the employ of
Employer and by virtue of such employment by Employer, Employee will become
familiar with the manner, methods, secrets and confidential information
pertaining to such business. During the Term, Employee will continue to
receive additional confidential information of the same kind. Through
representatives of Employer, Employee will become personally acquainted
with the business of Employer and its methods of operation.
C. In consideration of the employment or continued employment of
Employee as herein provided, the training of Employee by Employer, and the
disclosure by Employer to employee of the knowledge and confidential
information described above, Employer requests and Employee makes the
covenants hereinafter set forth. Employee understands and acknowledges that
such covenants are required for the fair and reasonable protection of the
business of Employer carried on in the area to which the covenants are
applicable and that without the limited restrictions on Employee's
activities imposed by the covenants, the business of Employer would suffer
irreparable and immeasurable damage. The covenants on the part of Employee
shall be construed as an agreement independent of any other provision of
this Agreement, and existence of any claim or course of action whether
predicated on this Agreement or otherwise, shall not constitute a defense
to the enforcement by Employer of the covenants.
D. Employee agrees that during the term of Employee's employment and
for the period of twelve (12) months immediately following the termination
of employment (which said time period shall be increased by any time during
which Employee is in violation of this Agreement) Employee will not, within
the territory hereinafter defined, directly or indirectly, for Employee, or
on behalf of others, as an individual on Employee's own account, or as an
employee, agent, or representative for any other person, partnership, firm
or corporation:
i. Compete with the business of Employer by engaging or
participating in or furnishing aid or assistance in competition with
the business of Employer.
ii. Engage, in any capacity, directly or indirectly, in or be
employed by any business similar to the kind or nature of business
conducted by Employer during the employment.
iii. For the purposes of this paragraph 8, the business of
Employer shall be limited to the wireless data transfer business,
which means any business primarily involving the wireless transfer of
data on behalf of third parties, but does not include any business
involving the wireless transfer of data in which Employee has a
substantial proprietary interest to third parties whose primary
purpose is acquiring the content of such data from such Employee
rather than obtaining from such Employee the means of transferring
wirelessly such data.
E The territory referred to in this paragraph 8 shall be the United
States.
F. Each restrictive covenant is separate and distinct from any other
covenant set forth in this paragraph. In the event of the invalidity of any
covenant, the remaining obligation shall be deemed independent and
4
<PAGE>
divisible. The parties agree that the territory set forth is reasonable and
necessary for the protection of Employer. In the event any term or
condition is deemed to be too broad or unenforceable, said provision shall
be deemed reduced in scope to the extent necessary to make said provision
enforceable and binding.
G. The provisions of this paragraph 8 shall not apply if Employee's
employment is terminated by Employer without Reasonable Cause or by
Employee for Good Reason.
9. INDUCING EMPLOYEE OF EMPLOYER TO LEAVE. Any attempt on the part of
Employee to induce others to leave Employer's employ or any efforts by Employee
to interfere with Employer's relationship with other employees would be harmful
and damaging to Employer. Employee expressly agrees that during the term of
Employee's employment and for a period of twelve (I 2) months thereafter
(provided said time period shall be increased by any time during which Employee
is in violation of this Agreement), Employee will not in any way directly or
indirectly:
A. Induce or attempt to induce an employee to sever his or her
employment with Employer;
B. Interfere with or disrupt Employer's relationship with other
employees; and
C. Solicit, entice, take away or employ any person employed with
Employer, excluding people Employee brings to Employer.
10. CONFIDENTIAL INFORMATION. It is understood between the parties hereto
that during the term of employment, Employee will be dealing with confidential
information, as defined above, which is Employer's property, used in the course
of its business. Employee will not disclose to anyone, directly or indirectly,
any of such confidential information or use such information other than in the
course of Employee's employment. All documents that Employee prepares, or
confidential information that might be given to Employee in the course of
employment, are the exclusive property of Employer and shall remain in
Employer's possession on the premises. Under no circumstances shall any such
information or documents be removed without Employer's written consent first
being obtained.
11. RETURN OF EMPLOYER'S PROPERTY. On termination of employment, regardless
of how termination is effected, or whenever requested by Employer, Employee
shall immediately return to Employer all of Employer's property used by Employee
rendering services hereunder or otherwise that is in Employee's possession or
under Employee's control.
12. VACATION. Employee shall be entitled to a vacation period of four (4)
weeks per calendar year. The vacation shall be taken by Employee at such time
during the year and for such period as determined by the Executive Committee of
Employer. All vacations must be taken in the year earned. No vacations will be
accrued.
13. REFERENCES. Employer agrees that, upon termination of this Agreement,
it will, upon written request of Employee, furnish references to third parties,
including prospective employers, regarding Employee. However, Employee
acknowledges that it is Employer's policy to confirm employment only and not to
release any additional information without a written release from Employee.
5
<PAGE>
14. NOTICES. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be deemed to have been
delivered on the date personally delivered or the date mailed, postage prepaid
by certified mail, return receipt requested, or taxed and confirmed, if
addressed to the respective parties as follows:
If to Employer: Thrucomm, Inc.
1641 Commerce Avenue North St.
Petersburg, FL 33716
Attention: Mark J. Gianinni, President
If to Employee:
Either party may change its address for the purpose of receiving notices,
demands, and other communications by giving written notice to the other party of
the change.
15. VOLUNTARY AGREEMENT. Employee represents that he has not been
pressured, misled or induced to enter this Agreement based upon any
representation by Employer not contained herein.
16. PROVISIONS TO SURVIVE. The parties hereto acknowledge that many of the
terms and conditions of this Agreement are intended to survive the employment
relationship. Therefore, any terms and conditions that are intended by the
nature of the promises or representations to survive the termination of
employment shall survive the term of employment regardless of whether such
provision is expressly stated as so surviving.
17. MERGER. This Agreement represents the entire Agreement between the
parties and shall not be subject to modification or amendment by any oral
representation, or any written statement by either party, except for a dated
written amendment to this Agreement signed by Employee and an authorized officer
of Employer.
18. VENUE AND APPLICABLE LAW. This Agreement shall be enforced and
construed in accordance with the laws of the State of Florida, and venue to any
action or arbitration under this Agreement shall be Pinellas County, FL.
19. SUBSIDIARIES AND AFFILIATED ENTITIES. Employee acknowledges and agrees
that Employer has or may have various subsidiaries and affiliated entities. In
rendering services to Employer, Employee will have considerable contact with
such subsidiaries and affiliates. Therefore, Employee agrees that all provisions
of paragraphs 7, 8, 9 and 10 shall apply to all such subsidiaries and
affiliates.
20. PERSONNEL INFORMATION. Employee shall not divulge or discuss personnel
information such as salaries, bonuses, commissions and benefits relating to
Employee or other employees of Employer or any of its subsidiaries with any
other person except the Executive Committee and the Board of Directors of
Employer.
21. ASSIGNMENT. This Agreement shall not be assignable by either party
without the written consent of the other party; provided, however, that this
Agreement shall be assignable to any corporation or entity which purchases the
6
<PAGE>
assets of or succeeds to the business of Employer (a "Successor Employer").
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Employer
THRUCOMM, INC.
By:
Mark J. Gianinni
President
Employee
7
<PAGE>
EXHIBIT A
Other Benefits
Employer shall provide Employee with a car allowance in the amount of $400.00
per month, which can be in the form of reimbursement for lease payments,
debt service and/or expenses of maintenance and operation.
8
<PAGE>
FASTCOM, LTD.
MANAGEMENT INCENTIVE PLAN
---------------------------
1. TERMS. This Document (the Plan) and the Partnership Agreement shall
govern all terms and conditions (the Terms) of the MIP Special Limited
Partnership Units of the Partnership, and all persons admitted to the
Partnership as MIP Special Limited Partners.
2. ADMINISTRATION. The Terms shall be administered by the Board of
Directors (the "Board") of Fastcom Management, Inc., the General Partner (the
"General Partner") of the Partnership. The Board may establish, subject to the
provisions hereof, such rules and regulations as it deems necessary for the
proper administration hereof, and has the authority to construe and interpret
these Terms whenever any question of meaning arises under it and make such
determinations and take such action in connection therewith or in relation to
the Terms as it deems necessary or advisable, consistent with the Terms. Any
such construction or interpretation shall be binding both on the Partnership and
on the MIP Special Limited Partner, his personal representatives, the
representatives of his estate, his heirs, or anyone else having or claiming to
have an interest as a MIP Special Limited Partner. Determinations by the Board
shall be by majority vote and shall be binding on all parties with respect to
all matters relating to the Terms.
3. ELIGIBILITY. Regular full-time employees of the Partnership who are key
employees of the Partnership shall be eligible to become MIP Special Limited
Partners. Such employees are herein referred to as "MIP Special Limited
Partners."
4. GRANT OF UNITS.
(a) The Board may from time to time, in its discretion and subject to
the provisions of the Terms, grant MIP Special Limited Partner units (the
"Units") to any or all MIP Special Limited Partners. Each grant shall be
embodied in a Management Incentive Plan Special Limited Partner Agreement
(the "Agreement") signed by the MIP Special Limited Partner and the
Partnership providing that the grant of Units shall be subject to these
Terms and containing such other provisions as the Board may prescribe not
inconsistent with the Terms. The "Date of Grant" for each Unit shall be the
date determined by the Board. The aggregate number of Units available for
grant hereunder is five hundred (500) Units, each of which represent 1/500
of the aggregate MIP Special Limited Partnership Units. Unless otherwise
provided herein or in the Agreement, all rights of MIP Special Limited
Partners to Units vest as follows:
______________________________________________________________________________
| Anniversary Date of Grant | Percentage of Vested Units |
|_________________________________________|____________________________________|
| First | 33 3/3% |
|_________________________________________|____________________________________|
| Second | 66 2/3% |
|_________________________________________|____________________________________|
| Third | 100% |
|_________________________________________|____________________________________|
1
<PAGE>
5. UNITS. Units granted to a MIP Special Limited Partner shall be credited
to a Unit account (the "Account") established and maintained for such MIP
Special Limited Partner. The Account of a MIP Special Limited Partner shall be
the record of Units granted to the MIP Special Limited Partner hereunder. The
Account is solely for accounting purposes and there shall not be a segregation
of any Partnership assets. Each Unit shall be valued in the manner provided in
Section 8.
6. FORFEITURE OF UNITS. The tables attached hereto as Exhibit A, Exhibit B
and Exhibit C, incorporated by reference herein, shall govern forfeiture of
Units. For purposes of Exhibit A: (i) a MIP Special Limited Partner will be
considered disabled if, in the determination of the Board, he is subject to a
physical or mental condition which is expected to render the MIP Special Limited
Partner unable to perform his usual duties or any comparable duties for the
Partnership; and (ii) a MIP Special Limited Partner will be considered retired
if the MIP Special Limited Partner's employment with the Partnership terminates
at or after the date the MIP Special Limited Partner attains the age of 65.
7. NON-TRANSFERABILITY. Units granted hereunder, MIP Special Limited
Partner Units, and any rights and privileges pertaining thereto, may not be
transferred, assigned, pledged or hypothecated in any manner, by operation of
law or otherwise, other than as provided in the Partnership Agreement. In the
event of a MIP Special Limited Partner's death, the right to any amount due
pursuant to the terms of paragraph 9 hereto shall be made to the duly appointed
and qualified executor or other personal representative of the MIP Special
Limited Partner to be distributed in accordance with the MIP Special Limited
Partner's will or applicable intestacy law; or in the event that there shall be
no such representative duly appointed and qualified within six (6) months after
the date of death of such deceased MIP Special Limited Partner, then to such
persons as, at the date of his death, would be entitled to share in the
distribution of such deceased MIP Special Limited Partner's personal estate
under the provisions of the applicable statute then in force governing the
descent of intestate property, in the proportions specified in such statute.
8. VALUATION OF UNITS. The value of the Units is determined pursuant to the
formula (the Formula) used to determine the number of shares (the Shares) of
Thrucomm, Inc., a Florida corporation (Thrucomm), to be issued or other assets
(including cash) to be distributed (Assets) upon a Mandatory Conversion Event of
the Mandatory Convertible Preferred Stock, Series M ("Series M Stock") of
Thrucomm, all as further set forth in the Statement of Rights and Preferences
for such Series M Stock filed or to be filed with the Secretary of State of
Florida. Anything to the contrary notwithstanding, no holder of the Units shall
be entitled to any distribution thereon in any form in excess of that .01%
aggregate interest as a MIP Special Limited Partner as provided in Section
9.2(c) of the Partnership Agreement, including but not limited to that from a
conversion of the Series M Stock, at any time at or after a Mandatory Conversion
Event if the Value used in the Formula is less than $30,000,000 aggregate (the
Minimum Amount), subject to adjustment upward but not downward, as follows: If
within 6 months from the date of adoption of this Plan, the Partnership,
Datalinc or Thrucomm receive one or more infusions of equity or deemed equity
(the Infusions), as reflected in the financial statements of the entity
receiving the infusion audited by Price Waterhouse and Co., L.L.P., valued at up
to $5,000,000, the $30,000,000 Minimum Amount shall be increased dollar for
dollar by the amount of the Infusions. There is no limit on the number of
adjustments so made; the limits are only on the time period and the amounts as
specified above.
2
<PAGE>
9. MANDATORY CONVERSION EVENT. Upon a Mandatory Conversion Event all Units
shall be considered 100% vested. However, any Shares or Assets received thereon
shall continue to be governed by these Terms. SEQ 4_1 \* Arabic \n10. Covenant
Not To Compete. MIP Special Limited Partner agrees to conform to the following
concerning non-competition.
(a) Partnership undertakes to train MIP Special Limited Partner and to
give MIP Special Limited Partner confidential information and knowledge
about Partnership's business policies, accounts procedures and methods. For
the purposes of this Agreement, the term "confidential information" shall
include but is not limited to any list of suppliers, customers, investors,
stockholders, including their names, addresses, phone numbers, amount of
investments and similar information, and in addition, any operational
information of Partnership , including but not limited to information on
Partnership's methods of conducting business, profits and/or losses of
Partnership, marketing material and any information that would reasonably
be considered proprietary or confidential in nature. Partnership has
established a valuable and extensive trade in its products and services,
which business has been developed at a considerable expense to Partnership.
The nature of the business is such that the relationship of its customers
with Partnership must be maintained through the close personal contact of
its employees.
(b) MIP Special Limited Partner desires to enter into or continue in
the employ of Partnership and by virtue of such employment by Partnership,
MIP Special Limited Partner will become familiar with the manner, methods,
secrets and confidential information pertaining to such business. During
the term of such employment, MIP Special Limited Partner will continue to
receive additional confidential information of the same kind. Through
representatives of Partnership, MIP Special Limited Partner will become
personally acquainted with the business of Partnership and its methods of
operation.
(c) In consideration of the employment or continued employment of MIP
Special Limited Partner and the rights as herein provided, the training of
MIP Special Limited Partner by Partnership, and the disclosure by
Partnership to MIP Special Limited Partner of the knowledge and
confidential information described above, Partnership requests and MIP
Special Limited Partner makes the covenants hereinafter set forth. MIP
Special Limited Partner understands and acknowledges that such covenants
are required for the fair and reasonable protection of the business of
Partnership carried on in the area to which the covenants are applicable
and that without the limited restrictions on MIP Special Limited Partner's
activities imposed by the covenants, the business of Partnership would
suffer irreparable and immeasurable damage. The covenants on the part of
MIP Special Limited Partner shall be construed as an agreement independent
of any other provision of this Agreement, and existence of any claim or
course of action whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by Partnership of the
covenants.
(d) MIP Special Limited Partner agrees that during the term of MIP
Special Limited Partner's employment and for the period of twelve (12)
months immediately following the termination of employment (which said time
period shall be increased by any time during which MIP Special Limited
Partner is in violation of this Agreement) MIP Special Limited Partner will
not, within the territory hereinafter defined, directly or indirectly, for
MIP Special Limited Partner, or on behalf of others, as an individual on
3
<PAGE>
MIP Special Limited Partner's own account, or as an MIP Special Limited
Partner, agent, or representative for any other person, partnership, firm
or corporation:
(i) Compete with the business of Partnership by engaging or
participating in or furnishing aid or assistance in competition with
the business of Partnership.
(ii) Engage, in any capacity, directly or indirectly, in or be
employed by any business similar to the kind or nature of business
conducted by Partnership during the employment.
(iii) For the purposes of this paragraph 10, the business of
Partnership shall be limited to the wireless data transfer business,
which means any business primarily involving the wireless transfer of
data on behalf of third parties.
(e) The territory referred to in this paragraph 10 shall be the United
States.
(f) Each restrictive covenant is separate and distinct from any other
covenant set forth in this paragraph. In the event of the invalidity of any
covenant, the remaining obligation shall be deemed independent and
divisible. The parties agree that the territory set forth is reasonable and
necessary for the protection of Partnership . In the event any term or
condition is deemed to be too broad or unenforceable, said provision shall
be deemed reduced in scope to the extent necessary to make said provision
enforceable and binding.
11. INDUCING EMPLOYEES OF PARTNERSHIP TO LEAVE. Any attempt on the part of
MIP Special Limited Partner to induce others to leave Partnership's employ or
any efforts by MIP Special Limited Partner to interfere with Partnership's
relationship with other employees would be harmful and damaging to Partnership.
MIP Special Limited Partner expressly agrees that during the term of MIP Special
Limited Partner's employment and for a period of twelve (12) months thereafter
(provided said time period shall be increased by any time during which MIP
Special Limited Partner is in violation of this Agreement), MIP Special Limited
Partner will not in any way directly or indirectly:
(a) Induce or attempt to induce an employee to sever his or her
employment with Partnership;
(b) Interfere with or disrupt Partnership's relationship with other
employees; and
(c) Solicit, entice, take away or employ any person employed with
Partnership.
12. CONFIDENTIAL INFORMATION. It is understood between the parties hereto
that during the term of employment, MIP Special Limited Partner will be dealing
with confidential information, as defined above, which is Partnership's
property, used in the course of its business. MIP Special Limited Partner will
not disclose to anyone, directly or indirectly, any of such confidential
information or use such information other than in the course of MIP Special
Limited Partner's employment. All documents that MIP Special Limited Partner
prepares, or confidential information that might be given to MIP Special Limited
Partner in the course of employment, are the exclusive property of Partnership
and shall remain in Partnership's possession. Under no circumstances shall any
such information or documents be removed without Partnership's written consent
4
<PAGE>
first being obtained, except for information used in the MIP Special Limited
Partners regular course of employment with the Partnership.
13. ADJUSTMENTS. MIP Special Limited Partner acknowledges that the number
of Shares issued or Assets distributed upon a Mandatory Conversion Event for the
Series M Stock is subject to change, including dilution, in accordance with the
Rights and Preferences of the Series M Stock, and MIP Special Limited Partner
has no right to object thereto.
14. AMENDMENT. The Board may amend these Terms at any time or from time to
time, but may not reduce the number of Units previously issued to MIP Special
Limited Partner.
15. PARTNERSHIP RESPONSIBILITY. All expenses related to the Units,
including the cost of maintaining records, shall be borne by the Partnership.
The Partnership shall have no responsibility or liability for any act or thing
done or left undone with respect to the grant of Units hereunder, so long as the
Partnership acts in good faith.
16. IMPLIED CONSENT OF MIP SPECIAL LIMITED PARTNERS. Every MIP Special
Limited Partner, by his acceptance of a grant of Units hereunder, shall be
deemed to have consented to be bound, on his own behalf and on behalf of his
heirs, assigns, and legal representatives, by all of the terms and conditions of
this Agreement and the Partnership Agreement.
17. WITHHOLDING. The Partnership shall have the right to deduct from all
amounts paid pursuant to the Terms any taxes required by law to be withheld with
respect to such awards.
18. VOTING. No MIP Special Limited Partner shall be entitled to any voting
rights with respect to Units credited to his Account.
19. MISCELLANEOUS PROVISIONS. No MIP Special Limited Partner or other
person shall have any claim or right to be granted an award hereunder. No action
3
<PAGE>
taken hereunder shall be construed as giving any MIP Special Limited Partner any
right to be retained in the employ of the Partnership.
20. EFFECTIVENESS AND TERMS OF TERMS. The effective date of the Terms shall
be July 15, 1997.
21. ASSUMPTION OF RIGHTS AND OBLIGATIONS BY THRUCOMM. Upon the consummation
of the contemplated reorganization of the Partnerships business into Thrucomm,
all rights, obligations and liabilities hereunder shall be transferred to and
assumed by Thrucomm, with no further action of Partnership or MIP Special
Limited Partner required, and Thrucomm shall be substituted for Partnership
throughout these Terms. If, prior to such time, the MIP Special Limited Partner
is an employee of Thrucomm, all provisions applicable to the MIP Special Limited
Partner and the Partnership shall be interpreted by substituting Thrucomm for
the Partnership hereunder.
IN WITNESS WHEREOF, Partnership has caused this instrument to be
executed as of this 1st day of August, 1997.
FASTCOM, LTD.
By: Fastcom Management, Inc.,
General Partner
By:___________________________________
Its:____________________________________
6
<PAGE>
FASTCOM, LTD.
MANAGEMENT INCENTIVE PLAN SPECIAL LIMITED PARTNER AGREEMENT
The Board of Directors of Fastcom Management, Inc., the General Partner of
Fastcom, Ltd. (the "Partnership") has granted the following units (the "Units")
to the MIP Special Limited Partner named below, in accordance with the
Partnership Agreement and the Terms.
1. Name of MIP Special Limited Partner:___________________________________
2. Date of Grant: _____________________________
3. Number of Units Granted:_______________________
4. Percent Vested as of Date of Grant: ____________________
Subject to the terms and conditions specified in the Terms, a copy of which
is attached hereto and made a part hereof and the Partnership Agreement into
which the Terms are incorporated by reference, the MIP Special Limited Partner
has been granted the number of Units shown in Line 3 above.
The Board of Directors has the authority to construe and to interpret the
terms of this grant whenever any question of meaning arises under it, and any
such construction or interpretation shall be binding both on the Partnership and
on the MIP Special Limited Partner, his personal representatives, the
representatives of his estate, his heirs, or anyone else having or claiming to
have an interest under this grant. This grant shall be construed and
administered in accordance with and governed by the laws of the State of
Florida.
The MIP Special Limited Partner, by his acceptance of this grant of Units,
shall be bound on his own behalf and on behalf of his heirs, legal
representatives, and any other person claiming through or under him, by all of
the terms and conditions of this grant and of the Terms and the Partnership
Agreement.
Agreed and Accepted:
--------------------------
Signature of MIP Special Limited Partner
7
<PAGE>
EXHIBIT 10.10.1
THRUCO INC.'S LINE OF CREDIT WITH
UNITED BANK AND TRUST
1
<PAGE>
NOTE
BORROWER'S NAME LENDER'S NAME AND Loan Number:
AND ADDRESS ADDRESS ______________
- --------------- ------------------------ Date: 12/23/96
THRUCO, INC. UNITED BANK AND TRUST CO. Maturity Date:
1641 COMMERCE AVE N 5801 49TH STREET NORTH MARCH 24, 1997
ST. PETERSBURG, FL 33716 ST. PETERSBURG, FL 33709 Loan Amount:
$600,000.00
Renewal Of:
---------------
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of SIX HUNDRED THOUSAND AND N0/100 * * * * * * *
* * * * * * * * * * * * * * Dollars$ 600,000.00 _____ Single Advance: I will
receive all of this principal sum on __________________. No additional advances
are contemplated under this note.
_XX_ Multiple Advance: The principal sum shown above is the maximum amount
of principal I can borrow under this note. On DEC. 23, 1996 1 will receive the
amount of $_______________ and future principal advances are contemplated.
Conditions: The conditions for future advances are UPON BORROWER'S REQUEST
AND LOAN NOT IN DAFAULT.
_XX_ Open End Credit: You and I agree that I may borrow up to the maximum
amount of principal more than one time. This feature is subject to all other
conditions and expires on MARCH 24, 1997.
____ Closed End Credit: You and I agree that I may borrow up to the maximum
only one time (and subject to all other conditions).
INTEREST: I agree to pay interest on the outstanding principal balance from
DECEMBER 23, 1996 at the rate of 9.870 % per year until FIRST CHANGE DATE.
_XX_ Variable Rate: This rate may then change as stated below.
_XX_ Index Rate: The future rate will be 0.750% OVER the following index
rate: UNITED BANK AND TRUST COMPANY PRIME RATE.
____ No Index: The future rate will not be subject to any internal or
external index. It will be entirely in your control.
_XX_ Frequency and Timing: The rate on this note may change as often as
DAILY. A change in the interest rate will take effect ON THE SAME DAY.
_XX_ Lmitations: During the term of this loan, the applicable annual
interest rate will not be more than 18% or less than _______%.
Effect of Variable Rate: A change in the interest rate will have the
following effect on the payments:
_XX_ The amount of each scheduled payment will change.
_XX_ The amount of the final payment will change.
2
<PAGE>
ACCRUAL METHOD: Interest will be calculated on a ACTUAL/360 basis.
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note
owing after maturity, and until paid in full, as stated below: ____ on the same
fixed or variable rate basis in effect before maturity (as indicated above).
_XX_ at a rate equal to 18.00%.
_XX_ LATE CHARGE: If a payment if made more than 10 days after it is due, I
agree to pay a late charge of 5.000% OF THE LATE PAYMENT WITH A MINIMUM OF
$10.00
_XX_ ADDITIONAL CHARGES: In addition to the interest, I agree to pay the
following charges which _XX_ are included in the principal amount above:
AS SHOWN ON CLOSING STATEMENT OF EVEN DATE HEREWITH.
PAYMENTS: I agree to pay this note as follows:
_X_ Interest: I agree to pay accrued interest ON THE 24TH OF EACH
MONTH BEGINNING JANUARY 24, 1997.
_XX_ Principal: I agree to pay the principal MARCH 24, 1997.
____ Installments: I agree to pay this note in _______ payments. The first
payment will be in the amount of $_________ and will be due ____________. A
payment of $_____________ will be due _______________, thereafter. The final
payment of the entire unpaid balance of principal and interest will be due
________________________,
ADDITIONAL TERMS: THIS OBLIGATION IS SECURED BY ALL OF DEBTOR'S RIGHT,
TITLE AND INTEREST IN AND TO ALL EQUIPMENT, INVENTORY AND ACCOUNTS RECEIVABLE
NOW OWNED AND/OR HEREAFTER ACQUIRED OF BORROWER AND DATALINC, LTD.; ADDITIONALLY
SECURED BY ACCOUNTS RECEIVABLE AND INVENTORY OF FASTCOM, LTD., AND ASSIGNMENTS
OF HARTFORD LIFE INSURANCE POLICIES #L06007644 AND #L06007641 ON THE LIVES OF
JOHN FLETCHER KOLENDA AND MARK J. GIANINNI.
INTANGIBLE TAX AT THE CURRENT RATE WILL BE DUE ON YOUR OUTSTANDING BALANCE
AS OF THE FIRST DAY OF EACH CALENDAR YEAR. THIS AMOUNT WILL BE BILLED TO YOU
AND IS DUE BY JANUARY 31.
THIS OBLIGATION IS CROSS-COLLATERALIZED WITH NOTE #101786156 AND NOTE
#101786158.
SECURITY: THIS NOTE IS SEPARATELY SECURED BY (describe
separate document by type and date): SECURITY AGREEMENTS
AND ASSIGNMENTS OF LIFE INSURANCE
PURPOSE: The purpose of this loan is BUSINESS:
WORKING CAPITAL FOR FASTCOM, LTD.
SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 2).
I have received a copy on today's date.
THRUCO, INC.
/S/ John F. Kolenda
BY: ________________________
John F. Kolenda, Chairman
3
<PAGE>
Signature for Lender
- ---------------------------------------
UNIVERSAL NOTE
@ 1984. 1991 Bankers Systems, Inc., St. Cloud, MN
Form UN-FL 1/23/96
4
<PAGE>
EXHIBIT 10.10.2
DATALINC LTD'S LINE OF CREDIT WITH
UNITED BANK OF PINELLAS
1
<PAGE>
NOTE
BORROWER'S NAME LENDER'S NAME AND Loan Number:
AND ADDRESS ADDRESS 0101786156___
- --------------- ------------------------ Date: 10/3/94
DATALINC, LTD. UNITED BANK OF PINELLAS Maturity Date:
1641 COMMERCE AVE N 5801 49TH STREET NORTH ON DEMAND
ST. PETERSBURG, FL 33716 ST. PETERSBURG, FL 33709 Loan Amount:
$300,000.00
Renewal Of:
0101786156
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of THREE HUNDRED THOUSAND AND N0/100 * * * * * *
* * * * * * * * * * * * * * Dollars$ 300,000.00 _____ Single Advance: I will
receive all of this principal sum on __________________. No additional advances
are contemplated under this note.
_XX_ Multiple Advance: The principal sum shown above is the maximum amount
of principal I can borrow under this note. On MARCH 3, 1994 1 will receive the
amount of $_______________ and future principal advances are contemplated.
Conditions: The conditions for future advances are UPON BORROWER'S REQUEST
AND LOAN NOT IN DAFAULT.
_XX_ Open End Credit: You and I agree that I may borrow up to the maximum
amount of principal more than one time. This feature is subject to all other
conditions and expires on DEMAND.
____ Closed End Credit: You and I agree that I may borrow up to the maximum
only one time (and subject to all other conditions).
INTEREST: I agree to pay interest on the outstanding principal balance from
OCTOBER 3, 1994 at the rate of 9.430 % per year until FIRST CHANGE DATE.
_XX_ Variable Rate: This rate may then change as stated below.
_XX_ Index Rate: The future rate will be 0.750% OVER the following index
rate: UNITED BANK OF PINELLAS PRIME RATE.
____ No Index: The future rate will not be subject to any internal or
external index. It will be entirely in your control.
_XX_ Frequency and Timing: The rate on this note may change as often as
DAILY. A change in the interest rate will take effect ON THE SAME DAY.
_XX_ Lmitations: During the term of this loan, the applicable annual
interest rate will not be more than 18% or less than _______%.
Effect of Variable Rate: A change in the interest rate will have the
following effect on the payments:
_XX_ The amount of each scheduled payment will change.
_XX_ The amount of the final payment will change.
2
<PAGE>
ACCRUAL METHOD: Interest will be calculated on a ACTUAL/360 basis.
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note
owing after maturity, and until paid in full, as stated below: ____ on the same
fixed or variable rate basis in effect before maturity (as indicated above).
_XX_ at a rate equal to 18.00%.
_XX_ LATE CHARGE: If a payment if made more than 10 days after it is due, I
agree to pay a late charge of 5.000% OF THE LATE PAYMENT WITH A MINIMUM OF
$10.00
_XX_ ADDITIONAL CHARGES: In addition to the interest, I agree to pay the
following charges which _XX_ are included in the principal amount above:
BANK FEE $375.00.
PAYMENTS: I agree to pay this note as follows:
_XX_ Interest: I agree to pay accrued interest MONTHLY BEGINNING
NOVEMBER 3, 1994.
_XX_ Principal: I agree to pay the principal ON DEMAND.
____ Installments: I agree to pay this note in _______ payments. The first
payment will be in the amount of $_________ and will be due ____________. A
payment of $_____________ will be due _______________, thereafter. The final
payment of the entire unpaid balance of principal and interest will be due
- -----------------
ADDITIONAL TERMS: THIS LOAN IS SECURED BY ALL EQUIPMENT, INVENTORY,
ACCOUNTS RECEIVABLE AND CONTRACTS RIGHTS NOW OWNED AND/OR HEREAFTER ACQUIRED.
INTANGIBLE TAX AT THE CURRENT RATE WILL BE DUE ON YOUR OUTSTANDING BALANCE AS OF
THE FIRST DAY OF EACH CALENDAR YEAR. THIS AMOUNT WILL BE BILLED TO YOU AND IS
DUE BY JANUARY 31.
PURPOSE: The purpose of this loan is BUSINESS: RENEWAL OF WORKING CAPITAL
LINE.
SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 2).
1 have received a copy on today's date.
DATALINC LTD.
/S/ John F. Kolenda
BY: __________________________
INTEGRATED COMMUNICATION, NETWORKS, INC.
BY: John F. Kolenda, Chairman
Signature for Lender
- ---------------------------------------
UNIVERSAL NOTE
@ 1984. 1991 Bankers Systems, Inc., St. Cloud, MN
Form UN-FL 1/23/96
3
<PAGE>
EXHIBIT 10.10.3
$500,000 Line of Credit, Commitment Letter from United Bank
dated July 18, 1997
<PAGE>
UNITED BANK Harold J. Winner
President
July 18, 1997
Mr. John Kolenda, Chairman
Datalinc, Ltd.
1641 Commerce Avenue North
P. 0. Box 21360
St. Petersburg, Florida 33742
Via Fax 576-5519
Orginal Mailed
Dear John:
United Bank and Trust Company ("Bank") is very pleased to approve a $500,000
loan to Datalinc, Ltd. ("Borrower") as follows:
AMOUNT OF LOAN: $500,000 (funds to be drawn as needed)
RATE: United Bank and Trust Company Prime plus .75%,
adjusted daily
FEE: $1,000
REPAYMENT TERMS: Interest only shall be payable monthly on any outstanding
sums and all principal shall be due six(6) months from
date of closing.
GUARANTORS: Blue Chip Capital Fund, Limited Partnership, John F.
Kolenda and Mark J. Gianinni, Thruco, Inc., Fastcom, Ltd.,
Integrated Communication Networks, Inc.
COLLATERAL: First lien on all inventory, accounts receivable and
equipment now owned or hereafter acquired of Datalinc,
Ltd., Fastcom, Ltd. and Thruco, Inc. (already collateral on
existing loans); assignment of a life insurance policy on
the lives of John F. Kolenda and Mark J. Gianinni in the
amount of $1,000,000 each (also already collateral on ]
existing loans).
Borrower will be responsible for all costs and out-of-pocket expenses associated
with this loan including but not limited to documentary stamps, intangible tax
based on the amount outstanding as of January lst, 1998, and necessary recording
and filing fees. The Bank's other typical terms and conditions as for previous
loans and commitments will also apply to this transaction.
<PAGE>
Page 2
Mr. John Kolenda
July 18, 1997
If the above terms and conditions are acceptable, please notify me so that we
can prepare documentation for the loan closing.
Thank you for allowing the Bank to present this loan commitment and continue to
be of service to your organization.
Sincerely,
/s/Harold J. Winner
_______________________
Harold J.Winner
President
HJW/gw
<PAGE>
EXHIBIT 10.11
INDUSTRIAL LEASE AGREEMENT
BETWEEN
INDUSTRIAL DEVELOPMENTS INTERNATIONAL, INC.
AS LANDLORD
AND
DATALINC-I, LTD.
AS TENANT
DATED: April 15, 1991
<PAGE>
LEASE INDEX
SECTION SUBJECT
- -------------------------------------------------------------------------------
1. Basic Lease Provisions
2. Demised Premises
3. Term
4. Minimum Rental
5. Security Deposit
6. Operating Expenses and Additional Rent
7. Use of Demised Premises
8. Insurance
9. Utilities
10. Maintenance and Repairs
11. Tenant's Personal Property: Indemnity
12. Tenant's Fixtures
13. Signs
14. Landlord's Lien
15. Governmental Regulations
16. Environmental Matters
17. Construction of Demised Premises
18. Tenant Alterations and Additions
19. Services by Landlord
20. Fire and Other Casualty
21. Condemnation
22. Tenant's Default
23. Landlord's Right of Entry
24. Mortgagee's Rights
25. Estoppel Certificate
26. Landlord's Liability
27. Notices and Payments
2
<PAGE>
28. Brokers
29. Assignment and Subleasing
30. Termination or Expiration
31. Relocation
32. Late Payments
33. Rules and Regulations
34. Miscellaneous
35. Special Stipulations
Exhibit "A" Site Plan
Exhibit "B" Floor Plan
Exhibit "C" Special Stipulations
Exhibit "D" Rules and Regulations
3
<PAGE>
INDUSTRIAL LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made this l5th day of April, 1991 by and
between INDUSTRIAL DEVELOPMENTS INTERNATIONAL, INC., a Delaware Corporation
("Landlord"), and DATALINC-I, LTD. a Florida Limited Partnership ("Tenant"),
(the words "Landlord" and "Tenant" to include
their respective legal representatives, successors and permitted assigns where
the context requires or permits).
W I T N E S S E T H:
1. BASIC LEASE PROVISIONS. The following constitute the "Basic Lease Provi-
sions" of this Lease:
(a) Demised Premises Address: 6900 Fairfield Business Drive
Fairfield, Ohio 45014
(b) Demised Premises Square Footage: 9,400
(c) Building Square Footage: 40,224
(d) Annual Minimum Rent:
Lease Year 1 $34,404.00 Lease Year 6 $79,128.00
Lease Year 2 $68,808.00 Lease Year 7 $79,128.00
Lease Year 3 $68,808.00 Lease Year 8 $79,128.00
Lease Year 4 $68,808.00 Lease Year 9 $79,128.00
Lease Year 5 $68,808.00 Lease Year 10 $79,128.00
(e) Monthly Minimum Rent Installments:
Lease Year 1 $ 5,734.00 Lease Year 6 $ 6,594.00
Lease Year 2 $ 5,734.00 Lease Year 7 $ 6,594.00
Lease Year 3 $ 5,734.00 Lease Year 8 $ 6.594.00
Lease Year 4 $ 5,734.00 Lease Year 9 $ 6.594.00
Lease Year 5 $ 5,734.00 Lease Year 10 $ 6,594.00
(f) Lease Commencement Date: June 1, 1991
(g) Minimum Rent Commencement Date: December 1, 1991
(h) Termination Date: May 31, 2001
(i) Term: One Hundred Twenty (120) Months
(j Tenant's Operating Expense Percentage: 23%
(k) Security Deposit: $25,000.00
(1) Date Tenant Must Approve Plans and Specifications For Improvements:
April 15, 1991
(m) Permitted Use: Satellite Hub Station
4
<PAGE>
(n) Address for notice:
Landlord: Industrial Developments International, Inc.
One Atlanta Plaza
950 East Paces Ferry Road, Suite 875
Atlanta, Georgia 30326
Attn: Vice President-Operations
Tenant: DATALINC-I, LTD.
1641 Commerce Avenue N.
St. Petersburg, Florida 33716
Attn: Mark Gianinni
(o) Broker(s): Mr. Bill Wiebe
CB COMMERCIAL
425 Walnut Street, 25th Floor
Cincinnati, Ohio 45202.
5
<PAGE>
2. DEMISED PREMISES. For and in consideration of the rent hereinafter
reserved and the mutual covenants hereinafter contained, Landlord does hereby'
lease and demise unto Tenant, and Tenant does hereby hire, lease and accept,
from Landlord the following premises, referred to as the "Demised Premises":
approximately 9,400 square fyet of space, 3,200 square feet of which is office
space, located within 6900 Fairfield Business Dr. (the "Building"), which
Building contains a total of 40,224 square feet and located in Butler County,
Ohio as shown on the site plan attached hereto as Exhibit A and incorporated
herein, all upon the terms and conditions hereinafter set forth.
3. TERM. To have and to hold the Demised Premises for the term (the "Term")
to commence on the Commencement Date set forth in l(f) of the Basic Lease
Provisions and to terminate on the Termination Date set forth in l(q) of the
Basic Lease Provisions, as the Termination Date may be extended pursuant to
Section 17(b).
4. MINIMUM RENT. Tenant shall pay to Landlord as minimum rent for the
Demised Premises, commencing on the Minimum Rent Commencement Date and
continuing throughout the Term in lawful money of the United States the annual
amount set forth in 1. of the Basic Lease Provisions payable in equal monthly
installments as set forth in 1. (e) of the Basic Lease Provisions (the "Minimum
Rent"), payable in advance, without demand and without abatement, reduction,
set-off or deduction, on the first day of each calendar month during the Term.
Tenannt shall pay to Landlord the first month's Minimum Rent due hereunder upon
execution of this lease by both parties. If the Commencement Date of the Term
shall fall on a day other than the first day of a calendar month, the Minimum
Rent shall be apportioned pro rata on a per diem basis for the period between
surh Commencement Date and the first day of the following calendar month and
such apportioned sum shall be paid on the Commencement Date.
5. SECURITY DEPOSIT. Upon execution of this Lease by both parties, Tenant
will pay to Landlord the sum set forth in l. (k) of the Basic Lease Provisions
as security for the full and faithful performance by Tenant of each and every
term, covenant and condition of this Lease. In the event that Tenant is in
default under this Lease, or fails to perform any of the terms, provisions and
conditions of this Lease, Landlord may use, apply, or retain the whole or any
part of the security so deposited for the payment of any sum due Landlord or
which Landlord may expend or be required to expend by reason of the Tenant's
default or failure to perform, including, but not limited to, any damages or
deficiency in the reletting of the Demised Premises; provided. however, that any
such use, application or retention by Landlord of the whole or any part of the
security deposit shall not be or be deemed to be an election of remedies by
Landlord or viewed as liquidated damages, it being expressly understood and
ayreed that, notwithstanding such use, application or retention, Landlord shall
have the r qlit to pursue any and all other remedies available to it under the
terms of this Lease or ot@erwise. In the event that Tenant shall comply with all
of the terms, covenants and conditions of this Lease, the security deposit shall
be returned to Tenant within thirty (30) days after compliance has been
ascertained by Landlord and after delivery of possession of the Demised Premises
to Landlord. In the event of a sale of the Building, Landlord shall have the
right to transfer the security deposit to the purchaser, and Landlord shall
thereupon be released from all liability for the return of such security
deposit. Tenant shall look solely to the new landlord for the return of such
security deposit. Tenant shall not assign or encumber the money deposited as
security, and neither Landlord nor it's successors or assigns shall be bound by
any such assignment or encumbrance.
6
<PAGE>
6. OPERATING EXPENSES AND ADDITIONAL RENT.
(a) Tenant agrees to pay as Additional Rent its proportionate share of
the amount paid or Incurred by Landlord during the Term for operation and
maintenance of the Building (collectively "Operating Expenses"). Operating
Expenses shall include all expenses for operation, repair, replacement and
maintenance as necessary to keep e Building and the common areas, grounds,
and parking areas associated therewith in good order, condition and repair,
including but not limited to, utilities for the common areas of and
relating to the Building, expenses associated with the driveways and
parking areas (including repaving and snow. trash and ice removal),
security systems, lighting facilities, landscaped areas, walkways,
directional signage, curbs, drainage strips, sewer lines, all charges
assessed against the Building pursuant to any applicable easements,
covenants or development standards, administrative fees (including property
management fees and attorneys' fees), all real property taxes and special
assessments imposed upon the land on which the Building is constructed, and
all insurance premiums paid by Landlord with respect to the Building,
including public liability Insurance. Operating Expenses shall not include
expenses for the costs of any maintenance and repair required to be
performed by Landlord at its own expense under Section (10.)(b). Further.
Operating Expenses shall not include the costs for capital improvements
unless such costs are incurred for the purpose of causing a material
decrease in the Operating Expenses of the Building, or are required by any
governmental authority because of the specific use by Tenant of the Demised
Premises. The proportionate share or Operating Expenses to be paid by
Tenant shall be a percentage of the Operating Expenses based upon the
proportion that the square footage of the Demised Premises bears to the
total square footage of the Building (such figure referred to as "Tenant's
Operating Expense Percentage" and set forth in l, (j) of the Basic Lease
Provisions). Landlord shall estimate the total amount of Operating Expenses
to be paid by Tenant during each calendar year promptly after the beginning
of each calendar year during the Term, and Tenant shall pay to Landlord
one-twelfth (1/12) of such sum on the first day of each calendar month
during each such calendar year, or part thereof, during the Term. Within a
reasonable time after the end of each calendar year, Landlord shall submit
to Tenant a statement of the actual amount of Operating Expenses for such
calendar year, and within thirty (30) days arter receipt of such statement,
Tenant shall pay any deficiency between the actual amount owed and the
estimates paid during such calendar year, or in the event of overpayment,
Landlord shall credit the amount of such overpayment toward the next
Installment of Operating Expenses owed by Tenant. If the Connencement Date
shall fall on other than the first day of the calendar year, and/or if the
Termination Date shrill fall on other than the last day of the calendar
year, Tenant's share of the Operating Expenses for such calendar year shall
be apportioned prorata.
(b) Any amounts required to be paid by Tenant hereunder and any
charges or expenses incurred by Landlord an behalf of Tenant under the
terms of this Lease shall be considered "Addiditional Rent" payable in the
same manner and upon the same terms and conditions as the Minimum Rent
reserved hereunder. Any failure on the part of Tenant to pay such
Additional Rent when and as the same shall become due shall entitle
Landlord to the remedies available to it for non-payment of Minimum Rent.
Tenant's obligations for non-payment of Additional Rent shall begin to
accrue on the Lease Commencement Date, regardless of the Minimum Rent
Commencement Date.
7
<PAGE>
(c) If applicable in the jurisdiction where the Demised Premises are
located, Tenant shall pay and be liable for all rental, sales, use and
inventory taxes or other similar taxes, any, levied or imposed by any city.
state, county or other governmental body having authority, such payments to
be in addition to all other payments required to be paid Landlord by Tenant
under the terms of this Lease. Such payment shall be made by Tenant
directly to such governmental body if billed to Tenant, or if billed to
Landlord, such payment shall be paid concurrently with the payment of the
Minimum Rent, Additional Rent, or such other charge upon which the tax is
based, all as set forth herein.
7. USE OF DEMISED PREMISES.
(a) The Demised Premises shall be used for the Permitted Use set forth
in 1. (m) of the Basic Lease Provisions. Other uses shall not be
unreasonably witheld or denied.
(b) Tenant will permit no liens to attach or exist against the
Demised Premises, and shall not commit any waste.
(c) The Demised Premises shall not be used for any illegal purposes,
and Tenant shall not allow, suffer, or permit any vibration, noise, odor,
light or other effect to occur within or around the Demised Premises that
could constitute a nuisance or trespass for Landlord or any occupant of an
adjoining building, its customers, agents, or invitees. Upon notice by
Landlord to Tenant that any of the aforesaid prohibited uses are occurring,
Tenant agrees forthwith to remove or control the same.
(d) Tenant shall not in any way violate any law, ordinance or
restrictive covenant affecting the Demised Premises, and shall not in any
manner use the Demised Premises so as to cause cancellation of, prevent the
use of, or increase the rate of, the fire and extended coverage insurance
policy required hereunder.
(e) In the event said insurance rates are increased over the least
hazardous rate available due to the nature of the use of the Demised
Premises by Tenant, said Increased amounts shall also be paid by Tenant as
Additional Rent.
8. INSURANCE.
(a) Tenant covenants and agrees that from and after the date of
delivery of the Demised Premises from Landlord to Tenant, Tenant will carry
and maintain, at its sole cost and expense, the following types of
insurance, in the amounts specified and in the form hereinafter provided
for:
(i) Liability Insurance in the Commercial General Liability form
(or reasonable equivalent thereto) claims for personal injury or
death, property damage and product liability occuring upon, in or
about the Demised Premises, such insurance to be written on an
occurrence basis (not a claims made basis), to be combined single
limits amounts not less that $1,000,000 and to have general aggredate
limits of not less than $2,000,000 for each policy year. The insurance
coverage required under this Section 8(a)(i) shall, in addition,
extend to any liability of Tenant arising out of the indemnities
8
<PAGE>
provided for in Section 11 and, if necessary, the policy shall contain
a contractual endorsement to that effect. The general aggregate limits
under the Commercial General Liability insurance policy or policies
must apply separately to the Demised Premises and to Tenant's use
thereof (and not to any other location or use of Tenant) and such
policy shall contain an endorsement to that effect. The certificate of
insurance evidencing the Commercial General Liability form of policy
shall specify all endorsements required herein and shall specify on
the face thereof that the limits of such policy apply separately to
the Demised Premises.
(ii) Insurance covering all of the items included in Tenant's
leasehold improvements, heating, ventilating and air conditioning
equipment, trade fixtures, merchandise and personal property from time
to time in, on or upon the Demised Premises, in an amount not less
than one hundred percent (100%) of their full replacement value from
time to time during the Term, providing rotection against perils
included within the standard form of "all-risks" fire and casualty
insurance policy, together with insurance against sprinkler damage,
vandalism and malicious mischief. Any policy proceeds from such
insurance shall be held in trust by Tenant's insurance company for the
repair, construction and restoration or replacement of the property
damaged or destroyed unless this Lease shall cease and terminate under
the provisions of Section 20(a).
(b) All policies of the insurance provided for in Section B(a) shall
be issued in form acceptable to Landlord by insurance companies with a
rating of not less than "A." and financial size or not less than Class X,
in the most current available "Best's Insurance Reports", and licensed to
do business in the state in which the Building is located. Each and every
such policy:
(i) shall name Landlord as well as Landlord's Mortgagee, as
defined in Section 24, and any other party reasonably designated by
Landlord, as an additional insured. In addition, the coverage
described in Section 8(a)(ii) shall also name Landlord as loss payee;
(ii) shall be delivered to Landlord within thirty (30) days after
delivery of possession of the Demised Premises to Tenant and
thereafter within thirty (30) days prior to the expiration of each
such policy, and, as often as any such policy shall expire or
terminate. Renewal or additional policies shall be procured and
maintained by Tenant in like manner and to like extent;
(iii)shall contain a provision that the insurer will give to
Landlord and such other parties in interest at least thirty (30) days
notice in writing in advance of any material change, cancellation,
termination or lapse, or the effective date of any reduction in the
amounts of Insurance; and
(iv) shall be written as a primary policy which does not
contribute to and is not in excess of coverage which Landlord may
carry.
(c) Any insurance provided for in Section 8(a) may be maintained by
means of a policy or policies of blanket insurance, covering additional
Items or locations or insureds, provided, however, that:
9
<PAGE>
(i) Landlord and any other parties in interest from time, to time
designated by Landlord to Tenant shall be named as an additional
insured thereunder as its interest may appear;
(ii) the coverage afforded Landlord and any such other parties in
interest will not be reduced or diminished by reason of the use of
such blanket policy of Insurance;
(iii) any such policy or policies shall specify therein the
amount of the total insurance allocated to the Tenant's improvements
and property; and
(iv) the requirements set forth in this Section 8 are otherwise
satisfied.
(d) In the event that Tenant shall fall to carry and maintain the
insurance coverages set forth in this Section 8, Landlord may upon thirty
(30) days notice to Tenant (unless such coverages will lapse in which event
no such notice shall be necessary) procure such policies of insurance and
Tenant shall promptly reimburse Landlord therefor.
(e) Landlord and Tenant hereby waive any rights each may have against
the other on account of any loss or damage occasioned to Landlord or
Tenant, as the case may be, their respective property, the Demised
Premises, its contents or to the other portions of the Building arising
from any risk covered by all risks fire and extended coverage Insurance,
and to the extent of recovery under valid and collectible policies of such
insurance, provided that such waiver does not invalidate such policies or
prohibit recovery thereunder. The parties hereto each, on behalf of their
respective insurance companies insuring the property of either Landlord or
Tenant against any such loss, waive any right of subrogation that such
Insurers may have against Landlord or Tenant, as the case may be.
9. UTILITIES. During the Term, Tenant shall promptly pay as billed to
Tenant all rents and charges for water and sewer services and all costs and
charges for gas, steam, electricity, fuel, light, power, telephone, heat and any
other utility or service used or consumed in or servicing the Demised Premises
and all other costs and expenses involved in the care, management and use
thereof. If Tenant fails to pay any utility bills or charges, Landlord may, at
its option, upon reasonable notice to Tenant pay the same and in such event, the
amount of such paymenle together with interest thereon at the interest rate as
defined in Section 31(g) from the date of such payment by Landlord, will be
added to Tenant's next due payment, as Additional Rent.
10. MAINTENANCE AND REPAIRS.
(a) Tenant shall, at its own cost and expense, maintain in good
condition and repair the interior of the Demised Premises, including but
not limited to the electrical systems, heating, air conditioning and
ventilation systems, plate glass, windows and doors, sprinkler and plumbing
systems. Tenant shall maintain in full force and effect a service contract
for the heating, ventilation and air conditioning systems with an entity
reasonably acceptable to Landlord. Tenant's obligations to repair and
maintain the Demised Premises shall include without limitation all plumbing
and sewer facilities within the Demised Premises, fixtures. interior walls.
floors, ceilings, windows, doors, storefronts. plate glass, skylights, all
electrical facilities and equipment including without limitation lighting
10
<PAGE>
fixtures, lamps, fans and any exhaust equipment and systems, electrical
motors, and all other appliances and equipment of every kind and nature
located in, upon or about the Demised Premises except as to such
maintenance and repair as is the obligation of Landlord pursuant to Section
10(b) herein. All glass, both interior and exterior, is at the sole risk of
Tenant; and any broken glass shall be promptly replaced at Tenant's expense
by glass of like kind, size and quality. (b) Landlord shall, at its own
cost and expense, maintain in good condition and repair the exterior walls,
roof, foundation and structural frame of the Building.
(c) Unless the same is caused solely by the negligent action or
inaction of Landlord, Landlord shall not be liable to Tenant or to any
other person for any damage occasioned by failure in 'any utility system or
by the bursting or leaking of any vessel or pipe in or about the Demised
Premises; or for any damaged occasioned by water coming into the Demised
Premises or arising from the acts or neglects of occupants of adjacent
property or the public.
11. TENANT'S PERSONAL PROPERTY: INDEMNITY All of Tenant's personal property
in the Demised Premises shall be and remain at Tenant's sole risk, and Landlord
shall not be liable for and Tenant hereby releases Landlord from any and all
liability for theft thereof or any damage thereto occasioned by any acts,
omissions or negligence of any persons, or any act of God, and Landlord shall
not be liable for any injury to the person or property of other persons in or
about the Demised Premises, Tenant expressly agreeing to indemnify and save
Landlord harmless in all such cases. Tenant further agrees to reimburse Landlord
for any costs or expenses, Including without limitation attorneys' fees which
Landlord may incur in investigating, handling or litigating any such claim
against Landlord by a third person.
12. TENANT'S FIXTURES. Tenant shall have the right to install in the
Demised Premises trade fixtures required by Tenant or used by it in its
business, and if installed by Tenant, to remove any or all such trade fixtures
from time to time during and upon termination of this Lease, provided Tenant is
not then in default under the terms of this Lease and any applicable grace
period has not expired with the default having not been cured; provided,
however, that Tenant shall repair and restore any damage or injury to the
Demised Premises (to the condition in which the Demised Premises existed prior
to such installation) caused by the installation and/or removal of any such
trade fixtures.
13. SIGNS. No sign, advertisement or notice shall be inscribed, painted,
affixed, or displayed on the windows or exterior walls of the Demised Premises
or on any public area of the Building, except in such places, numbers, sizes,
colors and styles as are approved in advance in writing by Landlord, and which
conform to all applicable laws and/or ordinances. Any and all permitted signs
shall be installed, maintained and removed by Landlord at Tenant's sole expense.
14. This Section has been deleted.
15. GOVERNMENT REGULATIONS. Tenant shall throughout the Term of this Lease,
at Tenant's sole cost and expense, promptly comply with al1 laws and ordinances
and notices, orders, rules, regulations and requirements of all federal, state,
and municipal governments and appropriate departments, commissions, boards and
officers thereof, and notices, orders, rules and regulations of the National
Board of Fire Underwriters, or any other body now or hereafter constituted
exercising similar functions, relating to all or any part of the Demised
11
<PAGE>
Premises, foreseen or unforeseen, ordinary as well as extraordinary, or to the
use or manner of use of the Demised Premises or to the sidewalks. parking areas.
curbs and access ways adjoining the Demised Premises. Without limiting the
generality of the foregoing, Tenant shall keep in force at all times all
licenses, consents and permits necessary for the lawful use of the Demised
Premises, and Tenant shall pay all personal property taxes, income taxes,
license fees. and other taxes which are or may be assessed, levied or imposed
upon Tenant in connection with Tenant's operation of its business upon the
Demised Premises. Tenant shall likewise observe and comply with the requirements
of all policies of public liability, fire and other policies of insurance at any
time in force with respect to the Demised Premises.
16. ENVIRONMENTAL MATTERS.
(a) Tenant warrants that all its activities on the Demised Premises,
the Building, or the Project during the course of this Lease will be
conducted in material compliance with all federal, state, and local laws,
regulations, orders, permits, ordinances, and the like concerning
protection of human health and/or the environment ("Environmental Laws").
Tenant warrants that it is currently in compliance with all applicable
Environmental Laws and that there are no pending or threatened notices of
deficiency, notices of violation, orders, or Judicial or administrative
actiofis involving alleged violations by Tenant of any Environmental Laws.
Tenant, at Tenant's sole cost and expense. shall be responsible for
obtaining all permits or licenses or approvals under Environmental Laws
necessary for Tenant's operation of its business on the Demised Premises
and shall make all notifications and registrations required by any
applicable Environmental Laws. Tenant, at Tenant's sole cost and expense,
shall at all times comply with the terms and conditions of all such
permits, licenses, approvals, notifications and registrations and with any
other applicable Environmental Laws. Tenant warrants that it has obtained
all such permits, licenses or approvals and made all such notifications and
registrations required by any applicable Environmental Laws necessary for
Tenant's operation of its business on the Demised Premises.
(b) Tenant shall not cause or permit any Hazardous Substances (as
hereinafter defined) to be brought upon, kept or used in or about the
Demised Premises, the Building, or the Project without the prior written
consent of Landlord, which consent may be unreasonably and arbitrarily
withheld.
(c) In the event Landlord shall grant its consent as described in
Section 16(b) above, Tenant shall not cause or permit the release of any
Hazardous Substances into any environmental media such as air, water or
land, or into or on the Demised Premises, the Building or the Project. If
such release shall occur, Tenant shall (i) immediately take all necessary
steps to contain, control and clean up such release and any associated
contamination, (ii) notify Landlord, and (iii) take any and all other
action which may be required by Environmental Laws, governmental agencies,
and/or Landlord.
(d) Tenant shall not install any underground storage tank on the
Demised Premises.
(e) Tenant shall indemnifi Landlord and hold Landlord harmless from
12
<PAGE>
and against any and all expense, loss, and liability suffered by Landlord,
with the sole exception of those expenses, lossess and liabilities arising
solely from Landlord's own negligence or willful act, by reason of Tenant's
improper (regardless of whether accidental, intentional, or negligent)
storage, generation, handling, treatment, transportation or disposal (or
arrangement for transportation or disposal) of any Hazardous Substances, or
by Tenant's breach of any of the provisions of this Section 16, including,
without limitation, (i) any and all expenses that Landlord may incur to
comply with any Environmental Laws as a result of Tenant's failure to
comply therewith; (II) any and all costs that Landlord may incur in
studying or remedying any Contamination at or arising from the Demised
Premises, the Building, or the Project; (III) any and all costs that
Landlord may incur in studying, removing, disposing or otherwise addressing
any Hazardous Substances; (iv) any and all fines, penalties or other
sanctions assessed upon Landlord by reason of Tenant's failure to comply
with Environmental Laws; and (v) any and all legal and professional fees
and costs incurred by Landlord in connection with the foregoing The
indemnity contained herein shall survive the termination or expiration of
this Lease.
(f) The term "Hazardous Substances" as used herein means any hazardous
or toxic substance or waste as those terms are defined by any applicable
federal or state law or regulation (including, without limitation, the
Comprehensive Environmental Recovery Compensation and Liability Act, 42
U.S.C. 9601 et. sec. and the Resource Conservation and Recovery Act, 42
U.S.C. 6901 et. sec.) and petroleum products and oil.
(g) The term "Contamination" as used herein means the uncontained or
uncontrolled presence of or release of Hazardous Substances into any
environmental media and into or on any portion of the Demised Premises, the
Building, or the Project so as to require remediation, cleanup or
investigation under any applicable Environmental Law.
17. CONSTRUCTION OF DEMISED PREMISES.
(a) Within thirty (30) days after the date hereof, Landlord shall
prepare, and submit to Tenant a complete set of plans and specifications
and construction drawings (collectively, the "Plans and Specifications")
covering all work to be performed by Landlord in constructing the interior
improvements for the Demised Premises. Said Plans and Specifications shall
be in such detail as Landlord may require and shall be in compliance with
all applicable statutes, ordinances and regulations. Tenant shall approve
the Plans and Specifications by the date set forth in l(l) of the Basic
Lease Provisions. If Tenant fails to approve the Plans and Specifications
by such date, and completion of construction of the requirements is delayed
beyond the Commencement Date, the Term and Tenant's obligation to pay rent
hereunder shall nevertheless begin on the Rent Commencement Date. Any
subsequent changes to said Plans and Specifications requested by Tenant
shall be at Tenant's sole cost and expense and subject to Landlord's
written approval.
(b) Landlord shall use reasonable speed and diligence to substantially
complete the improvements within the Demised Premises, and have Demised
Premises ready for occupancy on or before the Commencement Date. If
Landlord shall be unable to give possession of the Demised Premises on that
date or if the construction has begun and Landlord is unable due to Delay
13
<PAGE>
(as hereinafter defined) to complete the improvements on or before that
date, such failure to give possession shall not in any way affect the
obligation of Tenant hereunder except that the Minimum Rent and Additional
Rent obligation shall not occur until the Demised Premises are made
available for occupancy by Tenant, unless such failure to give possession
has been caused by any act or omission on the part of Tenant; and Landlord
and Tenant agree that the Term shail be extended b@ the period of such
Delay. No liability whatsoever shall arise or accrue against Landlord any
reason of its failure to deliver or afford possession, and Tenant hereby
releases and discharges Landlord from and of any claims for damage, loss,
or injury of every kind whatsoever as if this Lease were never executed.
(c) The construction period shall be extended for delays ("Delay")
incurred by reason of changes requested by Tenant In the Plans and
Specifications after the Tenant's approval thereof, and for such additional
time as is equal to the time lost by Landlord or Landlord's contractors or
suppliers in connection with the performance of Landiord's work and/or the
construction of the Building and related improvements due to strikes or
other labor troubles, governmental restrictions and limitations, war or
other national emergency, non-availabi]ily of materials or supplies, delay
in transportation, accidents, floods, fire, damage or other casualties,
weather or other conditions, acts or omissions of Tenant, or delays by
utility companies in bringing utility lines to the Demised Premises.
(d) Upon substantial completion of the Demised Premises, a
representative of Landlord and a representative of Tenant together shall
inspect the Demised Premises and generate a punchlist of defective or
uncompleted items relating to the completion of construction of the
Improvements within the Demised Premises. Landlord shall, within a
reasonable time after such punchlist is prepared and agreed upon by
Landlord and Tenant, complete such Incomplete work and remedy such
defective work as are set forth on the punchlist. All construction work
performed by Landlord shall be deemed approved by Tenant in all respects
except for items of said work which are not completed or do not conform to
the Plans and Specifications and which are included on the punchlist.
(e) Upon acceptance of the Demised Premises by Tenant, Tenant shall
execute and deliver to Landlord a letter of acceptance confirming that the
Commencement Date and Expiration Date remain as set forth in the Basic
Lease Provisions, or if revised pursuant to the terms hereof, setting forth
the Commencement Date and Expiration Date as so revised.
18. TENANT ALTERATIONS AND ADDITIONS. Tenant shall not make or permit to be
made any alterations, improvements, or additions to the Demised Premises (a
"Tenant's Change"), without first obtaining on each occasion Landlord's prior
written consent (which consent Landlord agrees not unreasonably to withhold) and
Mortgagee's prior written consent (if such consent is required). Tenant shall
furnish Landlord with a full set of plans and specifications for any Tenant's
change prior to the commencement thereof together with an original builder's
risk policy of insurance in form and amount of coverage reasonably acceptable to
Landlord, showing Tenant as named insured, and Landlord and Mortgagee as loss
payees. All Tenant's changes shall be performed in accordance with all legal
requirements applicable thereto and in a good and workmanlike manner with
first-class materials and, upon completion of any Tenant's change, Tenant shall
furnish to Landlord "as-built" drawings showing the location and type thereof.
If Landlord at the time of giving Its approval to any Tenant's change notifies
14
<PAGE>
Tenant that approval is conditioned upon restoration, then upon written request
of Landlord, Tenant shall, at its sole cost and expense and upon the termination
of this Lease, remove the same and restore the Demised Premises to its condition
prior to such Tenant's Change. No Tenant's Change shall impair the structural
strength of the Building or reduce Its value, Tenant shall take or cause to be
taken all steps that are required or permitted by law in order to avoid the
imposition of any materialmen's or mechanics' liens upon the Building or the
Demised Premises, and Tenant shall pay the full cost of any Tenant's Change and
shall give Landlord such reasonable security as may be requested by Landlord to
insure payment of such cost. Except as otherwise provided herein and in
Paragraph 12 hereof, all Tenant's Changes and all repairs and all other property
attached to or installed on the Demised Premises by or an behalf of Tenant shall
immediately upon completion or installation thereof be and become part of the
Demised Premises and the property of Landlord without payment therefor by
Landlord and shall be surrendered to Landlord upon the expiration or earlier
termination of the Term of this Lease. Landlord shall have no duty or obligation
to make any Tenant's Change, replacement or repair to the Building, whether
interior or exterior, structural or non-structural, ordinary or extraordinary,
or to maintain the Demised Premises.
19. SERVICES BY LANDLORD. Landlord shall be responsible for providing for
maintenance of the common areas of and relating to the Building, and for no
other services whatsoever. Tenant, by payment of T-enant's share of the
Operating Expenses, shall pay Tenant's pro rata share of the expenses incurred
by Landlord hereunder.
20. FIRE AND OTHER CASUALTY.
(a) In the event of total or artial destruction of the Demised
Premises by fire or other casualty insured by Landlord, Landlord agrees to
promptly restore and repair the Demised Premises at Landlord's expense to
the extent Landlord receives insurance proceeds therefor; provided, however
that in the event the Demised Premises are (i) so destroyed that they
cannot be repaired or rebuilt within one hundred twenty (120) days after
the commencement of such repair or rebuilding; or (ii) destroyed by a
casualty which is not covered by Landlord's insurance, or if such casualty
is covered by Landlord's insurance but a Landlord's Mortgagee or other
party entitled to insurance proceeds fails to make such proceeds available
to Landlord in an amount sufficient for restoration of the Demised
Premises, then, either Landlord or Tenant may terminate and cancel this
Lease effective as of the 5th day after such casualty by giving written
notice to the other party within such days of the date of such casualty.
Upon the giving of such notice, all further obligations hereunder shall
thereupon cease and terminate. If no such notice is given, Landlord shall
make such repair or restoration of the Demised Premises promptly and in
such manner as not to unreasonably Interfere with Tenant's use and
occupancy of the Demised Premises (if Tenant is still occupying the Demised
Premises). Any proceeds from the fire and extended coverage Insurance
policies not utilized by Landlord in restoring or repairing the Demised
Premises shall become the sole property of Landlord. Minimum Rent shall
proportionately abate during the time that the Demised Premises or any part
thereof are unusable by reason of any such damage thereto.
15
<PAGE>
(b) Except as provided herein, damage to or destruction of all or any
portion of the Demised Premises by fire or by any other cause shall not
terminate this Lease, nor entitle Tenant to surrender the Demised Premises
nor in any way affect Tenant's obligation to pay the Minimum Rent,
Additional Rent and other sums payable hereunder.
21. CONDEMNATION.
(a) If all of the Demised Premises is taken or condemned for a public
or quasi-public use, or if a material portion of the Demised Premises is
taken or condemned for a public or quasi-public use and the remaining
portion thereof is not usable by Tenant, this Lease shall terminate as of
the earlier of the date title to the condemned real estate vests in the
condemnor and the date on which Tenant is deprived of possession of the
Demised Premises. In such event, the Minimum Rent herein reserved and all
Additional Rent and other sums payable hereunder shall be apportioned and
paid In full by Tenant to Landlord to that date, all Minimum Rent,
Additional Rent and other sums payable hereunder prepaid for periods beyond
that date shall forthwith be repaid by Landlord to Tenant, and neither
party shall thereafter have any liability hereunder, except that any
obligation or liability of either party, actual or contingent, under this
Lease which has accrued on or prior to such termination date shall survive.
(b) If only part of the Demised Premises is taken or condemned for a
public or quasi-public use and this Lease does not terminate pursuant to
Section 21(a) above, Landlord to the extent of the award it receives, shall
restore the Demised Premises to a condition and to a size as nearly
comparable as reasonably possible to the condition and size thereof
immediately prior to the taking, and there shall be an equitable abatement
of the Minimum Rent and Additional Rent according to the value of the
Demised Premises before and after the taking. Pending such determination,
Tenant shall continue to pay Life Minimum Rent and Additional Rent as
herein originally specified, and upon such determination. If Tenant is
entitled to a refund because of an overpayment of Minimum Rent or
Additional Rent, Landlord shall make the same promptly, or in lieu thereof
credit the amount thereof to future installments of Minimum Rent or
Additional Rent as they become due.
(c) Landlord shall be entitled to receive the entire award in any
proceeding with respect to any taking provided for in this Section 21,
without deduction therefrom for any estate vested in Tenant by this Lease,
and Tenant shall receive no part of such award. Nothing herein contained
shall be deemed to prohibit Tenant from making a separate claim, against
Life condemnor, to the extent permitted by law, for the value of Tenant's
moveable trade fixtures, machinery and moving expenses, provided that the
making of such claim shall not and does not adversely affect or diminish
Landiord's award.
22. TENANT'S DEFAULT.
(a) The occurrence of any one or more of the following events shall
constitute an Event of Default of Tenant under this Lease: (i) If Tenant
falls to pay Minimum Rent or any Additional Rent hereunder as and when such
rent becomes due and such failure shall continue for more than 5 days after
receipt of written notice from Landlord of such failure; (ii) if Tenant
fails to pay Minimum Rent or any Additional Rent on time more than twice in
16
<PAGE>
any period of 12 months (provided Landlord has given Tenant written notice
of the previous failures during such 12 month period within 20 days of the
date such payment was due), notwithstanding that such payments have been
made within the applicable cure period, (iii) If the Demise Premises become
vacant, deserted, or abandoned for more than 10 consecutive days or if
Tenant fails to take possession of the Demised Premises on the Commencement
Date or promptly thereafter; (iv) if Tenant permits to be done anything
which creates a lien upon the Demised Premises and falls to discharge, bond
such lien or post security with Landlord acceptable to Landlord within 10
days after receipt by Tenant of written notice thereof; (v) if Tenant
violates the provisions of Section 29 of this Lease by attempting to make
an unpermitted assignment or sublease; (vi) if Tenant fails to maintain in
force all policies of insurance required by this Lease and such failure
shall continue for more than 10 days after Landlord gives Tenant notice of
such failure; (vii) if any petition is filed by or against Tenant or any
guarantor of this Lease under any present or future section or chapter of
the Bankruptcy Code, or under any similar law or statute of the United
States or any state thereof (which, in the case of an involuntary
proceeding, is not permanently discharged, dismissed, stayed, or vacated,
as the case may be, within 60 days of commencement), or if any order for
relief shall be entered against Tenant or any guarantor of this Lease in
any such proceedings,, (vill) if Tenant or any guarantor of this Lease
becomes insolvent or makes a transfer in fraud of creditors or makes an
assignment for the benefit of creditors; (ix) if a receiver. custodian, or
trustee is appointed for the Demised Premises or for all or substantially
all of the assets of Tenant or of any guarantor of this Lease, which
appointment is not vacated within 69 days following the date of such
appointment (x) if Tenant fails to perform or observe any other term of
this Lease and such failure shall continue for more than 10 days after
Landlord ves Tenant notice of such failure, or, if such failure cannot be
correrted within such 10 day period, if Tenant does not commence to correct
such default within said 10 day period and thereafter diligently prosecute
the correction of same to completion within a reasonable time and in any
event prior to the time a failure to complete such correction could cause
Landlord to be subject to prosecution for violation of any law, rule,
ordinance or regulation or causes, or could cause a default under any
mortgage, underlying lease, tenant leases or other agreements applicable to
the Project; or (xi) if Tenant fails to perform any term (other than the
payment of Minimum Rent or any Additional Rent) of this Lease more then 2
times In any period of 12 months, notwithstanding that Tenant has corrected
any previous failures within the applicable cure period.
(b) Upon the occurrence of any one or more of the aforesaid Events of
Default, or upon the occurrence of any other default or defaults by Tenant
under this Lease, Landlord may, at Landlord's option, without any demand or
notice whatsoever (except as expressly required In this Section 22):
(i) Terminate this Lease by giving Tenant notice of termination,
in which event this Lease shall expire and terminate on the date
specified In such notice of termination with the same force and effect
as though the date so specified were the date herein originally fixed
as the termination date of the term of this Lease. and all rights of
Tenant under this Lease and in and to the Demised Premises shall
expire and terminate and Tenant shall remain liable for all
obligations under this Lease arising up to the date of such
termination, and Tenant shall surrender the Demised Premises to
17
<PAGE>
Landlord on the date specified in such notice, and if Tenant fails to
so surrender Landlord shall have the right. without notice, to enter
upon and take possession of the Demised Premises and to expel or
remove Tenant and its effects without being liable for prosecution or
any claim for damages therefor; or
(ii) Terminate this Lease as provided in Section 22(b)(i) hereof
and recover from Tenant all damages Landlord may incur by reason of
Tenant's default, including, without limitation, a sum which, at the
date of such termination, represents the then value of the excess, if
any, of (1) the total Minimum Rent, Additional Rent, and all other
sums which would have been payable hereunder by Tenant for the period
commencing with the day following the date of such termination and
ending with the Termination Date of the Term, over (2) the aggregate
reasonable rental value of the Demised Premises for the same period,
plus (3) the costs of recovering the Demised Premises and all other
expenses incurred by Landlord due to Tenant's default, Including,
without limitation, reasonable attorney's fees, plus (4) the unpaid
Minimum Rent earned as of the date of termination plus interest at the
Interest Rate (as defined In Section 32 herein), plus other sums of
money and damages owing on the date of termination by Tenant to
Landlord under this Lease or in connection with the Demised Premises,
all.of which excess sum shall be deemed immediately due and payable:
or
(iii) Without terminating this Lease, and with or without notice
to Tenant, Landlord may in Its own name but as agent for Tenant enter
into and upon and take possession of the Demised Premises or any part
thereof, and, at Landlord's option, remove persons and property
therefrom and such property if any, may be removed and stored in a
warehouse or elsewhere at the cost of, and for the, account of Tenant.
all without being deemed guilty of trespass or becoming liable for any
loss or damage which may be occasioned thereby, and Landlord may rent
the Demised Premises or any portion thereof as the agent of Tenant
with or without advertisement, and by private negotiations and for any
term upon such terms and conditions as Landlord may deem necessary or
desirable in order to relet the Demised Premises. Landlord shall in no
way be responsible or liable for any failure to rent the Demised
Premises or any part thereof, or for any failure to collect any rent
due upon such reletting. Upon each such reletting, all rentals
received by Landlord from such reletting shall be applied: first, to
the payment of any indebtedness (Other than any rent due hereunder)
from Tenant to Landlord; second, to the payment of any costs and
expenses of such reletting, including, without limitation, brokerage
fees and attorney's fees and costs of alterations and repairs; third,
to the payment of rent and other charges then due and unpaid
hereunder: and the residue, if any, shall be held by Landlord to the
extent of and for application in payment of future rent, If any
becomes owing, as the same may become due and payable hereunder. In
reletting the Demised Premises as aforesaid, Landlord may grant rent
concessions and Tenant shall not be credited therefore. If such
rentals received from such reletting shall at any time or from time to
time be less than sufficient to pay to Landlord the entire sums then
due from Tenant hereunder, Tenant shall pay any such deficiency to
Landlord. Such deficiency shall, at Landiord's option, be calculated
and paid monthly. Notwithstanding any such reletting without
18
<PAGE>
termination, Landlord may at any time thereafter elect to terminate
this Lease for any such previous default provided same has not been
cured; or
(iv) Without terminating this Lease, and with or without notice
to Tenant, Landlord may enter into and upon the Demised Premises and
without being liable for prosecution or any claim for damages
therefore, maintain the Demised Premises and repair or replace any
damage thereto or do anything or make any payment for which Tenant is
responsible hereunder. Tenant shall reimburse Landlord Immediately
upon demand for any expenses which Landlord incurs in thus effecting
Tenant's compliance under this Lease, and Landlord shall not be liable
to Tenant for any damages with respect thereto; or
(v) Without liability to Tenant or any other party and without
constituting a constructive or actual eviction, suspend or discontinue
furnishing or rendering to Tenant any property, material, labor,
utilities or other service, wherever Landlord is obligated to furnish
or render the same so long as Tenant is in default under this Lease:
or
(vi ) Allow the Demised Premises to remain unoccupied and collect
rent from Tenant as it-comes due; or
(vil) Foreclose any security interest in the property of Tenant
which Landlord may have under the laws of the state where the Building
is located or under this Lease, including the immediate taking of
possession of all property on or in the Demised Premises; or
(vill) Pursue such other remedies as are available at law or
equity.
(c) If this Lease shall terminate as a result of or while there exists
a default hereunder, any funds of Tenant held by Landlord may be applied by
Landlord to any-damages payable by Tenant (whether provided for herein or
by law) as a result of such termination or default.
(d) The parties hereby waive trial by jury in any action, proceeding
or counterclaim brought by either of the parties herein against the other
on any matters whatsoever, arislng out of or in an way connected with this
Lease, Tenant's use or occupancy of the Demised Premises, or any claim of
injury or damage hereunder, and Tenant covenants and agrees that Tenant
will not interpose any counterclaim, offset, or deduction in any summary
proceeding brought by Landlord to recover possession of the Demised
Premises.
(e) Neither the commencement of any action or proceeding, nor the
settlement thereof, nor entry of judgment thereon shall bar Landlord from
bringing subsequent actions or proceedings from time to time, nor shall the
failure to include in any action or proceeding any sum or sums then due be
a bar to the maintenance of any subsequent actions or proceedings for the
recovery of such sum or sums so omitted.
(f) The foregoing provisions of this Article 22 shall apply to any
renewal or extension of this Lease.
19
<PAGE>
(g) If any statute or rule of law shall limit any of Landlord's
remedies as hereinabove set forth, Landlord shall nonetheless be entitled
to any and all other remedies hereinabove set forth.
(ii) No agreement to accept a surrender of the Demised Premises
and no act or omission by Landlord or Landlord's agents during the
Term shall constitute an acceptance or surrender of the Demised
Premises unless made in writing and signed by Landlord. No re-entry or
taking possession of the Demised Premises by Landlord shall constitute
an election by Landlord to terminate this Lease unless a written
notice of such intention is given to Tenant.
(i) No provision of this Lease shall be deemed to have been waived by
either party unless such waiver is in writing and signed by the party
making such waiver. Landlord's acceptance of Minimum Rent or Additional
Rent following an. Event of Default hereunder shall not be construed as a
waiver of such Event of Default. No custom or practice which may grow up
between the parties In connection with the terms of this Lease shall be
construed to waive or lessen either party's right to insist upon strict
performance of the terms of this Lease, without a written notice thereof
the other party.
(j) The rights granted to Landlord In this Section 22 shall be
cumulative of every other right or remedy provided in this Lease or which
Landlord may otherwise have at law or in equity or by statute, and the
exercise of one or more rights or remedies shall not prejudice or impair
the concurrent or subsequent exercise of other rights,or remedies or
constitute a forfeiture or waiver of Minimum Rent, Additional Rent or
damages accruing to Landlord by reason of any Event of Default under the
Lease. If an Event of Default shall occur, Tenant shall pay to Landlord, on
demand, all expenses incurred by Landlord as a result thereof, including
reasonable attorneys' fees, court costs and expenses. If Landlord shall be
made a party to any litigation commenced against Tenant as a result of this
Lease, Landlord's ownership of the Demised Premises or the relationshi of
Landlord and Tenant arising by virtue of this Lease, and Tenant, at its
expense, shalf fail to provide Landlord with counsel approved by Landlord,
Tenant shall pay all costs and reasonable attorneys' fees incurred by
Landlord In connection with such litigation.
(k) In the event that Tenant is in default hereunder, and any rent,
including Minimum Rent, Additional Rent and any other sums, owing under
this Leases collected by or through an attorney-at-law, Tenant agrees to
pay fifteen percent (15%) of such sum as attorneys fees.
23. LANDLORD'S RIGHT OF ENTRY. Tenant agrees to permit Landlord and the
authorized representatives of Landlord and of the Mortgagee to enter upon the
Demised Premises at all reasonable times for the purposes of inspecting them and
making any necessary repairs thereto and performing any work therein that may be
necessary by reason of Tenant's failure to make such repairs or perform any such
work required of Tenant under this Lease; provided that, except in the case of
an emergency, Landlord shall give the Tenant reasonable prior written notice of
Landlord's intended entry upon the Demised Premises. Nothing herein shall imply
any duty upon the part of Landlord to do any such work, and the performance
thereof by Landlord shall not constitute a waiver of Tenant's default in failing
to perform it. Landlord shall not be liable for inconvenience, annoyance,
disturbance or other damage to Tenant by reason of making such repairs or the
20
<PAGE>
performance of such work in the Demised Premises or on account of bringing
materials, supplies and equipment into or through the Demised Premises during
the course thereof, and the obligations of Tenant under this Lease shall not
thereby be affected: provided, however, that Landlord shall use reasonable
efforts not to annoy, disturb or otherwise interfere with Tenant's operations in
the Demised Premises in making such repairs or performing such work. Landlord
also shall have the right to enter the Demised Premises at all reasonable times
to exhibit the Demised Premises to any prospective purchaser and/or mortgagee
thereof; and Landlord shall have the right to exhibit the Demised Premises to
any prospective tenant at any time within six (6) months prior to the expiration
of the Term of this Lease, unless Tenant shall have previously exercised a then
current option to renew the Term beyond the then current Term.
24. MORTGAGEE'S RIGHTS.
(a) This Lease and all rights of Tenant hereunder are and shall be
subject and subordinate to the lien of Landlord's Mortgage (as defined
hereinbelow). Tenant recognizes and acknowledges the right of the holder of
Landlord's Mortgage (the "Mortgagee") to foreclose or exercise the power of
sale against the Demised Premises under Landlord's Mortgage.
(b) Tenant shall, in confirmation of the subordination set forth in
Section 24(a) above and notwithstanding the fact that such subordination is
self-operative, and no further instrument or subordination shall be
necessary, upon demand, at any time or times, execute, acknowledge, and
deliver to Landlord or to Mortgagee any and all instruments requested by
either of them to evidence such subordination.
(c) If requested by Mortgagee, Tenant shall. upon demand, at any time
or times, execute, acknowledge, and deliver to Mortgagee, any and all
instruments that may be necessary to make this Lease superior to the lien
of Landlord's Mortgage.
(d) If Mortgagee shall hereafter succeed to the rights of Landlord
under this Lease, whether through possession or foreclosure action or
delivery of a new lease, Tenant shall, at the option of the Mortgagee,
attorn to and recognize such successor as Tenant's Landlord under this
Lease without change in the terms and provisions of this Lease (provided
that such successor shall not be bound by (i) any payment of Minimum Rent
or Additional Rent for more than one month in advance, except prepayments
in the nature of security for the performance by Tenant of its obligations
under this Lease, and then only if such prepayments have been deposited
with and are under the control of such successor, or (ii) any provision of
any amendment to the Lease to which the Mortgagee has not consented, and
shall promptly execute and deliver any Instrument that may be necessary to
evidence such attornment. Upon such attornment, this Lease shall continue
in full force and effect as a direct lease between each successor Landlord
and Tenant, subject to all of the terms, covenants and conditions of this
Lease.
As used in this Paragraph 24 and In Paragraph 32, the term "Landlord's
Mortgagee" means any or all mortgages, deeds to secure debt, deeds of trust
or other Instruments in the nature thereof which may now or hereafter
affect or encumber Landlord's title to the Demised Premises.
21
<PAGE>
25. ESTOPPEL CERTIFICATE. Tenant agrees. at any time, and from time to
time, within ten (10) days' after Landlord's written request, to execute,
acknowledge and deliver to Landlord, a statement in writing in recordable form
to Landlord and/or its designee certifying that: (i) this Lease is unmodified
and in full force and effect (or, if there have been modifications, that the
same is in full force and effect, as modified) and (ii) the dates to which
Minimum Rent, Additional Rent and other charges have been paid, (iii) whether or
not, to the best knowledge of the signer of such certificates, there exists any
failure by Landlord to perform any term, covenant or condition contained in this
Lease, and, if so, specifying each such failure of which the signer may have
knowledge, (iv) (if such be the case) the Tenant has unconditionally accepted
the Demised Premises and is conducting its business therein, (v) and as to such
additional matters as may be requested by Landlord, it being intended that any
such statement delivered pursuant hereto may be relied upon by Landlord and by
any purchaser of title to the Demised Premises or by any Mortgagee or any
assignee thereof or any party to any sale-leaseback of the Demised Premises, or
the landlord under a ground lease affecting the Demised Premises.
26. LANDLORD LIABILITY. No owner of the Demised Premites, whether or not
named herein, shall have liability hereunder after lie ceases to hold title to
the Demised Premises, except for obligations which may have theretofore accrued.
Neither Landlord nor any officer, director,' shareholder, partner or principal,
whether disclosed or undisclosed, of Landlord shall be under any personal
liability with respect to any of the provisions of this Lease, an-a if Landlord-
is in breach or default with respect to Landlord's obligations or otherwise
under this Lease, Tenant shall look solely to the equity of Landlord in the
Demised Premises for the satisfaction of Tenant's remedies. It is expressly
understood and agreed that Landlord's liability under the terms, covenants,
conditions, warranties and obligations of this Lease shall in no event exceed
the loss of Landlord's equity interest in the Demised Premises.
27. NOTICES AND PAYMENTS. Any notice or payment required or permitted to be
given or served by either party to this Lease shall be deemed given when made in
writing, deposited with the United States Postal Service, postage prepaid, to be
mailed by registered mail, return receipt requested, or delivered by overnight
delivery service, properly addressed to the address set forth in l(n) of the
Basic Lease Provisions.
28. BROKERS. Neither Landlord nor Tenant has engaged any brokers who would
be entitled to any commission or fee based on the execution of this Lease, other
than those set forth in l(o) of the Basic Lease Provisions (the "Brokers") who
shall be paid pursuant to separate agreement. Further, neither Landlord nor
Tenant have had any conversations or negotiations with any broker except the
Brokers concerning the leasing of the Demised Premises. Landlord and Tenant
hereby indemnify each other against and from any claims for any brokerage
commissions (except those payable to the Brokers, all of wnich are payable by
Landlord) and all costs, expenses and liabilities in connection therewith,
including, without limitation, reasonable attorneys' fees and expenses, for any
breach of the foregoing. The foregoing indemnification shall survive the
termination of the Lease for any reason.
29. ASSIGNMENT AND SUBLEASING. Tenant may not assign, mortgage, pledge,
encumber or otherwise transfer this Lease, or any interest thereunder, or sublet
the Demised Premises, in whole or in part, without on each occasion first
obtaining the prior express written consent of Landlord, which consent Landlord
may give or withhold in its sole and absolute discretion. Permitted subtenants
22
<PAGE>
or assignees shall become liable directly to Landlord for all obligations of
Tenant hereunder, without, however, relieving Tenant of any of its liability
hereunder. Tenant further agrees that if such subtenant or assignee is required
to any rent greater than the rent required to be paid by Tenant hereunder, then
Landlord shall be entitled to receive and shall be paid such increased amount as
Additional Rent. No such assignment, subletting, occupancy or collection shall
be deemed the acceptance of the assignee, tenant or occupant, as Tenant, or a
release of Tenant from the further performance by Tenant of Tenant's obligations
under this Lease.
30. TERMINATION OR EXPIRATION.
(a) No termination of this Lease prior to the normal ending thereof by
lapse of time or otherwise, shall affect Landlord's right to collect rent
for the period prior to termination thereof.
(b) At the expiration or earlier termination of the Term of this
Lease, Tenant shall surrender the Demised Premises and all improvements,
alterations and additions thereto, and keys therefor to Landlord, clean and
neat, and in the same condition as at the commencement of the Term, natural
wear and tear only excepted.
(c) If Tenant remains in possession of the Demised Premises after
expiration of the Term hereof, with Landlord's acquiescence and without any
express agreement of the parties, Tenant shall be a tenant-at-will at one
hundred fifty percent (150%) of the Minimum Rent in effect at the end of
the Term of the Lease, together with all other Additional Rent due
hereunder, and there shall be no renewal of this Lease by operation of law.
31. This section has been deleted.
32. LATE PAYMENTS. In the event any installation of rent, inclusive of
Minimum Rent, or Additional Rent or other sums due hereunder. if any, is not
paid within five (5) days after the date when such rent is due, Tenant shall pay
interest or the amount past due at a rate of fifteen percent (15%) per annum
(the "Interest Rate") to defray the additional expenses incurred by Landlord In
processing such payment.
33. RULES AND REGULATIONS Tenant agrees to abide by the Rules and
Regulations set forth on Exhibit "D" attached hereto, as well as other rules and
regulations reasonably promulgated by the Landlord from time to time.
34. MISCELLANEOUS.
(a) The parties hereto hereby covenant and agree that this Lease is a
"net lease" and that, any present or future law to the contrary
notwithstanding, this Lease &hall not terminate, except as herein
specifically provided, and Landlord shall receive the Minimum Rent and
Additional Rent and all other sums payable by Tenant hereinabove provided
as net income from the Demised Premises, without any abatement, reduction,
sel-off, counterclaim, defense or deduction and not diminished by (a) any
imposition of an public authority of any nature whatsoever during the
entire Term, notwithstanding any changes in the method of taxation or
raising, levying or assessing any imposition, or any changes In the name of
any imposition, or (b) any expenses or charges required to be paid to
maintain and carry the Demised Premises or to continue the ownership of
23
<PAGE>
Landlord, other than payments under any mortage now existing or hereafter
created by Landlord. The obligations of Tenant hereunder shall not be
affected by reason of any damage to or destruction of the Demised Premises.
Tenant shall remain obligated under this Lease in accordance with its terms
and shall not take any action to terminate, rescind or void this Lease,
notwithstanding any bankruptcy, insolvency, reorganization, liquidation,
dissolution or other proceeding affecting Landlord or any assignee of
Landlord.
(b) If any clause or provision of this Lease is determined to be
illegal, invalid or unenforceable under present or future laws effective
during the term of this Lease, then and in that event. it is the intention
of the parties hereto that the remainder of this Lease shall not be
affected thereby. and that in lieu of such illegal, invalid or
unenforceable clause or provision there shall be substituted a clause or
provision as similar in terms to such illegal, invalid or unenforceable
clause or provision as may be possible and be legal, valid and enforceable.
(c) All rights, powers, and privileges conferred hereunder upon the
parties hereto shall be cumulative, but not restrictive to those given by
law.
(d) Time is of the essence of this agreement.
(e) No failure of Landlord or Tenant to exercise any power given
Landlord or Tenant hereunder or to insist upon strict compliance by
Landlord or Tenant with its obligations hereunder, and no custom or
practice of the parties at variance with the terms hereof shall constitute
a waiver of Landiord's or Tenant's rights to demand exact compliance with
the terms hereof.
(f) This Lease contains the entire agreement of the parties hereto and
no representations, inducements, promises or agreements, oral or otherwise,
between the parties not embodied herein shall be of any force and effect.
The masculine (or neuter) pronoun, singular number shall include the
masculine, feminine and neuter gender and the singular and plural number.
(g) This contract shall create the relationship of Landlord and Tenant
between Landlord and Tenant; no estate shall pass out of Landlord; Tenant
has a usufruct, not subject to levy and sale, and not assignable by Tenant
except as expressly set forth herein.
(h) Landlord and Tenant agree to execute, upon request of the other, a
memorandum of this Lease in recordable form and the requesting party shall
pay the costs and charges for the recording of such memorandum of lease.
Under no circumstances shall Tenant have the right to record this Lease,
and should Tenant do so, Tenant shall be in default hereunder.
(i) The captions of this Lease are for convenience only and are not a
part of this Lease, and do not in any way define, limit, describe or
amplify the terms or provisions of this Lease or the scope or intent
thereof.
(j) This Lease may be executed in multiple counterparts, each of which
shall constitute an original, but all of which taken together shall
constitute one and the same agreement.
24
<PAGE>
(k) This Lease shall be interpreted under the laws of the State where
the Demised Premises are located.
35. STIPULATIONS. The Special Stipulations, if any, attached hereto as
Exhibit C, are incorporated herein and made a part hereof, and to the extent of
any conflict between the foregoing provisions and the Special Stipulations, the
Special Stipulations shall govern and control.
IN WITNESS WHEREOF, the parties hereto have hereunto set their seals, the
day and year first above written.
LANDLORD:
INDUSTRIAL DEVELOPMENTS INTERNATIONAL, INC.
s/s Henry D. Gregory
By:________________________________
Henry D. "Greg" Gregory
Its: President
Approved by A & B s/s SO
s/s Timothy J. Gunter
Attest:____________________________
Timothy J. Gunter
Its: Secretary
(CORPORATE SEAL)
(If Tenant is an Individual)
TENANT:
_____________________________ (SEAL)
Name: _____________________________
(If Tenant is a Partnership)
TENANT:
s/s Mark J. Gianinni
______________________________ (SEAL)
By: Mark J. Gianinni
Its: President
25
<PAGE>
LANDLORD:
STATE 0F GEORGIA
COUNTY OF FULTON
BEFORE ME, a Notary Public in the aforesaid County, personally appeared
Henry D. "Greg" Gorgory and Timothy J. Gunter known to me to be the person(s)
who, as President and Secretary respectively, of Industrial Development
International, Inc., the corporation which executed the foregoing Instrument
in its capacity as Landlord, signed the same, and acknowledged to me that they
did so sign said instrument in the name and upon behalf of said corporation as
officers of said corporation, that the same is their free act and deed as such
officers, respectively, and they were duly authorized thereunto by its board of
directors; and that the seal affixed to said Instrument is the corporate seal o
said corporation.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name, and affixed my
official seal, this 30th day of May, 1991.
s/s Jane P. Cochran
_______________________________
Notary Public
My Commission Expires: 4/22/92
TENANT - Individual:
STATE OF
COUNTY OF
BEFORE ME, a Notary Public in and for said County, personally appeared
___________________________ known to me to be the person(s) who executed the
foregoing instrument in its capacity as Landlord, signed the same, and
acknowledged to me that (s)he did so sign said instrument in the name and that
the same is his/her free act and deed.
IN TESTIMONY WIIEREOF, I have hereunto subscribed my name, and afflxed my
official seal this day of 19_.
_______________________________
Notary Public
My Commission Expires:
26
<PAGE>
TENANT - Partnership:
STATE OF FLORIDA
COUNTY OF PINELLAS
BEFORE ME, a Notary Public in and for said County, personally appeared Mark
J. Gianinni and _______________________ known to me to be the person(s) and who,
as President and ____________________, respectively , of Datalinc-I, Ltd., the
partnership which executed the foregoing instrument in its capacity as Tenant,
signed the same, and acknowledged to me that they did so sign said instrument in
the name and upon behalf of said partnership, that the same is their free act
and deed and they were duly authorized thereunto by the partnership.
IN TESTIMONY WHEREOF, I have subscribed my name, and affixed my official
seal, this 8th day of May, 1991.
s/s Wendy C. Schroeder
_______________________________
Notary Public
My Commission Expires:
Notary Public, State of Florida at Large
My Commission Expires June 1, 1991
TENANT - Corporation:
STATE OF
COUNTY OF
BEFORE ME, a Notary Public in and for said County, personally appeared
__________________ and __________________ known to me to be the person(s) who,
as ___________________ and ___________________, respectively, of the corporation
which executed the foregoing instrument in its capacity as Tenant, signed the
same, and acknowledged to me that they did so sign said Instrument In the name
and upon behalf of said corporation as officers of said corporation. that the
same Is their free act and deed as such officers, respectively, and they were
duly authorized thereunto by its board of directors; and that the seal affixed
to said instrument is the corporate seal of said corporation.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name, and affixed my
official seal, this day of 19_.
_______________________________
Notary Public
My Commission Expires:
27
<PAGE>
EXHIBIT "C"
1. LANDLORD DEFAULT. In the event that Tenant shall receive a final
Judgment in a court of competent jurisdiction in the State of Ohio to the effect
that Landlord has committed a material breach of this Lease, and any appeal
period has expired without any appeal of such judgment being filed by Landlord,
and any cure period as established by such Judgment or otherwise has expired
without Landlord curing such breach, then Tenant may terminate this lease upon
five (5) days written notice to Landlord.
28
<PAGE>
EXHIBIT "D"
INDUSTRIAL DEVELOPMENTS INTERNATIONAL, INC.
RULES AND REGULATIONS
These Rules and Regulations have been adopted by Industrial Developments
International . Inc. ("Landlord") for the mutual benefit and protection of all
the tenants of the, Building In order to insure the safety, care and cleanliness
of the Building and the preservation of order therein.
1. The sidewalks, entrances, passages, corridors or halls shall not be
obstructed or used for any purpose other than ingress and egress. No tenant and
no employees of any tenant shall go upon the roof of the Building without the
consent of Landlord.
2. No awnings or other projections shall be attached to the outside walls
of the Building.
3. The wash room partitions, mirrors, wash basins and other plumbing
fixtures shall not be used for any purpose other than those for which they were
constructed, and no sweepings, rubbish, rags or other substances shall be thrown
therein.
4. No tenant shall cause or permit any objectionable or offensive noise or
odors to be emitted from the Premises.
5. The Premises shall not be used for lodging or sleeping or for any
immoral or illegal purposes.
6. No tenant shall make. or permit to be made any unseemly or disturbing
noises, sounds or vibrations or disturb or interfere with tenants of this or
neighboring buildings or premises or those having business with them whether by
use of any musical instrument, radio, phonograph, unusual noise, or in any other
way.
7. Each tenant must, upon the termination of this tenancy, restore to the
Landlord all keys of stores, offices, and rooms, either furnished to, or
otherwise procured by, such tenant and in the event of the loss of any keys so
furnished, such tenant shall pay to the Landlord the cost of replacing the same
or of changing the lock or locks opened by such lost key if Landlord shall deem
it necessary to make such change.
8. If any tenant shall employ one or more persons to do janitorial or other
similar work In the Premises, that tenant shall, while such persons are in the
Building and outside the Premises, follow such directions as the manager of the
Building may prescribe with respect to the control of such persons, and such
tenant shall be responsible for all acts of such persons.
9. Canvassing, soliciting and peddling in the Building are prohibited and
each tenant shall cooperate to prevent such activity.
29
<PAGE>
10. Landlord will direct electricians as to where and how telephone or
telegraph wires are to be introduced. No boring or cutting for wires or
stringing of wires will be allowed without written consent of Landlord. The
location of telephones, call boxes and other office equipment affixed to the
Premises shall be subject to the approval of Landlord.
11. Parking spaces associated with the Building are intended for the
exclusive use of passenger automobiles. Except for intermittent deliveries, no
vehicles other than passenger automobiles may be parked in a parking space
without the express written permission of Landlord.
12. Tenant shall not use any area within the Project for storage purposes
other then the interior of the Demised Premises.
30
<PAGE>
AMENDMENT NO. 1 TO LEASE AGREEMENT
This AMENDMENT NO. 1 TO LEASE AGREEMENT (this "Amendment") is entered into
this 16th day of September, 1991, between INDUSTRIAL DEVELOPMENTS INTERNATIONAL,
INC. ("Landlord") and DATALINC-I, LTD., a limited partnership having Integrated
Communication Networks, Inc. as its general partner ("Tenant").
RECITALS:
Landlord and Tenant entered into that certain Industrial Lease Agreement
dated April 15, 1991, for approximately 9,400 square feet of space within the
premises located at 6900 Fairfield Business Drive, Fairfield, Ohio (the
"Lease").
Landlord has agreed to construct additional improvements to the Demised
Premises, and Tenant has agreed to increase the Minimum Rent as consideration
therefore.
FOR AND IN CONSIDERATION of Ten and 00/100 Dollars ($10.00) and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereby agree as follows:
1. All defined terms used in this Amendment shall have the meaning given to
them in the Lease.
2. Minimum Rent. Landlord and Tenant agree that Annual Minimum Rent, as
defined in Section l(d) of the Lease, shall be increased by $.24 per square foot
of the Demised Premises for the first sixty (60) months following the Minimum
Rent Commencement Date. For the period commencing December 1, 1991, and ending
May 31, 1996, Annual Minimum Rent shall be $71,064.00 with monthly minimum rent
installments of $5,922.00. For the six month period commencing June 1, 1996, and
ending December 1, 1996, Annual Minimum Rent shall be $81,384.00, with monthly
minimum rent installments of $6,782.00.
3. Ratification. Except as modified hereby, the Lease is hereby ratified
and confirmed by Landlord and Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as
of the date written above.
LANDLORD:
INDUSTRIAL DEVELOPMENTS
INTERNATIONAL, INC.
s/s Henry D. "Greg" Gregory, Jr.
----------------------------------
By: Henry D. "Greg" Gregory, Jr.
Title: President
s/s Timothy J. Gunter
-------------------------------
Attest: Timothy J. Gunter
Title: Secretary
31
<PAGE>
TENANT:
DATALINC-I, LTD-, a Florida
limited partnership
By: Integrated Communications
Networks, Inc., general
partner
s/s Mark J. Gianinni
-------------------------------
By: Mark J. Gianinni
Title: President
32
<PAGE>
AMMENDMENT NO, 2 TO LEASE AGREEMENT
THIS AMENDMENT NO. 2 TO LEASE AGREEMENT (this "Amendment") is entered into
this 31st day of January, 1994, between INDUSTRIAL DEVELOPMENTS INTERNATIONAL,
INC. ("Landlord") and DATALINC-I, LTD., a Florida limited partnership having
Integrated Communication Networks, Inc. as its general partner ("Tenant").
RECITALS:
Landlord and Tenant entered into that certain Industrial Lease Agreement
dated April 15, 1991, as amended by that certain Amendment No. I to Lease
Agreement dated September 16, 1991 (as amended, the "Lease"), for approximately
9,400 square feet of space within the premises located at 6900 Fairfield
Business Drive, Fairfield, Ohio.
Landlord has consented to the construction of additional improvements
within the Demised Premises by Tenant and has agreed to reimburse Tenant for
Tenant's costs incurred in such construction, and Tenant has agreed to increase
the Minimum Rent as consideration therefore.
Landlord and Tenant desire to amend the Lease to, among other things,
extend the Term of the Lease and increase the Minimum Rent.
FOR AND IN CONSIDERATION of Ten and 00/100 Dollars ($10.00) and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereby agree as follows:
1. DEFINED TERMS. All capitalized terms used in this Amendment and not
defined herein shall have the meaning given to them in the Lease.
2. TERMINATION DATE. The Termination Date, as defined in Section I (h) of
the Lease, is hereby extended to January 31, 2005.
3. MINIMUM RENT. The Annual Minimum Rent, as defined in Section I (d) of
the Lease, shall be increased as follows. For the period commencing February 1,
1994, and ending May 31, 1996, Annual Minimum Rent shall be $80,500.00 with
Monthly Minimum Rent Installments of $6,708.33.'00. For the six month period
commencing June 1, 1996, and ending November 30, 1996, Annual Minimum Rent shall
be $90,820.00 with Monthly Minimum Rent installments of $7,568.33.00. For the
period commencing December 1, 1996, and ending January 31, 2004,- Annual Minimum
Rent shall be $88,564.00 with Monthly Minimum Rent installments of $7,380.33.
4. CONSTRUCTION OF ADDITIONAL IMPROVEMENTS.
(a) Tenant shall be responsible for constructing certain additional
interior improvements within the Demised Premises (the "Additional
Improvements"). Within thirty (30) days after the date hereof, Tenant
shall, at its sole cost and expense, prepare and submit to Landlord for
Landlord's written approval of disapproval (which approval will not be
unreasonably withheld or conditioned) a complete set of plans and
specifications and construction drawings (collectively, the "Plans and
Specifications") covering all work to be performed by Tenant in
constructing the Additional Improvements. The Plans and Specifications
shall be in such detail as Landlord may reasonably require and shall be in
compliance with all applicable statutes, ordinances and regulations.
Landlord shall review the Plans and Specifications and indicate requested
33
<PAGE>
changes, if any, by written notice to Tenant, within ten (10) days after
receipt of the Plans and Specifications by Landlord. If Landlord fails to
indicate such requested changes to the Plans and Specifications by such
date, the Plans and Specifications shall be deemed approved. Thereafter,
any changes to the Plans and Specifications shall be subject to Landlord's
written approval.
(b) Tenant or its contractor shall construct the Additional
Improvements in a good, first-class and workmanlike manner and in
accordance with the Plans and Specifications. Tenant shall carry, or cause
its contractor to carry, insurance reasonably satisfactory to Landlord
throughout the construction of the Additional Improvements.
(c) Upon substantial completion of the Additional Improvements, a
representative of Landlord and a representative of Tenant together shall
inspect the Demised Premises and generate a punchlist of defective or
uncompleted items relating to the completion of construction of the
Additional Improvements. Tenant shall, within a reasonable time after such
punchlist is prepared and agreed upon by Landlord and Tenant, complete such
incomplete work and remedy such defective work as are set forth on the
punchlist.
(d) Landlord shall reimburse Tenant for Tenant's costs (as defined in
subsection (e) below) incurred in constructing the Additional Improvements,
up to Sixty Thousand and No/100 Dollars ($60,000.00) (the "Tenant
Allowance") as follows:
(1) Landlord shall pay fifty percent (50%) of the Tenant
Allowance to Tenant at such time as:
(i) Tenant has delivered to Landlord copies of Tenant's
building permit;
(ii) Tenant has received Landlord's written approval
of the Plans and Specifications;
(iii) Tenant's contractor has completed fifty percent
(50%) of the Additional Improvements within the Demised
Premises, as evidenced by a certificate from Tenant's
architect and invoices, receipts and other evidence reasonably
required by Landlord to evidence the cost of the
Additional Improvements made as of the date of Tenant's request
for payment; and
(iv) Tenant has delivered to Landlord partial lien
waivers for the first fifty percent (50%) of the Additional
Improvements, from Tenant's contractor, all subcontractors
and all laborers or material suppliers having performed any
work at the Demised Premises relating to the construction
of the first fifty percent (50%) of the Additional Improvements.
(2) Landlord shall pay the remainder of the Tenant Allowance
to Tenant at such time that Tenant's contractor has:
34
<PAGE>
(i) substantially completed the Additional Improvements
and received a certificate of occupancy from the applicable
governing authority;
(ii) delivered to Landlord lien waivers and affidavits
from Tenant's contractor, all subcontractors, and all
laborers or materials suppliers having performed any work at
the Demised. Premises relating to the Additional
Improvements, together with any other evidence reasonably
required by Landlord to satisfy Landlord's title insurer that
there are no parties entitled to file a lien against the real
property underlying the Project in connection with such
work; and
(iii) delivered to Landlord all invoices, receipts
and other evidence reasonably required by Landlord to
evidence the cost of the Additional Improvements.
(f) Tenant's costs for construction of the Additional Improvements
shall include the cost of the Plans and Specifications, and all tenant
buildout, including, without limitation, demising walls, utilities, and the
heating, ventilating and air conditioning system.
(g) Tenant shall be responsible for all costs of construction of the
Additional Improvements in excess of the Tenant Allowance.
5. RATIFICATION. Except as modified hereby, the Lease shall be and remain
in full force and effect and unchanged. As amended hereby, the Lease is hereby
ratified and confirmed by Landlord and Tenant. To the extent the terms hereof
are inconsistent with the terms of the lease, the terms hereof shall control.
IN WITNESS THEREOF, Landlord and Tenant have executed this Amendment as of
the date written above.
LANDLORD:
INDUSTRIAL DEVELOPMENTS
INTERNATIONAL, INC.
s/s Merrelyn Rogers s/s Henry D. "Greg" Gregory, Jr.
_____________________________ By: ________________________________
WITNESS Name: Henry D. "Greg" Gregory, Jr.
PRINT NAME: Merrelyn Rogers Title: President
s/s Brigid Denery s/s Timothy J. Gunter
_____________________________ ATTEST: _____________________________
WITNESS NAME: Timothy J. Gunter
PRINT NAME: Brigid Denery TITLE: Secretary
[CORPORATE SEAL]
35
<PAGE>
TENANT:
DATALINC-I, LTD., a Florida limited
partnership
By: Integrated Communications
Networks, Inc., its general partner
s/s Johanna A. Davies s/s John F. Kolenda
_____________________________ By: ________________________________
WITNESS Name: John F. Kolenda
PRINT NAME: Johanna a. Davies Title: Chairman
s/s Michael C. Mothershead
_____________________________
WITNESS
PRINT NAME: Michael C. Mothershead
[CORPORATE SEAL]
36
<PAGE>
ACKNOWLEDGMENTS
LANDLORD
STATE OF GEORGIA
COUNTY OF FULTON
Before me, a notary public in and for said county, personally appeared
Harry D. Greg Grogory, Jr. and Timothy J. Gunter known to me to be the persons
who as, President and Secretary respectively of INDUSTRIAL DEVELOPMENTS
INTERNATIONAL, INC. the corporation which executed the foregoing instrument,
signed the same, and acknowledged to me that they did so sign said instrument in
the name and upon behalf of said corporation as such officers, respectively;
that the same is their free act and deed as such officers, respectively, and the
free and corporate act and deed of said corporation; that they were duly
authorized thereunto by its board of directors; and that the seal affixed to
said instrument is the corporate seal of said corporation. In testimony whereof,
I have hereunto subscribed my name, and affixed my official seal, at Atlanta,
Georgia this 10th day of February, 1994.
s/s Toni P. Cochran
_________________________
NOTARY PUBLIC
[NOTARIAL SEAL]
MY COMMISSION EXPIRES: 4/22/96
37
<PAGE>
TENANT
STATE OF FLORIDA
COUNTY OF PINELLAS
Before me, a notary public in and for said county, personallyy appeared
John F. Kolenda known to me to be the person who as, Chairman of INTEGRATED
COMMUNICATIONS NETWORKS, INC., the corporation which executed the foregoing
instrument as general partner of DATALINC-I, LTD., a Florida limited
partnership, signed the same, and acknowledged to me that s/he did so sign said
instrument in the name and upon behalf of said corporation and partnership as
such officer, respectively, that the same is her/his free act and deed as such
officer, and the free and corporate act and deed of said corporation; that s/he
was duly authorized thereunto by its board of directors; and that the seal
affixed to said instrument is the corporate seal of said corporation. In
testimony thereof, I have hereunto subscribed my name, and affixed my official
seal, at St. Petersburg this 31st day of January, 1994.
s/s Wendy C. Hilderbrand
_________________________
NOTARY PUBLIC
[NOTARIAL SEAL]
MY COMMISSION EXPIRES: 6/01/96
38
<PAGE>
CERTIFICATE OF AUTHORITY
CORPORATION
The undersigned, Secretary of INTEGRATED COMMUNICATIONS NETWORKS, INC. a
Florida corporation ("General Partner") which is the general partner of
DATALINC-I, LTD., a Florida limited partnership ("Tenant"), hereby certifies as
follows to INDUSTRIAL DEVELOPNMNTS INTERNATIONAL, INC., a Delaware corporation
("Landlord"), in connection with Tenant's proposed amendment to Tenant's lease
of premises at 6900 Fairfield Business Drive, Fairfield, Ohio (the "Premises"):
1 . Tenant is duly formed, validly existing and in good standing under the
laws of the State of Florida, and duly qualified to do business in the State of
Ohio.
2. That the following named persons, acting individually, are each
authorized and empowered to negotiate and execute, on behalf of Tenant, an
amendmendment Tenant's lease of the Premises and that the signature opposite the
name of each individual is an authentic signature:
Mark Gianinni President s/s Mark Gianinni
____________________ __________________ _____________________
(name) (title) (signature)
John F. Kolenda Chairman/CEO s/s John F. Kolenda
____________________ __________________ _____________________
(name) (title) (signature)
____________________ __________________ _____________________
(name) (title) (signature)
3. That the foregoing authority was conferred upon person(s) named above by
the Board of Directors of General Partner, at a duly convened meeting held
November 30, 1993.
s/s Mark Gianinni
______________________
Mark Gianinni
Secretary
39
<PAGE>
EXHIBIT 10.13
Letter from Hughes Network Systems
<PAGE>
HUGHES
NETWORK SYSTEMS
A Hughes Electronic Company
July 17, 1997
Mr. Mark Giannini
Integrated Communication Networks, Inc.
1641 Commerce Avenue, North
St. Petersburg, FL 33716
Dear Mark:
Thank you for your check of $100,000 which we received last week. As
agreed, we are applying this to some of the outstanding space segment invoices.
We are also taking this opportunity to reiterate the agreements made between
yourself and John Kolenda and myself and Ali Mohadjer regarding how HNS and ICN
will do business in the future.
It is our understanding that you have agreed that all outstanding amounts
will be paid in full upon finalization of your corporate restructuring and
financing arrangements, now expected to occur around the beginning of October.
You have also agreed to execute a promissory note evidencing this indebtedness
to be paid by not later than December 15, 1997. Further, you have agreed to make
a separate payment in the amount of $150,000 against the current balance on
September 15, 1997.
With respect to ongoing business, you have agreed that all future
requirements for new equipment will be paid for on a prepaid of COD basis. You
have also agreed to keep all new recurring charges current. Finally, you have
agreed that in the event any out of scope or special work is required (such as
customer requested moves, adds or changes), they will be paid for within 10 - 15
days after the work has been completed. In consideration of these promises, HNS
agrees to continue to provide the regular recurring services without
prepayments.
In the event that this letter accurately reflects your understandings of
our agreements, we would appreciate it if you could signify the same by signing
a copy of this letter in the space provided below and returning it to us. In the
event you have any other questions on this or any related matters, please let me
know. Thank you very much for your consideration.
Very truly yours,
/s/Phillip K. O'Brien
By: ________________________
Phillip K. O'Brien
Senior Director, Contracts
Agreed:
Integrated Communication Networks, Inc.
By:_______________________________
Date:_____________________________
cc: A. Mohadjer
J. Hasemann
D. Tuscano
11717 Exploration Lane, Germantown, MD 20876
Tel. (301)428-5500 TWX 710-828-0541
FAX: (301)428-1868/2830
<PAGE>
EXHIBIT NO.
99.1
Form of Written Consent of the Investors of Datalinc, Ltd.
<PAGE>
CONSENT IN LIEU OF A MEETING
OF THE LIMITED PARTNERS OF
DATALINC, LTD.
THIS CONSENT IS SOLICITED BY INTEGRATED COMMUNICATION NETWORKS, INC.
Pursuant to Section 620.133(3) of the Florida Revised Uniform Limited
Partnership Act (1986) and Section 5.4 of the Amended Agreement of Limited
Partnership of Datalinc, Ltd. ("Datalinc"), the following resolution is approved
and adopted without a meeting by the Limited Partners who have signed this
Consent, or a counterpart hereof (this Consent and all counterparts being hereby
deemed to constitute a single Consent), all as more particularly described in
the Consent Statement/Prospectus dated August __, 1997, the receipt of which is
hereby acknowledged. The resolution set forth herein shall be effective when
unrevoked Consents, or counterparts thereof, have been executed and delivered by
or on behalf of the Limited Partners holding of record on August __, 1997 more
than fifty percent (50%) of the outstanding voting rights of Datalinc, but not
before October __, 1997 (60 days after the date the Consent
Statement/Prospectus). Consents must be received by Datalinc before 5:00 p.m.,
EST, on October __, 1997, unless such date is extended by the Partnership.
INTEGRATED COMMUNICATION NETWORKS, INC. ("ICN"), THE GENERAL PARTNER,
STRONGLY RECOMMENDS A VOTE TO "APPROVE" THE RESOLUTION.
RESOLUTION: Approve and Adopt Agreement and Plan of Reorganization.
RESOLVED, that the Agreement and Plan of Reorganization by and among
Thrucomm, Inc., a newly organized Florida corporation ("Thrucomm"), Fastcom,
Ltd., a Florida Limited Partnership ("Fastcom"), and Datalinc (the
"Reorganization Agreement"), providing for the consolidation and reorganization
of the businesses of the Partnerships into Thrucomm by and among other things:
(A) The transfer of all of the assets and liabilities of Datalinc and
Fastcom into Thrucomm, upon the terms and conditions described in the
Reorganization Agreement;
(B) In exchange therefor, Datalinc will receive shares of Thrucomm's
Mandatory Convertible Preferred Stock, Series A-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, will distribute
the Underlying Shares to Datalinc's Investors and other equity owners
and to the investors and other equity owners in Fastcom, and the
Partnerships will dissolve.
is hereby approved and adopted.
|_| APPROVE |_| DISAPPROVE |_| ABSTAIN
<PAGE>
INSTRUCTION: To vote for or against the adoption of the Reorganization Agreement
check the appropriate box above. This Consent when properly executed will be
voted in the manner directed herein. IF NO DIRECTION IS GIVEN, THIS CONSENT WILL
BE VOTED TO "APPROVE" THE REORGANIZATION AGREEMENT.
Dated: , 1997
Signature(s):
__________________________________
__________________________________
__________________________________
Title or Authority (if applicable)
Please sign this consent form in exactly the same manner as the name(s)
appear(s) on the records of the Partnership. Joint owners must all sign. When
signing as an attorney, trustee, guardian, or in a similar capacity, please give
full title as such.
PLEASE SIGN, DATE AND MAIL THIS CONSENT PROMPTLY.
<PAGE>
EXHIBIT 99-3
AMENDED AGREEMENT OF LIMITED PARTNERSHIP OF
DATALINC, LTD.
<PAGE>
AMENDED
AGREEMENT OF LIMITED PARTNERSHIP
OF
DATALINC, LTD.
THIS AMENDED AGREEMENT OF LIMITED PARTNERSHIP made as of the lst day of
January, 1993 by and among INTEGRATED COMMUNICATION NETWORKS, INC., a Florida
corporation as the general partner (hereinafter referred to as the "General
Partner"); John F. Kolenda as the initial limited partner (hereinafter referred
to as the "Initial Limited Partner"); and those Persons who have executed this
Agreement as limited partners (hereinafter collectively referred to as the
"Limited Partners" and severally as "Limited Partner"; the said General Partner,
Initial Limited Partner and Limited Partners are hereinafter collectively
referred to as the "Partners" and severally as "Partner").
W I T N E S S E T H:
WHEREAS, a Certificate of Limited Partnership was filed on July 20, 1989
with the office of the Secretary of State of Florida, by the General Partner and
the Initial Limited Partner;
WHEREAS, subsequent to the filing of the Certificate of Partnership, the
parties entered into a Limited Partnership Agreement;
WHEREAS, pursuant to said Agreement of Limited Partnership, the General
Partner and the Initial Limited Partner formed a limited partnership under and
subject to the laws of the State of Florida for the purposes of developing,
operating, and otherwise dealing with the Hub (as hereinafter defined), and to
own or lease such other realty, personalty and/or fixtures as reasonably may be
related to the ownership or operation of the Hub, and to conduct such other
business activities and operations as are consistent with and reasonably related
to the foregoing purposes;
WHEREAS, the Partners desire to amend the Agreement to conform to the
provisions of the second Memorandum and the new Limited Partners desire to be
admitted as Limited Partners of the Limited Partnership; and
WHEREAS, the parties desire to enter into this Amended Agreement of Limited
Partnership, to define formally and express the terms and conditions of such
limited partnership and their respective rights and obligations with respect
thereto, as amended herein, and for the admission of the Limited Partners as
Limited Partners of the Limited Partnership.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and conditions herein contained, and other good and valuable
consideration, the receipt and sufficiency of which hereby is acknowledged by
each party to the others, the parties hereto, for themselves, their respective
heirs, executors, administrators, successors and assigns, hereby agree as
follows:
1
<PAGE>
ARTICLE I
CERTAIN DEFINED TERMS
As used herein, the following terms shall have the following meanings:
1.1 "ACT" shall mean the Florida Revised Uniform Limited Partnership Act.
1.2 "AFFILIATE" or "AFFILIATED PERSON" shall mean, when used with reference
to a specified person, (a) any person that directly or indirectly through one or
more intermediaries controls or is controlled by or is under common control with
the specified person, (b) any person who is an officer, partner or trustee of,
or which serves in a similar capacity with respect to, the specified person or
of which the specified person is an officer, partner or trustee, or with respect
to which the specified person serves in a similar capacity, (c) any person
which, directly or indirectly, is the beneficial owner of 10% or more of any
class of equity securities of, or otherwise has a substantial beneficial
interest in, the specified person or of which the specified person is directly
or indirectly the owner of 10% or more of any class of equity securities or in
which the specified person has a substantial beneficial interest and (d) a
spouse or child living in the household of the specified person.
1.3 "AGREEMENT" shall mean this Agreement of Limited Partnership, as
amended from time to time, as the context requires. Words such as "herein,"
"hereinafter," "hereof," "hereto," "hereby" and "hereunder," when used with
reference to this Agreement, refer to this Agreement as a whole, unless the
context otherwise requires.
1.4 "BANKRUPTCY" with respect to any Person shall mean:
a. the institution by such Person of proceedings to be adjudged as
bankrupt or insolvent, or for an order of relief or the consent by such
Person to the institution of bankruptcy or insolvency proceedings against
him or it, or the filing by such Person of a petition or answer or consent
seeking reorganization or relief under the present or any future Federal
bankruptcy statute or any other present or future applicable federal,
state, or foreign law regarding bankruptcy, insolvency or other relief for
debtors, or the consent by such Person to the filing of any such petition
or to he appointment of a receiver, liquidator, trustee (or other similar
official) of such Person or of all or of a substantial part of the assets
of such Person, or the making by such Person of any assignment for the
benefit of creditors or the admission in writing by such Person of his or
its inability to pay his or its debts generally as they come due or the
commission by such Person of any act sufficient to sustain an order for
relief under the present or any future Federal bankruptcy statute); or
b. the entry by a court of competent jurisdiction of an order,
judgment or decree judging such Person a bankrupt or insolvent or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of such Person under the present
or any future Federal bankruptcy statute or any other present or future
applicable federal, state or foreign law relating to bankruptcy,
insolvency, or other relief of debtors, or appointing a receiver,
liquidator, trustee (or other similar official) of such Person or of all or
2
<PAGE>
a substantial part of the assets of such Person, or ordering the winding up
or liquidation of the affairs of such Person, which order, judgment or
decree shall remain unstayed and in effect for an aggregate of thirty (30)
days (whether or not consecutive).
1.5 "CAPITAL ACCOUNT" means, with respect to any Partner, the Capital
Account maintained for such Person in accordance with the following provisions:
(i) To each Person's Capital Account there shall be credited such
Person's Capital Contributions, such Person's distributive share of
Profits, and any items in the nature of income or gain that are specially
allocated pursuant to Article V hereof, and the amount of any Partnership
liabilities that are assumed by such Person or that are secured by any
Partnership property distributed to such Person.
(ii) To each Person's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Partnership property
distributed to such Person pursuant to any provision of this Agreement,
such Person's distributive share of Losses, and any items in the nature of
expenses or losses that are specifically allocated pursuant to Article V
hereof, and the amount of any liabilities of such Person that are assumed
by the Partnership or that are secured by any property contributed by such
Person to the Partnership.
In the event any interest in the Partnership is transferred in accordance
with the terms of this Agreement, the Transferee shall succeed to the Capital
Account of the Transferor to the extent it relates to the transferred interest.
In the event the Gross Asset Values of Partnership assets are adjusted
pursuant hereto, the Capital Accounts of all Partners and Limited Partners shall
be adjusted simultaneously to reflect the aggregate net adjustment as if the
Partnership recognized gain or loss equal to the amount of such aggregate net
adjustment.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulation Section 1.704-1(b), and shall be interpreted and applied in
a manner consistent with such Regulations.
1.6 "CAPITAL CONTRIBUTION" of a Partner shall mean the amount of cash
contributed by such Partner to the Limited Partnership pursuant to Article III
hereof.
1.7 "CASH FLOW" in any fiscal year shall mean the net income in such period
from operations of the Limited Partnership determined in accordance with Federal
income tax principles consistently applied (not including Sale Proceeds or
Refinancing Proceeds) plus:
a. depreciation;
b. amortization of capitalized costs;
c. other non-cash charges deducted in determining such net income,
and;
3
<PAGE>
d. the net reduction in the amount of any reserves or escrows
described in "f" below, if distributable;
minus the following:
e. principal payments on all secured and unsecured borrowings of the
Limited Partnership, and any other indebtedness of the Limited Partnership
including that to the General Partner or Affiliates;
f. the amount of cash set aside for working capital, property
replacement reserves and any other reserves reasonably deemed necessary by
the General Partner; and
g. any other cash expenditures or escrows (except Distributions or
payments to Partners) which have not been deducted in determining the net
income of the Limited Partnership and which were not funded by borrowings.
1.8 "CLOSING DATE" shall mean the Termination Date or the Extended
Termination Date as set forth in the Memorandum.
1. 9 "CODE" shall mean the United States Internal Revenue Code of 1986, the
Regulations promulgated thereunder and any corresponding provisions of
subsequent law.
1.10 "CONSULTANT" shall mean Certified Financial Group, Inc., a Florida
corporation.
1.11 "CONSULTANT UNITS" shall mean the Limited Partnership Units described
in this Agreement owned by the Consultant.
1.12 "DEPRECIATION" means, for each fiscal year or other period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization, or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis.
1.13 "DISTRIBUTION" shall mean any funds distributed to the Partners
pursuant to this Agreement.
1.14 "GENERAL PARTNER" shall mean Integrated Communication Networks, Inc.,
a Florida corporation or any Person or Persons who or which, at the time of
reference thereto, have been admitted as a successor to the interest of the
General Partner or as an additional General Partner.
1.15 "GROSS ASSET VALUE" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the Partnership;
4
<PAGE>
(ii) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined
by the General Partner, as of the following times: (a) the acquisition of
an additional interest in the Partnership (other than pursuant to Article
IV hereof) by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (b) the distribution by the Partnership to a
Partner of more than a de minimis amount of Partnership property other than
money, unless all Partners receive simultaneous distributions of undivided
interests in the distributed property in proportion to their interests in
the Partnership; and (c) the termination of the Partnership for federal
income tax purposes pursuant to Code Section 708(b)(1)(B); and
(iii) If the Gross Asset Value of an asset has been determined or
adjusted pursuant to section (i) or (ii) above, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with
respect to such asset for purposes of computing Profits and Losses.
1.16 "HUB" shall mean the satellite communications hub described in the
Memorandum.
1.17 "INITIAL LIMITED PARTNER" shall mean the initial limited partner
hereinabove referred to who has made a Capital Contribution of $10 to the
Limited Partnership.
1.18 "LIMITED PARTNER" shall mean any Person who is a Limited Partner at
the time of reference thereto, including a Substituted Limited Partner. "Limited
Partners" shall refer to all Limited Partners at the time of reference thereto.
1.19 "LIMITED PARTNERSHIP" shall mean the limited partnership formed
pursuant to the Certificate of Limited Partnership filed on July 20, 1989, as
said limited partnership may from time to time be constituted.
1.20 "MAJORITY VOTE" shall mean the affirmative vote or written consent of
Limited Partners then owning of record more than fifty percent (50%) of the
outstanding Units of the Partnership.
1.21 "MEMORANDUM" shall mean collectively the initial Confidential Summary
Offering Memorandum dated December 1, 1989, for the sale of Series 100 Units of
Limited Partnership interest ("First Memorandum") and the second Confidential
Summary Offering Memorandum dated May 1, 1991, for the sale of Series 200 Units
and Series 300 Units to persons who will be admitted as Limited Partners
("Second Memorandum").
1.22 "NEGATIVE CASH FLOW" shall mean the net loss from operations of the
Limited Partnership determined in accordance with Federal income tax principles
consistently applied (not including Sale Proceeds or Refinancing Proceeds),
reduced by
a. depreciation;
b. amortization of capitalized costs;
c. other non-cash charges deducted in determining such net loss; and
d. the net reduction in the amount of any reserves or escrows
described in "f" below; increased by the following:
5
<PAGE>
e. principal payments on all loans and any other indebtedness of the
Limited Partnership including to General Partner and Affiliates;
f. the amount of cash set aside for working capital, property
replacement reserves and any other reserves; and
h. any other cash expenditures or escrows (except distributions or
payments to Partners, and escrows of Limited Partnership funds for property
taxes taken into account in computing net loss), which have not been
included in determining the net loss of the Limited Partnership and which
were not funded by borrowings.
1.23 "NON-DEDUCTIBLE EXPENDITURES" shall mean all items of Limited
Partnership expenditure described in Code Section 705(a)(2)(B) or treated as
Code Section 705(a)(2)(B) expenditures pursuant to the Regulations promulgated
under Section 704(b) of the Code, including but not limited to any syndication
expenses.
1.24 "OFFERING" shall mean the offer by the Limited Partnership to sell the
Units subject to the terms and conditions set forth herein.
1.25 "OPTIONAL LOANS" shall mean the optional loans referred to herein.
1.26 "PARTNER" shall mean the General Partner, Initial Limited Partner or
any Limited Partner and "Partners" collectively refers to the General Partner,
Initial Limited Partner and the Limited Partners.
1.27 "PERSON" shall mean any individual, general partnership, limited
partnership, corporation, joint venture, trust, business trust, cooperative or
association and the heirs, executors, administrators, successors and assigns
thereof, where the context so admits.
1.28 "REFINANCING" shall mean the replacement, increase, consolidation,
modification or extension, etc. of any indebtedness.
1.29 "REFINANCING PROCEEDS" shall mean the proceeds from a Refinancing
after deducting the expenses incurred in connection with the receipt or
collection thereof, the amounts thereof which are applied in reduction of
Limited Partnership liabilities and the amounts thereof which, in the sole
discretion of the General Partner, are set aside for working capital, property
replacement reserves and any other reserves reasonably deemed necessary by the
General Partner.
1. 30 "SALE" shall mean a sale, condemnation, voluntary or involuntary
conversion, insured casualty or other disposition of the Hub or any portion
thereof.
1.31 "SALE PROCEEDS" shall mean the proceeds from any Sale after deducting
(a) expenses incurred in connection with the receipt or collection thereof, (b)
in the case of a condemnation, voluntary or involuntary conversion and insured
casualty, such portion thereof as is required to repair, restore or replace the
Hub or any portion thereof, (c) all amounts which are applied in reduction of
Limited Partnership liabilities and (d) all amounts which, in the sole
discretion of the General Partner, are set aside for working capital, property
6
<PAGE>
replacement reserves and any other reserves reasonably deemed necessary by the
General Partner.
1.32 "SERIES 100 UNITS" shall mean Limited Partners acquiring Units in the
Partnership's initial offering.
1.33 "SERIES 200 UNITS" shall mean Limited Partners acquiring Series 200
Units as described in the Memorandum concerning the Partnership's second
offering.
1.34 "SERIES 300 UNITS" shall mean Limited Partners acquiring Series 300
Units as described in the Memorandum concerning the Partnership's second
offering.
1.35 "SHARING RATIO" of any Limited Partner shall mean such Partner's Units
to the total Units of all Limited Partners in the same Series.
1.36 "SUBSTITUTED LIMITED PARTNER" shall mean any person admitted to the
Limited Partnership as a Limited Partner pursuant to the provisions of Section
8.6 hereof.
1.37 "SYNDICATION EXPENSES" means all expenditures classified as
syndication expenses pursuant to Treasury Regulation Section 1.709-2(b).
Syndication Expenses shall be taken into account under this Agreement at the
time they would be taken into account under the Partnership's method of
accounting if they were deductible expenses.
1.38 "TREASURY REGULATIONS" means the Income Tax Regulations promulgated
under the Code ' as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
1.39 "UNITS" shall mean Series 100 Units, Series 200 Units and Series 300
Units collectively.
ARTICLE II
CONTINUATION; PURPOSES; AND TERM
2.1 CONTINUATION OF LIMITED PARTNERSHIP.
The Partners, by execution of this Agreement, hereby agree to continue the
limited partnership heretofore formed under and subject to the Act.
2.2 NAME AND PRINCIPAL PLACE OF BUSINESS.
The Limited Partnership shall conduct its business and promote its purposes
under the firm name and style DATALINC, LTD., or such other name or names as the
General Partner hereinafter from time to time may select. The Limited
Partnership's principal office for the transaction of business shall be
maintained at 1641 Commerce Avenue North, St. Petersburg, Florida 33716, or such
other place or places within or outside the State of Florida as the General
Partner hereinafter may select.
7
<PAGE>
2.3 PURPOSES.
Except as otherwise expressly provided herein, the purposes of the Limited
Partnership shall be to develop, operate, and hold for investment the Hub, to
own or lease such other realty, personalty and/or fixtures as reasonably may be
related to the ownership or operation of the Hub, and to conduct such other
business activities and operations as are consistent with and reasonably related
to the foregoing purposes, and in connection therewith, to enter into contracts
and leases, to borrow money necessary for the Limited Partnership's business, to
pledge, mortgage or otherwise encumber all or any part of the Limited
Partnership's assets.
2.4 TERM.
The term of the Limited Partnership shall commence as of the date the
original Certificate of Limited Partnership was filed with the Secretary of
State of Florida, and shall continue and extend to and including December 31,
2039, or until such earlier date as the Limited Partnership shall be dissolved
and terminated pursuant to the laws of the State of Florida or Article XII
hereof.
ARTICLE III
PARTNERS AND CAPITAL
3.1 GENERAL PARTNER'S AND INITIAL LIMITED PARTNER'S CAPITAL CONTRIBUTIONS.
The General Partner has contributed $100 and the Initial Limited Partner
has contributed $10 in cash to the capital of the Limited Partnership.
3.2 LIMITED PARTNERS' CAPITAL CONTRIBUTIONS.
The Partnership initially sold 17 Series 100 Limited Partner Units as
described in the First Memorandum. The Partnership is offering for sale up to
230 Series 200 Units and up to 600 Series 300 Limited Partner Units for such
Capital Contribution and on such terms as are described in the Second
Memorandum.
The General Partner and its Affiliates may, but are not required to,
purchase Series 200 or Series 300 Units at the same price and upon the same
terms as other Investors, including sufficient Units to permit the Partnership
to close the offering of either or both classes of Units and disburse funds from
the Escrow Account. In the alternative, prior to the Termination Date or
Extended Termination Date, the General Partner may loan the Partnership not less
than the difference between subscription proceeds in the Escrow Account at the
date of the making of such loan and $850,000 less $400 per unsold Unit with
respect to the offering of Series 200 Units and $1,800,000 less $400 for the
offering of Series 300 Units, assuming no reduction in the amount of the Series
300 offering or exercise of the Additional Series 300 Unit Option. Such loan, if
made, shall bear interest not to exceed the prime or base rate plus 1.5% of
United Bank, St. Petersburg, Florida, and may be repaid from any source of funds
available to the Partnership including, without limitation, proceeds realized
upon the subsequent resumption and completion of the offering or a subsequent
8
<PAGE>
offering of the unsold Units. Any such resumption and completion of the offering
or any subsequent offering, if undertaken, shall be undertaken in compliance
with all applicable law including, without limitation, applicable securities
laws; and the expenses of any such offering shall be borne by the Partnership.
Funds may be released from the Escrow Account when such loan has been made to
the Partnership.
The Partnership will pay CFG Securities Corp ("Managing Dealer") and other
NASD registered broker/dealers ("Participating Dealers") commissions of up to 8%
per Unit ($400 per Unit for each Series 300 Unit) sold. On January 1, 1993, the
Partnership amended certain agreements with Certified Financial Group, Inc., a
the Managing Dealer. Pursuant to the amended agreement, the Consultant will
receive during the existence of the Partnership compensation equal to 8% of the
Cash Flow distributed to the General Partner, with the General Partner waiving
right to receive Distributions in like amount, and an option to acquire for the
sum of $1.00 the Managing Dealer Units which constitute a 4% interest in the
Partnership. Upon acquisition of the Managing Dealer Units, the Financial
Consulting Agreement will terminate. In addition, Series 300 Units may be
purchased by the Managing Dealer and its officers, directors and affiliates and
other broker/dealers participating in this offering net of commissions.
3.3 TERMS OF OFFERING.
Except as otherwise provided in the Agreement, the General Partner shall
have sole and complete discretion in determining the terms and conditions of the
offering and is authorized and directed to do all things which it deems to be
necessary, convenient, appropriate or advisable in connection therewith,
including but not limited to, the execution and performance of agreements with
such persons concerning the marketing of the Units on such basis and upon such
terms as the General Partner shall determine.
3.4 WITHDRAWAL OF INITIAL LIMITED PARTNER.
Upon the admission of the Limited Partners to the Limited Partnership, the
Limited Partnership shall return to the Initial Limited Partner his Capital
Contribution, the Initial Limited Partner shall withdraw from the Limited
Partnership and the interest of the Initial Limited Partner in the Limited
Partnership shall thereupon terminate.
3.5 INTEREST AND RIGHT TO PROPERTY.
No Partner shall be paid interest on any Capital Contribution, nor shall
any Partner have the right to take and receive property other than cash in
return for his or its Capital Contribution.
3.6 NO WITHDRAWAL FROM CAPITAL ACCOUNTS.
Except as otherwise expressly provided herein, no Partner shall be
permitted to make any withdrawals from his or its Capital Account.
3.7 NO INTEREST ON CAPITAL CONTRIBUTIONS.
No Partner shall receive any interest, salary, or draw with respect to his
Capital Contributions or his Capital Account or for services rendered on behalf
of the Partnership or otherwise in his capacity as a Partner, except as
otherwise provided in this Agreement.
9
<PAGE>
ARTICLE IV
SPECIAL POWER OF ATTORNEY
4.1 APPOINTMENT OF GENERAL PARTNER.
Each Limited Partner, by his or its execution hereof, hereby irrevocably
makes, constitutes and appoints the General Partner as his or its true and
lawful attorney-in-fact, with power and authority in his or its name, place and
stead, to make, execute, sign, acknowledge and file on behalf of him or it and
on behalf of the Limited Partnership:
a. This Agreement and any Amended Certificate of Limited Partnership
as may be required or permitted pursuant to the provisions of this
Agreement or by law;
b. All papers which may be deemed necessary or desirable by the
General Partner to effect the termination of the Limited Partnership after
its dissolution as provided in this Agreement; and
c. All such other instruments, documents and certificates which may
from time to time be required or permitted by the laws of any state, the
United States of America, or any political subdivision or agency thereof,
to effectuate, implement, continue and defend the valid and subsisting
existence, rights and property of the Limited Partnership as a limited
partnership and its power to carry out its purposes as set forth in this
Agreement.
4.2 TERMS OF GRANT.
The foregoing appointment:
a. Is irrevocable and shall be deemed to be a power coupled with an
interest in recognition of the fact that the Partners will be relying upon
the power of the General Partner to act as contemplated by this Agreement
in such execution, acknowledgment and filing and such other actions by the
General Partner on behalf of each Limited Partner;
b. Shall survive the death, incapacity or Bankruptcy of any Limited
Partner granting the same and the transfer, by operation of law or
otherwise, by any such granting Limited Partner of the whole or any part of
his or its interest in and to the Limited Partnership, its capital, profits
or losses hereunder; and
c. May be exercised by the General Partner on behalf of each Limited
Partner by a facsimile signature of the General Partner or by listing all
of the Limited Partners executing any instrument with a single signature of
the General Partner, as attorney-in-fact for all of them.
4.3 SEPARATE FORM.
Each Limited Partner hereby agrees to execute, acknowledge and deliver to
the General Partner, promptly upon request therefor by the General Partner, a
power of attorney in recordable form satisfactory to the General Partner
evidencing the foregoing appointment.
10
<PAGE>
ARTICLE V
MANAGEMENT; RIGHTS OF GENERAL AND
LIMITED PARTNERS; FEES AND EXPENSES
5.1 MANAGEMENT.
Except as otherwise expressly provided herein and subject to the
restrictions contained in Section 5.4 hereof, the General Partner shall have the
exclusive right and power to manage, operate and control the Limited
Partnership, to do all things necessary or appropriate to carry on its business
and purposes, including, but not limited to, the right to incur and satisfy
obligations relating to the formation and operation of the Limited Partnership,
and to exercise all rights and powers conferred upon the General Partner by law,
including, but not limited to, the right:
a. To hold and dispose of the personal property of the Limited
Partnership in furtherance of the business of the Limited Partnership,
including but not limited to commencing, defending and/or settling
litigation regarding the Limited Partnership, the Hub or any aspect
thereof;
b. To adjust, compromise, settle or refer to arbitration any claim in
favor of or against the Limited Partnership, and to institute, prosecute
and defend any legal action or proceeding or any arbitration proceeding;
c. To enter into, make and perform any and all contracts, leases,
easements and other agreements in connection with the business and purposes
of the Limited Partnership which the General Partner shall deem necessary
or desirable and in the best interests of the Limited Partnership;
d. To obtain loans for the Partnership's purposes and to issue,
accept, endorse and execute promissory notes, bonds or other evidences of
indebtedness and, as security therefor, to mortgage, pledge, grant security
interests in, or otherwise encumber its assets, including, but not limited
to, the Hub; to obtain replacements of any mortgage or mortgages and to
pre-pay, in whole or in part, refinance, recast, increase, modify,
consolidate or extend any obligation affecting the Limited Partnership;
e. To acquire and enter into any contract of insurance necessary or
proper for the protection of the Limited Partnership, the conservation of
the Hub or any other purpose proper and beneficial to the Limited
Partnership;
f. To retain or employ and coordinate the services of all employees,
supervisors, accountants, attorneys, contractors and other persons or
entities necessary or appropriate to carry out the business and purposes of
the Limited Partnership, whether or not affiliated with the General
Partner;
g. To perform other obligations provided elsewhere in this Agreement
to be performed by the General Partner;
11
<PAGE>
h. To open accounts and deposit and maintain funds in the name of the
Limited Partnership in banks, savings and loan associations or trust
companies; provided, however, that the Limited Partnership funds shall not
be commingled with the funds of any other person;
i. To exercise all rights and powers conferred upon the General
Partner by law;
j. To amend this Agreement to reflect the addition or substitution of
Limited Partners or the reduction of Capital Accounts upon the return of
capital to the Partners; and
k. To execute, acknowledge and deliver any and all instruments
necessary or desirable in effectuating the foregoing.
5.2 FEES.
The General Partner and its Affiliates shall be entitled to all fees and
compensation for services as described in the memorandum and any other services,
contracts or agreements between the Partnership, the General Partner and its
Affiliates entered into pursuant to the terms hereof.
5.3 REIMBURSEMENT FOR LIMITED PARTNERSHIP EXPENSES.
The Partnership shall bear all expenditures incident to its formation. The
Partnership shall reimburse the General Partner for (or pay directly) all actual
and direct expenditures incident to its formation, including the fees of the
attorneys and accountants who represent the General Partner in connection with
the review, negotiation and preparation of this Agreement, as well as any costs
incurred by the General Partner in connection with the creation and development
of the Partnership prior to execution hereof, all as further specified herein.
Subject to the restrictions concerning indemnification of the General Partner as
set forth herein, the General Partner shall be entitled to reimbursement by the
Limited Partnership for all out-of-pocket expenses reasonably paid or incurred
by it in connection with the discharge of its obligations under this Agreement
or otherwise reasonably paid or incurred by it on behalf of the Limited
Partnership.
5.4 RESTRICTIONS.
Notwithstanding the grant of authority to the General Partner under Section
5.1 hereof, without the prior Majority Vote of Limited Partners except for
Section 5.4(b) and (c), which shall require unanimous consent of the Limited
Partners, the General Partner shall not:
a. To sell the Hub;
b. Do any act in contravention of this Agreement;
c. Employ, or permit the Limited Partnership to employ, the funds or
assets of the Limited Partnership in any manner except for the exclusive
benefit of the Limited Partnership;
12
<PAGE>
5.5 LIMITATION OF TIME AND LIABILITY OF THE GENERAL PARTNER.
The General Partner shall not be required to devote all of its time or
business efforts to the affairs of the Partnership, but shall devote so much of
its time and attention to the Partnership as is reasonably necessary and
advisable to manage the affairs of the Partnership to the best advantage of the
Partnership.
5.6 NON-EXCLUSIVITY.
Any Partner, whether General or Limited, may engage in or possess an
interest in other business ventures of every nature and description,
independently or with others, including, but not limited to, the ownership,
financing, operation, management, syndication, brokerage and development of
other real property, and neither the Limited Partnership nor any Partners
thereof shall have any right by virtue of this Agreement in such independent
ventures or to the income, profits or losses derived therefrom. The fact that a
Partner, whether General or Limited, or any member of his family or any
Affiliate thereof, as the case may be, is employed by, or is directly or
indirectly interested in or connected with, any Person with which the Limited
Partnership transacts business shall not prohibit the General Partner from
dealing with such Person, and neither the Limited Partnership nor any Partners
thereof, as such, shall have any rights in such Person, or to any income,
profits or losses derived therefrom. The General Partner shall not be obligated
to present any particular investment opportunity to the Limited Partnership even
if such opportunity is of a character which, if presented to the Limited
Partnership could be taken by the Limited Partnership and the General Partner
shall have the right to take for its own account (individually or as trustee),
or to recommend to others any such particular investment opportunity.
5.7 NO LIABILITY AND INDEMNITY.
The General Partner shall not be liable, responsible or accountable to the
Limited Partnership or any Partner for any act or omission performed or omitted
pursuant to the authority granted to it hereunder or by law, or for a loss
resulting from any mistake or error in judgment on its part or from the
negligence, dishonesty, fraud or bad faith of any employee, broker or other
agent of the Limited Partnership, provided that such act or omission, such
mistake or error in judgment or the selection of such employee, broker or other
agent as the case may be was made in good faith and did not result from the
fraud, misconduct or negligence of the General Partner. The General Partner may
consult with legal counsel and any action taken or omitted in good faith in
reliance upon and in accordance with the opinion or advice of such counsel shall
be full protection and justification of the General Partner with respect to the
action so taken or omitted. The Limited Partnership shall indemnify and save
harmless the General Partner from any loss, damage, liability or expense
incurred or sustained by it by reason of any act performed by him or any
omission by him for or on behalf of the Limited Partnership and in furtherance
of its interest, but this indemnity shall not be applicable to loss, damage,
liability or expense resulting from the fraud, misconduct, or negligence of the
General Partner, nor shall the Limited Partners be required to make any Capital
Contribution therefor to the Limited Partnership other than those referred to in
Section 3.2 hereof.
13
<PAGE>
The Partnership shall not incur the cost of the portion of any insurance
which insures any party against any liability as to which such party is herein
prohibited from being indemnified.
5.8 RELIANCE BY THIRD PARTIES.
Third parties dealing with the Limited Partnership may rely conclusively
upon the power and authority of the General Partner to act as set forth herein
and shall not be required to inquire into or ascertain the authority of the
General Partner so to act.
5.9 GENERAL AUTHORITY.
Except as otherwise provided in this Agreement and by the Act, the General
Partner shall have all the rights and powers and shall be subject to all the
restrictions and liabilities of a partner in a partnership without limited
partners under the laws of the State of Florida.
5.10 CERTAIN LOANS.
The General Partner and its Affiliates or Limited Partners may, but shall
not be required to, loan the Partnership funds upon the request of the General
Partner. Any such loans will bear interest at the prime rate plus 1.5% of United
Bank, St. Petersburg, Florida, and shall be repayable as provided in this
Agreement.
The Partnership may loan funds to other partnerships which are affiliated
with the General Partner on such terms and conditions as are set forth in the
Memorandum.
5.11 REMOVAL OF GENERAL PARTNER.
a. Limited Partners holding at least 66-2/3% of the Units shall have
the right, exercisable by written notice to all Partners, to remove a
General Partner for good cause stated; provided, however that the Limited
Partners may not remove a General Partner if such removal would cause or
result in a default by the Partnership under any loan agreement, promissory
note, mortgage, security agreement or other instrument evidencing
Partnership indebtedness. For purposes of this provision, "good cause"
shall be limited to any action taken with respect to the management or
operations of the Partnership constituting willful misconduct or gross
negligence of the General Partner and which results in (i) a material
violation of this Agreement; or (ii) a material financial loss to the
Partnership, provided any such matter is not timely remedied by the General
Partner.
b. In the event the General Partner shall be compelled to withdraw
from the Partnership pursuant to paragraph (a) of this Section 5.11, the
Partnership shall be dissolved. Notwithstanding the preceding sentence and
the provisions of Section 12.1, the Limited Partners may elect to continue
the business of the Partnership pursuant to the provisions of Article XII
and subject to the rights of the Limited Partners to appoint a successor
General Partner under Section 12.2.
14
<PAGE>
c. If the General Partner is removed from the Partnership pursuant to
paragraph (a) of this Section 5.11, it shall retain its interest, if any,
in the Partnership's Profits and Losses,, Cash Flow, Sale Proceeds,
Refinancing Proceeds, and any other allocations, payments or distributions
hereunder to which it was entitled as the General Partner, and from and
after the effective date of the removal, shall be a Limited Partner of the
Partnership without voting rights. For all purposes of this Agreement, a
General Partner so removed shall be deemed to have involuntarily withdrawn
from the Partnership as the General Partner effective as of the date of
such removal, shall become a Limited Partner of the Partnership, and such
withdrawal shall not be deemed to have occurred in violation of this
Agreement.
5.12 NO ASSESSMENT.
No Limited Partner shall be subject to an assessment.
5.13 LIMITED LIABILITY.
Performance of one or more of the acts described in this Article V hereof
shall not in any way cause any Limited Partner to be deemed a General Partner or
impose any personal liability on any Limited Partner. No Limited Partner or, in
appropriate cases, former Limited Partner shall be liable for any debts or
obligations of the Partnership in excess of his Capital Contribution, including
any portion of such capital plus interest or any other amount which has been
returned to him and with respect to which, by the terms of the Florida Revised
Uniform Limited Partnership Act, he shall remain liable. All undistributed Cash
Flow or Sale Proceeds or Refinancing Proceeds which would otherwise be
distributed to the Limited Partners shall be available to creditors to satisfy
the debts and obligations of the Partnership until the time of actual
distribution.
All repayments of returns of capital made pursuant to this Article by
Limited Partners shall be made within ten (10) days after the General Partner
shall have repaid the share apportioned to the General Partner. Failure of any
Partner or former Partner to make repayment required under this Article shall
subject the defaulting person to payment of interest on the amount due from him
from the date of the General Partner's notice requiring such payment, at the
highest lawful rate allowed by law plus the costs and expenses,, including
reasonable attorney's fees, of collections.
The Capital Contributions of the Limited Partners shall be available for
the debts, liabilities or other obligations of the Partnership.
5.14 MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS.
a. Meetings of the Limited Partners to vote upon any matters as to
which the Limited Partners are authorized to take action under this
Agreement may be called at any time by the General Partner or by one or
more Limited Partners holding ten percent (10%) or more of the outstanding
Units at a time and place convenient by delivering written notice, either
in person 'or by registered mail, to the Limited Partners entitled to vote
at such meeting to the effect that a meeting will be held at a designated
time and place, fixed by the General Partner, convenient to the Limited
15
<PAGE>
Partners. However, upon receipt of a written request either in person or by
certified mail stating the purpose(s) of the meeting the General Partner
shall provide all Limited Partners within ten days after receipt of said
request, written notice (either in person or by certified mail) of a
meeting and the purpose of such meeting to be held on a date not less than
15 nor more than 60 days after receipt of said request and place convenient
to Limited Partners. All expenses of the meeting and notification shall be
borne by the Partnership.
b. Limited Partners shall be entitled to a number of votes equal to
their percentage interest in the Partnership based upon the percentage of
Distributions of Cash Flow which they would receive prior to receiving
Distributions of any type in an amount equal to their cash Capital
Contribution plus aggregate Preferred Return as specified in Section 8.1,
subject to the reallocation provisions of Section 8.9. All references to
the percentage of Units required for any matter under this Agreement shall
be based upon the foregoing. Limited Partners present in person or by
proxy, holding in excess of fifty percent (50%) of the Units, shall
constitute a quorum at any meeting. Attendance by a Limited Partner at any
meeting and his voting in person shall revoke any written proxy submitted
with respect to any action proposed to be taken at such meeting. Any
matters as to which the Limited Partners are authorized to take action
under this Agreement or under the law may be acted upon by the Limited
Partners without a meeting; and any such action shall be valid and
effective as action taken by the Limited Partners at a meeting assembled,
provided that if written consents to such action by the Limited Partners
are signed by Limited Partners who hold the number of Units required to
authorize such action and that they are delivered to the General Partner.
In the event that there shall be no General Partner, the Limited Partners
may take action without a meeting by the written consent of Limited
Partners having a majority of the voting power of the Limited Partners
entitled to vote. All Partners shall be bound by actions taken in
accordance with the provisions of this Agreement at such meetings.
c. The General Partner shall be responsible for enacting all needed
rules of order for conducting all meetings and shall keep, or cause to be
kept, at the expense of the Partnership, an accurate record of all matters
discussed and action taken at all meetings or by written consent. The
records of all said meetings and written consent shall be maintained at the
principal place of business of the Partnership and shall be available for
inspection by any Partner at reasonable times.
5.15 NO THIRD PARTY RIGHTS.
The right of the Partnership to require any additional contributions or
loans under the terms of this Agreement including, but not limited to, the terms
of this Article V, shall not be construed as conferring any rights or benefits
to or upon any party not a party to this Agreement, including, but not limited
to, any tenant of any part of the Hub, or the holder of any obligations secured
by a mortgage, deed of trust, security interest or other lien or encumbrance
upon or affecting the Partnership or any interest of a Limited Partner therein
or the Hub or improvements on the Hub, or any part thereof or interest therein;
and such provisions may be amended at any time and from time to time without the
approval or consent of such other person.
16
<PAGE>
ARTICLE VI
RIGHTS OF LIMITED PARTNERS; LIMITED LIABILITY
6.1 NO RIGHT TO PARTICIPATE IN MANAGEMENT.
Limited Partners shall have no right to, nor shall they take any part in or
interfere in any manner with the conduct, control or management of the Limited
Partnership's business and shall have no right or authority to act for or bind
the Limited Partnership, said powers being vested solely and exclusively in the
General Partner. Except as otherwise expressly provided herein, the Limited
partners shall have only those rights granted to limited partners pursuant to
the Act.
6.2 LIMITED LIABILITY.
No Limited Partner shall be liable for the debts, liabilities, losses,
contracts or any other obligations of the Limited Partnership. A Limited Partner
shall be liable only to make his or its Capital Contribution and shall not be
required to lend any funds to the Limited Partnership or, after his or its
Capital Contribution shall have. been paid, to make any further Capital
Contribution to the Limited Partnership; provided, however, that a Limited
Partner shall be required to return all or any portion of his Capital
Contribution previously distributed to him as required pursuant to the
provisions of the Florida Revised Uniform Limited Partnership Act. The General
Partner shall have no personal liability for the repayment of the Capital
Contribution of any Limited Partner.
6.3 RESTRICTIONS ON LIMITED PARTNERS.
No Limited Partner shall have the right or power to:
a. Withdraw or reduce his or its Capital Contribution to the Limited
Partnership;
b. Cause the termination and dissolution of the Limited Partnership by
court decree or otherwise;
c. Have priority over any other Limited Partner either as to the
return of Capital Contributions or as to Distributions. Other than upon the
termination and dissolution of the Limited Partnership as provided by this
Agreement, there has been no time agreed upon when the Capital Contribution
of each Limited Partner may be returned; or
d. Bring an action for partition against the Limited Partnership.
6.4 RIGHT OF FIRST REFUSAL AND INTEREST IN FUTURE OFFERINGS.
Limited Partners shall have the right of first refusal to acquire the
Limited Partnership Units offered by Affiliated Partnerships (partnerships with
the same or an affiliated General Partner) to finance the development of Hubs,
'initially, pro rata based upon their ownership interest in the Partnership and
on a first come/first serve basis with respect to unsold Units thereafter.
17
<PAGE>
The Partnership will become a Special Limited Partner in all Affiliated
Partnerships developing similar Hubs. As a Special Limited Partner, the
Partnership will receive 5% of the General Partner's interest in such Affiliated
Partnerships. If the Affiliated Partnership's allocations and distributions were
to be 50% to the General Partner and 50% to the Limited Partners, the Limited
Partners in this offering will in effect receive a 2.5% interest in such
Affiliated Partnership. [General Partner's interest in such Affiliated
Partnership is 50%; Special Limited Partner's (i.e. this Partnership's) interest
is 10% of such 50% or 5%; and Limited Partners in this Partnership interest is
50% of such 5% or 2.5%.]
ARTICLE VII
TRANSFER OF PARTNERSHIP INTERESTS
7.1 WITHDRAWAL OF PARTNERS.
Except as otherwise provided herein or by the laws of the State of Florida,
no Limited Partner may resign, withdraw or retire voluntarily from the Limited
Partnership or sell, transfer, assign or otherwise dispose of his or its
interest in the Limited Partnership.
The General Partner may not withdraw or resign as General Partner without
the approval of a majority in interest of the Limited Partners.
7.2 ADDITIONAL LIMITED PARTNERS.
After the completion of the offering, and the closing thereunder, the
General Partner and the Partnership shall not have the right to sell additional
Units or to admit additional Limited Partners to the Limited Partnership without
the Majority Vote of the Limited Partners. Any new Units sold will be at such
price and on such terms and shall receive such allocations and Distributions as
the General Partner and a Majority Vote of the Limited Partners shall determine.
7.3 TRANSFERS BY GENERAL PARTNER.
Except as otherwise provided herein, the General Partner shall have the
right to sell, assign, pledge, transfer, hypothecate or otherwise dispose of all
or any part of its interests in and to the Limited Partnership, the General
Partner and their capital, profits and losses, without the prior written consent
of the Limited Partners.
7.4 TRANSFERS BY LIMITED PARTNERS.
Each Limited Partner shall not, sell, assign, transfer, pledge,
hypothecate, grant a security interest in, encumber or in any other manner
dispose of all or any part of his or its interest in and to the Limited
Partnership, its capital, profits and losses, without (a) the prior written
consent of the General Partner, (b) a statement from the transferee of such
Limited Partner's interest that the transferee intends to hold such interest for
investment purposes, and (c) an opinion of his or its counsel, in form and
substance reasonably acceptable to the General Partner, to the effect that such
transfer shall not (1) violate or cause the Limited Partnership or the General
Partner to violate any applicable Federal, state or local securities law,
regulation or interpretive ruling, and (2) shall not cause a termination of the
18
<PAGE>
Limited Partnership for the purposes of any applicable Federal, state or local
tax law, regulation or interpretive ruling. In the event that any Limited
Partner at any time attempts to make a sale, assignment, transfer, pledge,
hypothecation, mortgage, encumbrance or other disposition of his or its interest
in and to the Limited Partnership, its capital, profits and losses, or any part
thereof, in violation of the provisions of this Agreement, the other Partners or
any one of them, shall in addition to all other rights and remedies which they
may have in law, in equity or under the provisions of this Agreement, be
entitled to a decree or order restraining and enjoining such attempted sale,
assignment, transfer, pledge, hypothecation, mortgage, encumbrance or other
disposition, and the offending Partner shall not plead in defense thereto that
there would be an adequate remedy at law, it being recognized and agreed that
the injury and damage resulting from such a breach would be impossible to
measure monetarily. Any transfer made in violation of the provisions of this
Agreement shall be void ab initio. Further, no Limited Partner may sell, assign,
transfer, pledge, hypothecate, grant a security interest in, encumber or in any
other manner dispose of all or any part of his or its interest in the
Partnership, its capital, profits or losses except by delivery of the
Certificate representing his interest in the Partnership as specified in Section
13.22. Further, the Units may not be "publicly traded" as the term is defined in
the Revenue Act of 1987.
7.5 WITHDRAWAL, DISSOLUTION OR BANKRUPTCY OF THE GENERAL PARTNER.
The withdrawal, dissolution or Bankruptcy of the General Partner shall
cause a dissolution of the Limited Partnership unless the remaining Partners
exercise the right set forth in Section 11.2 hereof. The entire interest of the
withdrawn, dissolved or Bankrupt General Partner in and to the Limited
Partnership, its capital profits and losses shall be reconstituted into an
equivalent Limited Partner interest and the legal representatives or
successors-in-interest, as the case may be, of the former General Partner shall
be admitted to the Limited Partnership as a Substituted Limited Partner upon
compliance with Section 7.7 hereof; provided, however, that in the event of the
Bankruptcy of the General Partner, if such representative or
successor-in-interest shall not comply with Section 7.7 hereof, then the
interest of the Bankrupt General Partner shall be dealt with in accordance with
applicable law at the earliest practicable time. Anything herein contained to
the contrary notwithstanding, such reconstituted interest shall not affect the
rights of the Limited Partners as to distributions or return of their Capital
Contributions or otherwise. Except as otherwise provided in this Agreement, or
by the Act, no additional General Partner shall be admitted to the Limited
Partnership.
7.6 DEATH, INSANITY, DISSOLUTION OR BANKRUPTCY OF A LIMITED PARTNER.
The death, insanity, dissolution or Bankruptcy of a Limited Partner shall
not cause a dissolution of the Limited Partnership. Upon the death, insanity,
dissolution or Bankruptcy of a Limited Partner, the representative or
successor-in-interest thereof, as the case may be, shall be deemed to be an
assignee of the economic interest of the Limited Partner and may apply for
admission to the Limited Partnership as a Substituted Limited Partner upon
compliance with Section 7.7 hereof; provided, however, that in the event of
Bankruptcy of a Limited Partner if such representative or successor-in-interest
19
<PAGE>
shall not comply with Section 7.7 hereof, then the economic interest of that
Limited Partner shall be dealt with in accordance with applicable law at the
earliest practicable time.
7.7 SUBSTITUTED LIMITED PARTNERS.
Anything herein contained to the contrary notwithstanding:
a. No successor-in-interest of a Limited Partner and no assignee or
transferee of all or any part of a Limited Partner's interest in and to the
Limited Partnership, its capital, profits and losses, shall be admitted to
the Limited Partnership as a limited partner except upon:
(i) submitting to the General Partner a duly executed and
acknowledged counterpart of the instrument or instruments making such
transfer, together with such other instrument or instruments,
including, but not limited to, a counterpart of this Agreement as it
then may have been amended, signifying such transferee's agreement to
be bound by all of the provisions of the Limited Partnership,
including, but not limited to, the restrictions upon transfers of
interests therein and thereto, all of the foregoing in such form and
substance as shall be reasonably satisfactory to the General Partner;
(ii) obtaining the General Partner's consent thereto; and
(iii) agreeing to bear all costs and expenses, including legal
fees of the Limited Partnership, incurred in effecting such
substitution.
Upon such transferee's compliance with the foregoing provisions, each of
the Partners shall take all actions reasonably required to effectuate the
recognition, of the effectiveness of such transfer and the admission of such
transferee to the Limited Partnership as a Substituted Limited Partner
including, but not limited to, transferring such interest in and to the Limited
Partnership, its capital, profits and losses upon the books thereof and
executing, acknowledging and causing to be filed any necessary or desirable
amendment to this Agreement and the Certificate of Limited Partnership.
b. The General Partner shall not consent to the admission of any such
assignee as a substituted partner if, in the reasonable opinion of the
General Partner, such admission:
(i) would jeopardize the status of the Limited Partnership as a
partnership for Federal income tax purposes;
(ii) would cause a termination of the Limited Partnership within
the meaning of Section 708(b) of the Code;
(iii) would violate, or cause the Limited Partnership to violate,
any applicable law or governmental rule or regulation; or
(iv) in the sole discretion of the General Partner would not be
in the best interest of the Partnership.
c. No assignment to a non-resident alien, minor or incompetent shall
be effective in any respect.
20
<PAGE>
7.8 NON-COMPLYING ASSIGNMENTS.
Any assignment, sale, exchange or other transfer in contravention of any of
the provisions of this Article VII shall be void and ineffectual, and shall not
bind or be recognized by the Limited Partnership.
7.9 CONSENT TO ADMISSION.
By executing or adopting this Agreement, each Limited Partner hereby
consents to the admission of Substituted Limited Partners by the General Partner
and to any assignee of his or its Unit becoming a Substituted Limited Partner.
7.10 OBLIGATIONS OF SUCCESSORS.
Any person who acquires an interest in the Limited Partnership by
assignment or is admitted to the Limited Partnership as a Substituted Limited
Partner shall be subject to and bound by all the provisions of this Agreement as
if originally a party to this Agreement.
7.11 ADMISSION OF SUCCESSOR OR ADDITIONAL GENERAL PARTNERS.
With the Majority Vote of the Limited Partners, a General Partner may at
any time resign and/or designate one or more persons to be his successor General
Partner or to be an additional General Partner, in each case with such
participation in such General Partner's interest as the General Partner and such
successor or additional General Partner may agree upon, provided that the
percentage interests of the Limited Partners in Profits, Losses and
Distributions of the Limited Partnership shall not be affected thereby. In the
event of the addition or substitution of a General Partner in accordance with
the provisions of this Section 7.11, the General Partner shall execute, file and
record with the appropriate governmental agencies such documents (including
amendments to this Agreement) as are required to reflect the substitution or
admission of such substituted or additional General Partner.
7.12 NO PUBLIC TRADING OF UNITS.
No Units may be traded on an established securities market or readily
tradable on a secondary market (or the equivalent thereof) as such terms are
utilized in Code S 7704(b), or any Regulations promulgated thereto or
legislative history in connection therewith. Any such trade will be deemed void
ab initio and will not be recognized by the General Partner, tire Partnership or
the depository or any other agent of the Partnership or the General Partner.
ARTICLE VIII
DISTRIBUTIONS
8.1 CASH FLOW.
Assuming the sale of all Series 200 and no Series 300 Units, all Cash Flow
of the Partnership, as, when and to the extent available with respect to each
fiscal year of the Partnership or any portion thereof, shall be distributed
68.5% to the Series 100 Limited Partners and 31.5% to the Series 200 Limited
Partners until such Limited Partners have received Distributions of any type in
an amount equal to their total cash Capital Contributions plus the aggregate
21
<PAGE>
Preferred Return; and thereafter, 34.25% to the Series 100 Limited Partners,
15.75% to the Series 200 Limited Partners, 4% to the Managing Dealer Limited
Partners, and 46% to the General Partner.
Assuming the sale of all Series 200 and Series 300 Limited Partnership
Units and no exercise of the additional Series 300 Unit option, all Cash Flow of
the Partnership, as, when and to the extent available with respect to each
fiscal year of the Partnership or any portion thereof, shall be distributed
45.9% to the Class A Limited Partners, 21.1% to the Series 200 Limited Partners
and 33% to the Series 300 Limited Partners pro rata until such Limited Partners
have received Distributions of any type in an amount equal to their total cash
Capital Contributions plus the aggregate Preferred Return; and thereafter,
22.95% to the Class A Limited Partners, 10.55% to the Series 200 Limited
Partners, 16.5% to the Series 300 Limited Partners, 4% to the Managing Dealer
Limited Partners, and 46% to the General Partner.
Series 100 Limited Partners will receive a 10% per annum cumulative,
non-compounded Preferred Return on their Adjusted Capital Investment, commencing
the date of closing of the Series 200 Unit offering. Series 200 Limited Partners
will receive a 10% cumulative, non-compounded Preferred Return on their Adjusted
Capital Investment from the date the Series 200 Unit offering escrow is broken.
Investors acquiring Series 300 Units in the offering of Series 300 Units which
terminated December 31, 1992 will receive an 8% cumulative, non-compounded
Preferred Return on their Adjusted Capital Investment from the date the Series
300 Unit offering escrow is broken. Investors acquiring Series 300 Units in the
offering commencing January 1, 1993 will receive an 8% cumulative,
non-compounded Preferred Return on their Adjusted Capital Investment from the
first day of the month following acceptance of their Subscription Agreement. The
term "ADJUSTED CAPITAL INVESTMENT" means total cash Contributions of a Limited
Partner to the Partnership less all Distributions of any kind from the
Partnership. Distributions of Cash Flow with respect to unsold Series 300 Units
will be allocated pro rata to the other Series of Limited Partnership Units.
8.2 REFINANCING PROCEEDS AND SALE PROCEEDS.
Assuming the sale of all Series 200 and no Series 300 Units, all
Refinancing Proceeds and Sale Proceeds of the Partnership, as, when and to the
extent available with respect to each fiscal year of the Partnership or any
portion thereof, shall be distributed 68.5% to the Series 100 Limited Partners
and 31.5% to the Series 200 Limited Partners until such Limited Partners have
received Distributions of any type in an amount equal to their total cash
Capital Contributions plus the aggregate Preferred Return; and thereafter,
34.25% to the Series 100 Limited Partners, 15.75% to the Series 200 Limited
Partners, 4% to the Managing Dealer Limited Partners, and 46% to the General
Partner.
Assuming the sale of all Series 100, Series 200 and Series 300 Limited
Partnership Units and no exercise of the additional Series 300 Unit option, all
Refinancing Proceeds and Sale Proceeds of the Partnership, as, when and to the
extent available with respect to each fiscal year of the Partnership or any
portion thereof, shall be distributed 45.9% to the Class A Limited Partners,
21.1% to the Series 200 Limited Partners and 33% to the Series 300 Limited
Partners pro rata until such Limited Partners have received Distributions of any
type in an amount equal to their total cash Capital Contributions plus the
aggregate Preferred Return; and thereafter, 22.95% to the Class A Limited
Partners, 10.55% to the Series 200 Limited Partners, 16.5% to the Series 300
22
<PAGE>
Limited Partners, 4% to the Managing Dealer Limited Partners, and 46% to the
General Partner. Notwithstanding the foregoing, should there be a sale which
results in liquidation of the Partnership under Article XI, if a Limited Partner
has a positive Capital Account balance which is greater than the amount of Sale
Proceeds to be distributed to him as determined pursuant to the foregoing (the
"Excess Distribution"), such Partner shall receive a Distribution in an amount
equal to the positive Capital Account balance and such Excess Distribution shall
be deducted on a pro rata basis for all Partners who are not in such an excess
position.
8.3 SHARING RATIO.
Distributions to be made to the Limited Partners under this Article VIII
shall be allocated among them in proportion to each Limited Partner's Sharing
Ratio.
8.4 TIME FOR DISTRIBUTIONS.
Distributions to Partners of Cash Flow shall be made quarterly when
available and distributions of Refinancing Proceeds and Sale Proceeds shall be
made promptly after the occurrence of the event giving rise thereto as the
General Partner deems reasonably prudent.
8.5 MINIMUM ALLOCATION TO GENERAL PARTNER.
Anything herein contained to the contrary notwithstanding, at all times
during the existence of the Limited Partnership, there shall be allocated and
paid to the General Partner not less than 1% of each item of Cash Flow,
Refinancing Proceeds and Sale Proceeds of the Limited Partnership.
8.6 ZEROING OUT THE CAPITAL ACCOUNTS.
Notwithstanding the preceding provisions of this Article VIII, when the
Partnership is wound up and dissolved pursuant to Article XI and all of its
remaining assets are to be distributed, all items of income, gain, loss and
deduction shall first be allocated to the Partners' Capital Accounts under
Article IX, and other credits and deductions to the Partners' Capital Accounts
shall be taken before the final Distribution is made. Such Distributions shall
be made in accordance with Sections 11.3 and 11.9, thereby adjusting each
Partner's Capital Account to zero.
8.7 GENERAL AND LIMITED PARTNER PRIORITIES.
Distributions to the General Partner provided for in this Article VIII
shall be made at the same time as Distributions are made to the Limited
Partners.
8.8 COMPENSATION NOT TO BE DEEMED DISTRIBUTIONS.
Any compensation paid to the General Partners as set forth in the
Memorandum shall not be deemed to be Distributions for purposes of Article VIII
of this Partnership Agreement, regardless of how such Distributions are
characterized for federal income tax purposes.
8.9 REALLOCATION OF DISTRIBUTIONS.
23
<PAGE>
To the extent less than the maximum number of Series 200 or Series 300
Limited Partnership Units as set forth in the Memorandum are sold, the
Distributions will be reallocated to the Series 100 and/or Series 200 Limited
Partners on a pro rata basis.
ARTICLE IX
ALLOCATION OF PROFITS AND LOSSES
9.1 PROFITS AND LOSSES DEFINED.
"PROFITS" OR "LOSSES" shall be synonymous with "Net Profit" or "Net Tax
Losses" and shall mean for each fiscal year or other period, an amount equal to
the Partnership's taxable income or loss for such year or period, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in Profits or Losses), with the following
adjustments:
(i) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits
or Tax Losses pursuant to this section shall be added to such taxable
income or loss;
(ii) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treasury Regulation Section 1.704-1(b)
(2)(iv)(i), and not otherwise taken into account in computing Profits
or Losses pursuant to this section, shall be subtracted from such
Profits or Losses;
(iii) Profit or Loss resulting from any disposition of
Partnership property with respect to which gain or loss is recognized
for federal income tax purposes shall be computed by reference to the
Gross Asset Value of the property disposed of, notwithstanding that
the adjusted tax basis for such property differs from its Gross Asset
Value;
(iv) In lieu of the depreciation, amortization, and other cost
recovery deduction taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such
fiscal year or other period, computed in accordance herewith; and
(v) Notwithstanding any other provision of this section, any
items which are specially allocated pursuant to Article IX hereof
shall not be taken into account in computing Profits or Losses.
9.2 ALLOCATION OF PROFITS AND LOSSES OTHER THAN FROM A REFINANCING OR SALE.
a. Profits and Losses other than from a Refinancing or Sale shall be
allocated in the same proportion as Distributions of Cash Flow.
24
<PAGE>
b. All Non-deductible Expenditures shall be allocated initially in an
amount equal to the positive balance of all Partners' Capital Accounts and
thereafter 22.95% to the Class A Limited Partners, 10.55% to the Series 200
Limited Partners, 16.5% to the Series 300 Limited Partners, 4% to the
Managing Dealer Limited Partners and 46% to the General Partner.
9.3 ALLOCATION OF PROFITS AND LOSSES FROM A REFINANCING OR SALE.
For any year in which there occurs a Sale, Ref inancing or a liquidation
pursuant to Article XI hereof, Profits and Losses with respect to or resulting
from such Sale, Refinancing or liquidation, shall be allocated as follows:
a. If the Limited Partnership realizes items of income, credit or tax
preference for Federal income tax purposes (hereinafter collectively
referred to as "Gain"), upon such Refinancing, Sale or liquidation, all
such Gain shall be allocated as follows:
(i) First, if any Partner has a negative balance in his or its
Capital Account, then an amount of such Gain equal to the aggregate of
the negative balances of all such Partners shall be allocated among
such Partners in the proportion that the negative balance in each such
Partner's Capital Account bears to the aggregate negative balances in
all such Partners' Capital Accounts;
(ii) Next, an amount of Gain so that the positive balance of
Capital Accounts is equal to the amount of Sale Proceeds or
Refinancing Proceeds distributed to each Partner pursuant to Section
8.2 shall be allocated to each Partner hereunder; and
(iii) The balance, if any, shall be allocated 22.95% to the 200
Limited Partners, 16.5% to the Series 300 Limited Partners, 4% to the
Managing Dealer Limited Partners and 46% to the General Partner.
Notwithstanding the foregoing, if there is not sufficient Gain such that
the positive balance of Capital Accounts can be adjusted in order to give effect
to the provisions concerning the Distribution of Sale Proceeds set forth in
Section 8.2, the Gain will be allocated in such a manner as to approximate as
closely as possible the amount which would have been Distributed to such
Partners under Section 8.2 if there were sufficient Gain.
b. If the Limited Partnership realizes items of loss or deduction
(herein collectively referred to as a "Loss"), upon such Refinancing, Sale
or liquidation, such Loss shall be allocated to the Partners as follows:
(i) First, if any Partner shall have a positive balance in his or
its Capital Account, then an amount of loss, equal to the aggregate
positive balances in all such Partners' Capital Accounts shall be
allocated among such Partners in the same proportion that the positive
balance in each such Partner's Capital Account bears to the aggregate
positive balances in all such Partners' Capital Accounts; and
(ii) Then, the balance of such Losses, if any, shall be allocated
22.95s to the Series 100 Limited Partners, 10.55% to the Series 200
Limited Partners, 16.5%' to the Series 300 Limited Partners, 4% to the
Managing Dealer Limited Partners and 46% to the General Partner.
25
<PAGE>
9.4 ALLOCATIONS.
Allocations to be made to the Limited Partners under this Article IX shall
be allocated among them in the proportion that each Limited Partner's Sharing
Ratio bears to the Sharing Ratios of all Limited Partners.
9.5 BASIS ADJUSTMENT
In the event of a transfer of an interest in and to the Limited
Partnership, its capital, profits and losses, or the distribution of any Limited
Partnership property to a Partner, the General Partner, upon the request of the
transferee or distributes, as the case may be, may, in its discretion, elect on
behalf of the Limited Partnership under Section 754 of the Code to cause the
basis of the Limited Partnership's property to be adjusted, for Federal income
tax purposes in the manner provided in Sections 734 or 743 of the Code, as the
case may be. At the General Partner's option, the Limited Partnership also may
elect to adjust the basis of the Property pursuant to corresponding provisions
of state and local tax laws.
9.6 AUTHORITY OF GENERAL PARTNER TO VARY ALLOCATIONS TO PRESERVE AND
PROTECT PARTNERS' INTENT.
a. It is the intent of the Partners that each Partner's distributive
share of income, gain, loss, deduction or credit (or item hereof) shall be
determined and allocated in accordance with this Article IX to the fullest
extent permitted by Section 704(b) of the Code. In order to reserve and
protect the determination and allocations provided for in this Article IX,
the General Partner is authorized and directed to allocate income, gain,
loss, deduction or credit (or items thereof) arising in any year
differently than otherwise provided for in this Article IX if, and to the
extent that, allocating income, gain, loss, deduction or credit (or item
hereof) in the manner provided for in this Article IX would cause the
determinations and allocations of each Partner's distributive share of
income, gain, loss, deduction or credit (or item thereof) not to be
permitted by Section 704(b) of the Code and Treasury Regulations
promulgated thereunder. Any allocations made pursuant to this Section 9.6
shall be deemed to be a complete substitute for any allocation otherwise
provided for in this Article IX, and no amendment of this Agreement or
approval of any Partner shall be required.
b. In making any allocation (the "New Allocation") under Section 9.6a,
the General Partner is authorized to act only after having been advised by
the Limited Partnership's accountants or counsel that, under Section 704(b)
of the Code and the Treasury Regulations thereunder, (i) the new allocation
is necessary,, and (ii) the new allocation is the minimum modification of
the allocations otherwise provided for in Article IX necessary to assure
that, either in the then current year or in any preceding year each
Partner's distributive share of income, gain, loss, deduction or credit (or
item thereof) is determined and allocated in accordance with this Article
IX to the fullest extent permitted by Section 704(b) of the Code and the
Treasury Regulations thereunder.
26
<PAGE>
c. In the event that the General Partner is required by Section 9.6a
to make any New Allocation in a manner less favorable to the Limited
Partners than is otherwise provided for in this Article IX, the General
Partner is authorized and directed, insofar as it is permitted to do so by
Section 704(b) of the Code in accordance with the advice of the Limited
Partnership's accountants, to allocate income, gain, loss, deduction or
credit (or item thereof) arising in later years in a manner so as to bring
the proportion of income, gain, loss, deduction or credit (or item thereof)
allocated to the Limited Partners as nearly as possible to the proportion
otherwise contemplated by this Article IX.
d. New Allocations made by the General Partner in reliance upon the
advice of the accountants or counsel described above shall be deemed to be
made pursuant to the fiduciary obligation of the General Partner to the
Limited Partnership and the Limited Partners, and no such New Allocation
shall give rise to any claim or cause of action by any Limited Partner.
9.7 GENERAL CONDITIONS.
Allocation of Profits and Losses will be made on the basis of monthly
periods. All Profits and Losses to be allocated for each month will be allocated
solely to the Partners admitted to the Partnership as of or prior to the 15th
day of such month; provided, however, that Partners admitted after the 15th but
before the end of any month shall be deemed admitted as of the first day of the
following month.
Profits or Losses from current operations for any year will be allocated
between a transferor and a transferee based upon the number of days during the
calendar year that each was recognized as the holder of a Unit, without regard
as to whether Partnership operations during particular periods of such year
produced profits or losses. Cash distributions of Sale Proceeds or Refinancing
Proceeds, if any, arising from the sale or refinancing of the Hub will be
distributed, and all related Profits or Losses will be allocated, to the persons
recognized as holders of the Units on the date on which the sale or refinancing
occurred. For this purpose, transfers will be recognized as of the date
specified by the transferor and the transferee in the instrument of assignment
or, if no date is specified, the date of the last acknowledgment of such
instrument.
In the event there is more than one General Partner, all amounts allocated
and distributed to the General Partner pursuant to this Section 9.7 shall be
divided among them as it may agree.
Neither the Partnership nor the General Partner shall incur any liability
for making allocations and distributions in accordance with the provisions of
this Article 9.7, notwithstanding that any General Partner or the Partnership
has knowledge of any transfer of ownership of any Unit.
9.8 SPECIAL ALLOCATIONS.
Notwithstanding any of the provisions for allocations of Profits or Losses
set forth above, the following allocations thereof shall control:
27
<PAGE>
a. Minimum Allocation to the General Partner. If at any time the
allocation provisions as set forth in Article IX do not result in the
General Partner being allocated at least one percent (1%) of the
Partnership's material items of income, gain, loss, deduction or credit,
then Article 9.8(a) of this Agreement shall become operative and cause the
General Partner to be allocated so much more of each of these items as will
cause it to be allocated at all times during the existence of the
Partnership, exclusive of allocations made to it as a result of its
ownership of an interest in the Partnership, one percent (1%) of all
material items of Partnership income, gain, loss, deduction or credit.
b. Special Allocation in Lieu of Fees. Notwithstanding the general
provisions of this Agreement if the Internal Revenue Service successfully
disallows the deduction of all or any part of any fee paid by the
Partnership to the General Partner or its Affiliates by recharacterizing
such fee as a distribution to such General Partner, there shall be, to the
extent permitted by the Code, a special allocation of Profits to the
General Partner for the taxable year in which such disallowed deduction was
claimed by the Partnership in the amount of such disallowed deduction.
c. Except as provided in Section 9.8(g) hereof, in the event any
Limited Partner unexpectedly receives any adjustments, allocations, or
distributions described in Section 1.704l(b)(2)(ii)(d)(f),
1.704-1(b)(2)(ii)- (d)(5), or 1.704l(b)(2)(ii)(d)(6) of the Regulations,
items of Partnership income and gain shall be specifically allocated to
each such Limited Partner in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, the Adjusted Capital Account
Deficit of such Limited Partner as quickly as possible.
d. To the extent the Partnership has taxable interest income with
respect to any Promissory Note pursuant to IRC _483 or __1271-1288:
(i) Such interest income shall be specially allocated to the
Partner to whom such Promissory Note relates; and
(ii) The amount of such interest income shall be excluded from
the Capital Contributions credited to such Partner's Capital Account
in connection with payments of principal with respect to such
Promissory Note.
e. Except as provided in Section 9.8(g) hereof, in the event any
Limited Partner has a deficit Capital Account at the end of any Partnership
fiscal year that is in excess of the sum of (i) the amount such Limited
Partner is obligated to restore (pursuant to the terms of such Limited
Partner's Promissory Note or otherwise) and (ii) the amount such Limited
Partner is deemed to be obligated to restore pursuant to the penultimate
sentence of Regulations _1.704-1(b)(4)(iv)(f), each such Limited Partner
shall be specially allocated items of Partnership income and gain in the
amount of such excess as quickly as possible.
f. Notwithstanding any other provision of this Section 9.8, if there
is a net decrease in Partnership Minimum Gain during any Partnership fiscal
year, each Partner who would otherwise have an Adjusted Capital Account
Deficit at the end of such year shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent
28
<PAGE>
years) in an amount and manner sufficient to eliminate such Adjusted
Capital Account Deficit as quickly as possible. The items to be so
allocated shall be determined in accordance with Regulations 5
1.704-1(b)(4)(iv)(e). This Section 9.8(f) is intended to comply with the
minimum gain charge-back requirement in such Section of the Regulations and
shall be interpreted consistently therewith.
g. To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to IRC _1.704l(b)(2)(iv)(m), to be taken into
account in determining Capital Accounts, the amount of such adjustment to
the Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis), and such gain or loss shall be specially allocated to the Partners
in -a manner consistent with the manner in which their Capital Accounts are
required to be adjusted pursuant to such Section of the Regulations.
h. Syndication Expenses for any fiscal year or other period shall be
specially allocated to the Limited Partners in proportion to their Units,
provided that, if additional Limited Partners are admitted to the
Partnership pursuant hereto on different dates, all Syndication Expenses
shall be divided among the Persons who own Units from time to time so that,
to the extent possible, the cumulative Syndication Expenses allocated with
respect to each Unit at any time is the same amount. In the event the
General Partner shall determine that such result is not likely to be
achieved through future allocations of Syndication Expenses, the General
Partner may allocate a portion of Profits or Losses so as to achieve the
same effect on the Capital Accounts of the Limited Partners,
notwithstanding any other provision of this Agreement.
i. The allocations set forth in Sections 9.2 (last sentence), 9.3(c),
9.3(e), 9.3(f), and 9.3(g) hereof (the "Regulatory Allocations") are
intended to comply with certain requirements of Regulations _1.704-1(b).
The Regulatory Allocations may not be consistent with the manner in which
the Partners intend to divide Partnership distributions. Accordingly, the
General Partner is hereby authorized to divide other allocations of
Profits, Losses, and other items among the Partners and Limited Partners so
as to prevent the Regulatory Allocations from distorting the manner in
which Partnership distributions will be divided among the Partners and
Limited Partners pursuant to Article XI hereof. In general, the Partners
anticipate that this will be accomplished by specially allocating other
Profits, Losses, and items of income, gain, loss, and deduction among the
Partners and Limited Partners so that the net amount of the Regulatory
Allocations and such special allocations to each such Person is zero.
However, the General Partner shall have discretion to accomplish this
result in any reasonable manner.
9.9 OTHER ALLOCATIONS RULES.
a. For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily or monthly basis using any permissible method under
Code Section 706 and the Treasury Regulations thereunder.
b. Except as otherwise provided in this Agreement, all items of
Partnership income, gain, loss, deduction, and any other allocations not
29
<PAGE>
otherwise provided for shall be divided among the Partners and Limited
Partners in the same proportions as they share Profits or Losses, as the
case may be, for the year.
c. The Partners are aware of the income tax consequences of the
allocations made by this Article IX and hereby agree to be bound by the
provisions of this Article IX in reporting their shares of Partnership
income and loss for income tax purposes. d. In accordance with IRC 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Partnershi.p
shall, solely for tax purposes, be allocated among the Partners so as to
take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross
Asset Value.
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant hereto, subsequent allocations of income, gain, loss, and deduction
with respect to such asset shall take account of any variation between the
adjusted basis of such asset for federal income tax purposes and its Gross Asset
Value in the same manner as under IRC _704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocations shall be made
by the General Partner in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section 9.9(d) are
solely for purposes of federal, state, and local taxes and shall not affect, or
in any way be taken into account in computing, any Person's Capital Account or
share of Profits, Losses, or other items or distributions pursuant to any
provision of this Agreement.
9.10 AMOUNTS WITHHELD.
All amounts which the Partnership is required by law to withhold pursuant
to the Code or any provision of any state or local tax law with respect to any
payment or distribution to the Partnership or the Limited Partners shall be
treated as amounts distributed to the Limited Partners pursuant to this Article
IX for all purposes under this Agreement. The General Partner may allocate any
such amounts among the Units Holders in any manner that is in accordance with
applicable law.
9.11 GENERAL PROVISIONS.
Whenever a proportionate part of Partnership Profits or Losses is credited
or charged to a Partner's Capital Account, every item of income, gain, loss,
deduction or credit entering into the computation of such Profits or Losses, or
applicable to the period during which such Profits or Losses is realized, shall
be considered credited or charged, as the case may be, to such account in the
same proportion.
To the extent less than the maximum number of Series 200 or Series 300
Limited Partnership Units as set forth in the Memorandum are sold, the
Allocations will be reallocated to the Series 100 and/or Series 200 Limited
Partners on a pro rata basis.
30
<PAGE>
9.12 MANAGING DEALER UNITS.
If the Managing Dealer Units have not been acquired, all Allocations or
Distributions otherwise to be made or paid to the Managing Dealer Limited
Partner shall be made or paid to the General Partner.
ARTICLE X
RECORDS AND BOOKS OF ACCOUNT; FISCAL YEAR;
BANKING; REPORTS TO PARTNERS
10.1 RECORDS AND BOOKS OF ACCOUNT.
The General Partner shall maintain or cause to be maintained at the Limited
Partnership's principal office or at such other place or places as the General
Partner from time to time may determine, full and accurate records and books of
account of the Limited Partnership's business. Such records and books of account
shall be maintained on the method of accounting determined by the General
Partner to be most advantageous to the Limited Partnership. Each Partner shall
be afforded full and complete access to all such records and books of account
during reasonable business hours and, at such hours, shall have the right of
inspection and copying of such records and books of account, at his or its
expense.
10.2 FISCAL YEAR.
The fiscal year of the Limited Partnership shall be the calendar year.
10.3 BANKING.
An account or accounts in the name of the Limited Partnership shall be
maintained at such bank or banks as the General Partner may select. All
uninvested funds of the Limited Partnership shall be deposited in a bank account
of the Limited Partnership. All funds so credited to the Limited Partnership in
any such account shall be subject to withdrawal by checks made in the name of
the Limited Partnership and signed by the General Partner or such person or
persons as the General Partner may from time to time designate.
10.4 REPORTS TO PARTNERS.
a. As soon as reasonably practical, but in no event later than
ninety (90) days after the close of each fiscal year of the Limited
Partnership, the General Partner shall cause to be prepared and furnished
to each Partner:
(i) The information necessary for the preparation by such Partner
of his or its Federal, state and other income tax returns;
(ii) The amount in the Capital Account of such Partner as of the
day of such fiscal year;
31
<PAGE>
(iii) An income statement and balance sheet of the Limited
Partnership as of the last day of such fiscal year, which shall be
prepared by a certified public accountant; provided, however, that
upon the request in writing of the holders of 30% of the Units, said
financial statements shall contain an express opinion by an
independent certified public accountant that such statements fairly
present the financial position and results of operations of the
Limited Partnership; and
(iv) Such other reports as the General Partner deems reasonably
necessary for the Partners to be advised of the current status of the
Limited Partnership and its business.
ARTICLE XI
DISSOLUTION; LIQUIDATION; AND TERMINATION
11.1 DISSOLUTION.
Subject to the provisions of the Act, the Limited Partnership shall be
dissolved upon the first to occur of any of the following events:
a. The expiration of the term provided for in Section 2.4 hereof;
b. The withdrawal, dissolution or Bankruptcy of the General Partner
unless the Limited Partnership's business is continued as provided in
Section 11.2 hereof;
c. The sale of all or substantially all of its assets, including, but
not limited to, the Hub, and the collection and distribution of the
proceeds thereof;
d. The unanimous consent thereto of all Partners; or
e. When required by law.
11.2 RIGHT TO CONTINUE THE LIMITED PARTNERSHIP'S BUSINESS.
The withdrawal, dissolution or Bankruptcy of the General Partner shall
cause a dissolution of the Limited Partnership unless the remaining Partners
acting unanimously shall have the right, but not the obligation, exercisable
within sixty (60) days from such withdrawal, dissolution or Bankruptcy to admit
a new General Partner to the Limited Partnership upon such terms and conditions
as they shall agree, and to elect to continue the Limited Partnership's
business, in a reconstituted form as herein provided. In such event, the Limited
Partnership shall not be dissolved but shall continue, and the interest therein
and thereto of the withdrawn, dissolved or Bankrupt General Partner shall be
reconstituted into a Limited Partner's interest with otherwise equivalent
benefits, shall pass to such former General Partner's successor-in-interest or
legal representative, and such reconstituted limited partnership shall have the
exclusive right to use the Limited Partnership's firm name and style.
32
<PAGE>
11.3 LIQUIDATION.
a. Upon the dissolution of the Limited Partnership, the General
Partner shall take or cause to be taken a full account of the Limited
Partnership's assets and liabilities as of the date of such dissolution and
shall proceed with reasonable promptness to liquidate the Limited
Partnership's assets and to terminate its business. The cash proceeds from
the liquidation, as and when available therefor, shall be applied and
distributed in the following order:
(i) to the payment of all taxes, debts and other obligations and
liabilities of the Limited Partnership, including the necessary
expenses of liquidation, but excluding therefrom secured creditors
whose obligations continue in existence after the liquidation of the
Limited Partnership assets; provided however, that all debts and other
obligations and liabilities of the Limited Partnership as to which
personal liability exists with respect to any Partner shall be
satisfied or a reserve established therefor, prior to the satisfaction
of any debt or other obligation or liability of the Limited
Partnership as to which no such personal liability exists for either
the Limited Partnership or any Partner; provided however, that where a
contingent debt, obligation or liability exists, a reserve, in such
amount as the General Partner deems reasonable, shall be established
to meet such contingent debt, obligation or liability, which reserve
shall be distributed as provided in this paragraph (a) only upon the
termination of such contingency; and
(ii) all remaining proceeds in liquidation of the Limited
Partnership shall be distributable pursuant to the provisions of
Article VIII and Section 11.9 hereof.
b. The General Partner shall administer the liquidation of the Limited
Partnership and the termination of its business. The General Partner shall
be allowed a reasonable time for the orderly liquidation of the Limited
Partnership's assets and the discharge of liabilities to creditors, so as
to minimize losses resulting from the liquidation of the Limited
Partnership's assets.
c. Anything herein contained to the contrary notwithstanding, the
General Partner shall not be personally liable for the return of the
Limited Partners' Capital Contributions, or any part thereof. Any such
return shall be made solely from the Limited Partnership's assets.
d. Except as otherwise provided herein, no dissolution or termination
of the Limited Partnership shall relieve, release or discharge any Partner,
or any of his or its successors, assigns, heirs or legal representatives,
from any previous breach or default of, or any obligation theretofore
incurred or accrued under any provision of this Agreement, and any and all
such liabilities, claims, demands or causes of action arising from any such
breaches, defaults and obligations shall survive such dissolution and
termination.
33
<PAGE>
e. Each Limited Partner shall look solely to the assets of the Limited
Partnership for the return of his Capital Account, and if the Limited
Partnership property remaining after the payment or discharge of the debts
and liabilities of the Limited Partnership is insufficient to return the
Capital Account of each Limited Partner, such Limited Partner shall have no
recourse against the General Partner or any other Limited Partner. The
winding up of the affairs of the Limited Partnership and the distribution
of its funds shall be conducted exclusively by the General Partner, except
as provided herein, who are hereby authorized to do any and all acts and
things authorized by law for such purposes.
11.4 LIMITED PARTNERS' RIGHTS.
If necessary, a special liquidator may be appointed by Limited Partners
owning more than fifty percent (50%) of the Limited Partnership Units of the
Partnership. In connection with any such winding up and liquidation, an
independent certified public accountant retained by the Partnership shall, if
requested by Limited Partners owning more than fifty percent (50%) of the Units
of the Partnership, audit the Partnership as of the date of termination, and
such audited statement shall be furnished to all Partners.
11.5 GAINS OR LOSSES IN PROCESS OF LIQUIDATION.
Any gains or losses on disposition of the Hub in the process of liquidation
shall be credited or charged to the Partners in the manner specified in Article
IX. No property shall be distributed in kind.
11.6 INSTRUMENTS OF TERMINATION.
Upon the termination of the Partnership, the General Partner (or special
liquidator, as the case may be) shall make such filings and do such other acts
as shall be required by the Partnership Law, and the Partners hereby agree to
execute and deliver to the General Partner (or special liquidator, as the case
may be) such certificates or documents as shall be so required.-
11.7 TIME OF LIQUIDATION.
A reasonable time shall be allowed for the orderly liquidation of the
assets of the Partnership and the discharge of liabilities to creditors so as to
enable the General Partner to minimize the losses attendant upon a liquidation.
11.8 NO RIGHT OF PARTITION.
The Partners and Assignees and their estates or representative upon death
or the receiver upon bankruptcy or dissolution shall have no rights to receive
Partnership property in kind, nor shall such Partners or Assignees have the
right to partition, sale, or appraisal of the Partnership's property, whether or
not upon dissolution and termination of the Partnership, notwithstanding any
provision of law to the contrary.
34
<PAGE>
Notwithstanding the foregoing, if any Partner shall be indebted to the
Partnership, then until payment of such amount by him, the liquidator shall
retain such Partner's distributive share of property or assets and apply the
income therefrom to the liquidation of such indebtedness and the cost of
operation of such property or assets during the period of such liquidation;
however, if at the expiration of six (6) months after the statement for which
provision is made herein has been given to such Partner, such amount has not
been paid or otherwise liquidated, the liquidator may sell the interest of such
Partner at public or private sale at the best price immediately obtainable which
shall be determined in the sole judgment of the liquidator. So much of the
proceeds of such sale as shall be necessary shall be applied to the liquidation
of the amount then due under this Article, and the balance of such proceeds, if
any, shall be delivered to such Partner.
11.9 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS.
In the event the Partnership is "liquidated" within the meaning of Treasury
Regulation Section 1.704-1(b)(2)(ii)(g), (a) distributions shall be made
pursuant to this Section (if such liquidation constitutes a dissolution of the
Partnership) or Article VIII hereof (if it does not) to the General Partner and
Limited Partners who have positive Capital Accounts in compliance with Treasury
Regulation Section 1.704-1(b)(2)(ii)(b)(2), and (b) if any General Partner's
Capital Account has a deficit balance (after giving effect to all contributions,
distributions, and allocations for all taxable years, including the year during
which such liquidation occurs), such General Partner shall contribute to the
capital of the Partnership the amount necessary to restore such deficit balance
to zero in compliance with Treasury Regulation Section 1.704-1(2)(ii)(b)(3).
Distributions pursuant to the preceding sentence may be distributed to a trust
established for the benefit of the General Partner and Limited Partners for the
purposes of liquidating Partnership assets, collecting amounts owed to the
Partnership, and paying any contingent or unforeseen liabilities or obligations
of the Partnership or of the General Partner arising out of or in connection
with the Partnership. The Assets of any such trust shall be distributed to the
General Partners and Limited Partners from time to time, in the reasonable
discretion of the General Partner, in the same proportions as the amount
distributed to such trust by the Partners would otherwise have been distributed
to the General Partner and Limited Partners pursuant to this Agreement; or
withheld to provide a reasonable reserve for Partnership liabilities (contingent
or otherwise) and to reflect the unrealized portion of any installment
obligations owed to the Partnership, provided that such withheld amounts shall
be distributed to the General Partner and Limited Partners as soon as
practicable.
11.10 TERMINATION.
Upon compliance with the foregoing plan of liquidation and distribution,
the General Partner shall file or cause to be filed a Certificate of
Cancellation of the Certificate of Limited Partnership as well as any and all
other documents required to effectuate the dissolution and termination of the
Limited Partnership and the Limited Partnership thereupon shall be terminated.
35
<PAGE>
11.11 GENERAL PARTNER CONTRIBUTION.
Notwithstanding anything in this Agreement, upon the dissolution and
termination of the Partnership, the General Partner shall be required to make
Capital Contributions to the Partnership equal to the lesser of (i) the deficits
in its Capital Account; or (ii) the excess of 1.01% of the total Capital
Contributions of the Limited Partner over the previous Capital Contributions of
the General Partner.
ARTICLE XII
PARTNERSHIP STATUS
Anything in this Agreement to the contrary notwithstanding, it is expressly
intended that the entity formed hereby be a partnership as determined by the
applicable provisions of the Code, the rules and regulations promulgated
thereunder, and other laws pertaining thereto, and that in every respect all of
the terms and provisions hereof shall at all times be so construed and
interpreted as to give effect to this intent. In the event that the Internal
Revenue Service of the United States or any governmental authority having
jurisdiction shall in any way or at any time determine that any provision or
provisions of this Agreement affects the status of this entity, the General
Partner shall amend or modify the terms and provisions of this Agreement to the
extent necessary to comply with the rules, regulations and requirements of the
Internal Revenue Service of the United States or any other government authority
having jurisdiction, in order that the entity formed hereby be treated as a
partnership, be taxable as such, and the Partners hereof taxable as partners of
a partnership; which modification or amendment shall be retroactively applied to
the date of this Agreement.
ARTICLE XIII
GENERAL PROVISIONS
13.1 NOTICES.
Except as otherwise provided herein, any notice, payment, distribution or
other communication which shall be required to be given to any Limited Partner
in connection with the business of the Partnership shall be duly given if
delivered personally in writing, or if sent by mail or telegraph, to the last
address furnished by such Limited Partner. Written notice to the General Partner
or the Partnership shall be given when actually received at the principal office
of the Partnership.
13.2 SURVIVAL OF RIGHTS.
This Agreement shall be binding upon and inure to the benefit of the
Partners and their respective heirs, legatees, legal representatives, successors
and assigns.
13.3 HEADINGS.
The headings of the Articles and subparagraphs of this Agreement are for
convenience only and shall not be deemed part of the text of this Agreement.
36
<PAGE>
13.4 AGREEMENT IN COUNTERPARTS.
This Agreement, or any amendment hereto, may be executed in multiple
counterparts, each of which shall be deemed an original agreement, and all of
which shall constitute one agreement, by each of the parties hereto on the dates
respectively indicated in the acknowledgments of said parties, notwithstanding
that all of the parties are not signatories to the original or the same
counterpart, to be effective as of the day and year first above written. For
purposes of recording a Certificate of Limited Partnership, a second signature
page and acknowledgment page may be attached to each counterpart hereof, and the
second signature page and the acknowledgment page pertaining thereto may be
detached from the counterpart, when executed, and attached to another
counterpart, which other counterpart may thereafter be filed as the Certificate
of Limited Partnership.
13.5 GOVERNING LAW.
This Agreement is enforceable in accordance with its terms and shall be
governed, construed and enforced according to the laws of the State of Florida.
All Limited Partners consent to the jurisdiction of state and federal courts in
Florida and appoint the Secretary of State of Florida as agent for service of
process.
13.6 TIME.
Time is of the essence in this Agreement.
13.7 VALIDITY.
Should any portion of this Agreement be declared invalid and unenforceable,
then such portion shall be deemed severable from this Agreement and shall not
affect the remainder hereof.
13.8 AMENDMENT.
Except as otherwise provided in this Agreement, this Agreement may be
amended by a vote of the General Partner and a Majority Vote of Limited Partners
at a meeting called pursuant to this Agreement.
13.9 PRONOUNS.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
13.10 RIGHT TO RELY UPON THE AUTHORITY OF THE GENERAL PARTNER.
The General Partner shall be authorized to bind the Partnership by its
signature alone, which may be a facsimile signature, and persons dealing with
the Partnership may rely upon the representation of the General Partner that
such General Partner has the authority to make any commitment or undertaking on
behalf of the Partnership. No person dealing with the General Partner shall be
required to determine its authority to make such commitment or undertaking, nor
to determine whether the General Partner concurs in the commitment or
undertaking or any other fact or circumstance bearing upon the existence of its
37
<PAGE>
authority. In addition, no purchaser of any property or interest therein owned
by the Partnership shall be required to determine the sole and exclusive
authority of the General Partner to sign and deliver on behalf of the
Partnership any instrument of transfer with respect thereto or to see to the
application or distribution of revenues or proceeds paid or credited in
connection therewith, unless such purchasers shall have received written notice
from the Partnership respecting the same.
13.11 LOAN RESTRICTIONS.
A creditor who makes a non-recourse loan to the Partnership must not have,
or acquire, at any time as a result of making the loan, any direct or indirect
interest greater than 20% in the profits, capital or property of the Partnership
other than as a secured creditor.
13.12 MERGER.
This Agreement contains the entire understanding among the parties and
supersedes any prior understanding and agreements between them respecting the
matters described herein.
13.13 ARBITRATION.
Any controversy or claim arising out of or relating to this Agreement or
any provision thereof shall be settled by arbitration at St. Petersburg,
Florida, in a manner agreed upon by the General Partner and any Limited Partners
directly affected, or if not otherwise agreed upon, then in accordance with the
rules of the American Arbitration Association in effect at that time. Judgment
upon the award so rendered may be entered in any court having competent
jurisdiction thereover. The costs of the arbitration shall be borne equally by
the parties, provided that each party shall pay for and bear the cost of its own
experts, evidence and legal counsel unless otherwise agreed in writing.
13.14 TAX MATTERS PARTNER.
a. The General Partner is hereby designated as the Tax Matters Partner
of the Partnership, as provided in regulations pursuant to Section 6231 of
the Code (the "Tax Matters Partner"). Each Partner, by the execution of
this Agreement, consents to such designation of the Tax Matters Partner-
and agrees to execute, certify, acknowledge, deliver, swear to, file and
record at the appropriate public offices such documents as may be necessary
or appropriate to evidence such consent.
b. The duties of the Tax Matters Partner may include the following:
(1) To the extent and in the manner provided by applicable law
and regulations, the Tax Matters Partner shall furnish the name,
address, profits, interest and taxpayer identification number of each
Partner to the Secretary of the Treasury or his delegate (the
"Secretary").
(2) To the extent and in the manner provided by applicable law
and regulations, the Tax Matters Partner shall keep each Partner
informed of the administrative and judicial proceedings for the
adjustment at the Partnership level of any item required to be taken
into account by a Partner for income tax purposes (such administrative
38
<PAGE>
proceeding being referred to hereinafter as a "Tax Audit" and such
judicial proceeding being referred to hereinafter as "Judicial
Review").
(3) If the Tax Matters Partner, on behalf of the Partnership,
receives a notice with respect to the Partnership tax audit from the
Secretary, the Tax Matters Partner shall, within 30 days of receiving
such notice, forward a copy of such notice to the Partners who hold or
held an interest (through their Interests) in the profits or losses of
the Partnership for the Partnership taxable year to which the notice
relates.
c. The Tax Matters Partner is hereby authorized, but not required:
(1) To enter into any settlement agreement with the Internal
Revenue Service or the Secretary with respect to any Tax Audit or
Judicial Review, in which agreement the Tax Matters Partner may
expressly state that such agreement shall bind the other Partners,
except that such agreement shall not bind any Partner who (within the
time prescribed pursuant to the Code and Treasury Regulations
thereunder) files a statement with the Secretary providing that the
Tax Matters Partner shall not have the authority to enter into a
settlement agreement on behalf of such Partner;
(2) In administrative adjustment required to be taken into (a
"Final Adjustment") is seek Judicial Review of the event that a notice
of a final at the Partnership level of any item account by a Partner
for tax purposes mailed to the Tax Matters Partner, to such Final
Adjustment, including the filing of a petition for readjustment with
the Tax Court, the District Court of the United States for the
district in which the Partnership's principal place of business is
located, or the Court of Claims;
(3) To intervene in any action brought by any other Partner for
Judicial Review of a Final Adjustment;
(4) To file a request for an administrative adjustment with the
Secretary at any time and, if any part of such request is not allowed
by the Secretary, to file a petition for Judicial Review with respect
to such request;
(5) To enter into an agreement with the Service to extend the
period for assessing any tax which is attributable to any item
required to be taken into account by a Partner for tax purposes, or an
item affected by such item; and
(6) To take any other action on behalf of the Partners or the
Partnership in connection with any administrative or judicial tax
proceeding to the extent permitted by applicable laws or regulations.
d. The Partnership shall indemnify and reimburse the Tax Matters
Partner for all expenses, including legal and accounting fees, claims,
liabilities, losses and damages incurred in connection with any Tax Audit
or Judicial Review with respect to the tax liability of the Partners. The
payment of all. such expenses shall be made before any distributions are
made of Cash Flow any discretionary reserves are set aside by the General
39
<PAGE>
Partner. Neither the General Partner, any Affiliate, nor any other person
or entity shall have any obligation to provide funds for such purpose. The
taking of any action and the incurring of any expense by the Tax Matters
Partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole discretion of the Tax Matters
Partner, and the provisions on limitations of liability of General Partner
and indemnification set forth in this Agreement shall be fully applicable
to the Tax Matters Partner in its capacity as such.
13.15 BINDING EFFECT.
Except as otherwise provided in this Agreement, every covenant, term, and
provision of this Agreement shall be binding upon and inure to the benefit of
the Partners and their respective heirs, legatees, legal representatives,
successors, transferees, and assigns.
13.16 CONSTRUCTION.
Every covenant, term, and provision of this Agreement shall be construed
simply according to its fair meaning and not strictly for or against any
Partner.
13.17 SEVERABILITY.
Every provision of this Agreement is intended to be severable. If any term
or provision hereof is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity or legality of the
remainder of this Agreement.
13.18 INCORPORATION BY REFERENCE.
Every exhibit, schedule, and other appendix attached to this Agreement and
referred to herein is hereby incorporated into this Agreement by reference.
13.19 ADDITIONAL DOCUMENTS.
Each Partner, upon the request of any General Partner, agrees to perform
all further acts and execute, acknowledge, and deliver any documents that may be
reasonably necessary,, appropriate, or desirable to carry out the provisions of
this Agreement.
13.20 WAIVER OF ACTION FOR PARTITION.
Each of the Partners irrevocably waives any right that he may have to
maintain any action for partition with respect to any of Partnership property.
13.21 SOLE AND ABSOLUTE DISCRETION.
Except as otherwise provided in this Agreement, all actions which any
General Partner may take and all determinations which any General Partner may
make pursuant to this Agreement may be taken and made at the sole and absolute
discretion of such General Partner.
13.22 CERTIFICATES REPRESENTING UNITS.
The Partnership shall issue Certificates representing the Units to all
Limited Partners.
40
<PAGE>
ARTICLE XIV
ADDITIONAL CAPITAL CONTRIBUTIONS,
FINANCING AND ASSESSMENTS
14.1 The General Partner may permit persons (including persons who are
concurrently admitted as Limited Partners, pursuant to the provisions of this
Agreement) to make additional Capital Contributions at such times, through sale
of Units or otherwise, in such amounts and form and for such consideration as
the General Partner and the Limited Partners owning 50% of the Units shall
determine, and to receive therefor, additional Units. Contributions to the
Partnership's capital may be made in any of the following forms: cash, notes or
relinquishment of legal rights or reduction of Partnership obligations pursuant
to notes, debentures, bonds and other kinds of debt obligations issued by the
Partnership.
14.2 Except as provided in Section 14.1, all Units offered pursuant to this
Article XIV shall be initially offered pro rata to all existing Limited Partners
in accordance with their Sharing Ratio. Any Units not purchased by the existing
Limited Partners within thirty (30) days of notice of the right to purchase the
Units may be offered by the General Partner to any person or entity in its sole
discretion.
14.3 The General Partner or its Affiliates, or both, may, in addition to
any of its previous Capital Contributions, make additional Contributions in cash
to the capital of the Partnership in the manner specified in this Article,
provided such additional Contributions shall be regarded as in payment of
Limited Partners' Units and not of General Partner's Units. In addition, the
General Partner may purchase those fractional interests in the Partnership
attributable to the unpaid obligations by Limited Partners by paying such
obligations and assuming said fractional interests.
14.4 Fractional Limited Partnership Units may be issued at the sole
discretion of the General Partner.
14.5 Consistent with the foregoing, after the expenditure or commitment of
the Original Invested Capital, additional Partnership activities may be financed
by any method which the General Partner believes to be appropriate. under the
circumstances, by borrowing funds, utilizing Partnership revenues and other
accepted methods of financing.
41
<PAGE>
IN WITNESS WHEREOF, the Partners have hereunto set their hands and seals
the day and year first above written.
DATALINC, LTD.
Integrated Communication
Networks, Inc.
By: _____________________________
John F. Kolenda
Chief Executive Officer
As General Partner and as
Attorney-In-Fact for the
Limited Partners set forth
on Schedule A attached
__________________________________
John F. Kolenda
JBP3/MTW/31366MAPA2
87081 (d-3 2/4/93)
42
<PAGE>
EXHIBIT NO.
99.4
Amended and Restated Agreement of Limited Partnership of Fastcom, LTd.
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
FASTCOM, LTD.
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP made as of the _____ day
of _____________, 1997, by and among FASTCOM MANAGEMENT, INC., a Florida
corporation, having a business address of 1641 Commerce Avenue North, St.
Petersburg, Florida 33716, as the general partner (hereinafter referred to as
the "General Partner") and those Persons who have executed this Agreement as
limited partners (hereinafter collectively referred to as the "Limited Partners"
and severally as "Limited Partner;" the said General Partner and Limited
Partners are hereinafter collectively referred to as the "Partners" and
severally as "Partner").
R E C I T A L S
A. A Certificate of Limited Partnership was filed on March 31, 1994, with the
office of the Secretary of State of Florida, by the General Partner.
B. Pursuant to the Certificate of Limited Partnership, the General Partner and
Datalinc as a Limited Partner formed a limited partnership under and
subject to the laws of the State of Florida for the purposes of acquiring,
owning, developing, constructing, managing, leasing, operating, and
otherwise dealing with the Network (as hereinafter defined), and to own or
lease such other realty, personalty and/or fixtures as reasonably may be
related to the ownership or operation of the Network, and to conduct such
other business activities and operations as are consistent with and
reasonably related to the foregoing purposes.
C. Series 300 and Management Incentive Plan Special Limited Partners desire to
be admitted as Limited Partners of the Limited Partnership.
D. The parties desire to enter into this Amended and Restated Agreement of
Limited Partnership, to restate formally and express the terms and
conditions of such limited partnership and their respective rights and
obligations with respect thereto and to provide for the admission of the
Limited Partners as Limited Partners of the Limited Partnership all as of
the date first above written.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and conditions herein contained, and other good and valuable consideration, the
receipt and sufficiency of which hereby is acknowledged by each party to the
others, the parties hereto, for themselves, their respective successors and
assigns, hereby agree as follows:
1
<PAGE>
ARTICLE I
CERTAIN DEFINED TERMS
As used herein, the following terms shall have the following meanings:
"ACT" shall mean the Florida Revised Uniform Limited Partnership Act.
"ADJUSTED CAPITAL INVESTMENT" shall mean total cash Contributions of a
Limited Partner to the Partnership less Distributions of any kind from the
Partnership.
"AFFILIATE" OR "AFFILIATED PERSON" shall mean, when used with reference to
a specified person, (a) any person that directly or indirectly through one or
more intermediaries controls or is controlled by or is under common control with
the specified person, (b) any person who is an officer, partner or trustee of,
or which serves in a similar capacity with respect to, the specified person or
of which the specified person is an officer, partner or trustee, or with respect
to which the specified person serves in a similar capacity, (c) any person
which, directly or indirectly, is the beneficial owner of 10% or more of any
class of equity securities of, or otherwise has a substantial beneficial
interest in, the specified person or of which the specified person is directly
or indirectly the owner of 10% or more of any class of equity securities or in
which the specified per on has a substantial beneficial interest and (d) a
spouse or child living in the household of the specified person.
"AGREEMENT" shall mean this Agreement of Limited Partnership, as amended
from time to time, as the context requires. Words such as "herein,"
"hereinafter," "hereof," "hereto," "hereby" and "hereunder," when used with
reference to this Agreement, refer to this Agreement as a whole, unless the
context otherwise requires.
"BOOK VALUE" means, with respect to any asset, such asset's adjusted basis
for federal income tax purposes, except as follows:
a. The initial Book Value of any asset contributed by a Partner to the
Partnership shall be the fair market value of such asset, as determined by
the contributing Partner and the Partnership;
b. The Book Values of all Partnership assets shall be adjusted to
equal their respective fair market values, as determined by the General
Partner, in its sole and absolute discretion, as of the following times:
(1) The acquisition from the Partnership, in exchange for more
than a de minimus capital contribution, of (i) a Partnership Interest
by an additional Partner, or (ii) an additional Partnership Interest
by an existing Partner;
(2) The distribution by the Partnership to a Partner of more than
a de minimus amount of Partnership property other than money;
(3) The termination of the Partnership for federal income tax
purposes pursuant to Code Section 708(b)(1)(B) on account of the sale
or exchange of fifty percent (50%) or more of the interests in capital
and profits of the Partnership within a twelve month period; and
2
<PAGE>
(4) The Partnership's ceasing to be a going concern (even though
it may continue in existence for the purposes of winding up its
affairs, paying its debts, and distributing any proceeds of the
collection of its receivables to the Partners).
c. If the Book Value of an asset has been determined or adjusted
pursuant to this section, such Book Value shall thereafter be adjusted by
the Depreciation taken into account with respect to such asset.
"CAPITAL ACCOUNT" shall mean the Capital Account that shall be established,
maintained and adjusted for each Partner in accordance with the rules of Section
1.704-1(b)(2)(iv) of the Regulations. To that end, each Partner's Capital
Account shall be credited with: (a) the amount of cash contributed to the
Partnership by the Partner; (b) additional money contributed to the Partnership
by the Partner; (c) the distributive share of Partnership Taxable Profit
allocated to the Partner pursuant to Article IX; (d) the distributive share of
Partnership Gross Income allocated to him pursuant to Article IX; and (e) the
basis adjustment under Section 48(q)(2) of the Code allocated to him pursuant to
Article IX hereof. Each Capital Account shall be debited by: (i) Distributions
made to the Partner pursuant to Article IX; (ii) the distributive share of
Partnership Tax Loss allocated to the Partner pursuant to Article IX; (iii) the
distributive share of Partnership Non-recourse Deductions allocated to the
Partner pursuant to Article IX; (iv) the distributive share of any Partnership
expenditures described in Section 705(a)(2)(B) of the Code or treated as Section
705(a)(2)(B) expenses pursuant to Section 1.704-1(b)(2)(iv)(i) f the Regulations
and not otherwise taken into account in computing Taxable Profit and Tax Loss,
allocated to the Partner pursuant to Article IX; and (v) the basis adjustment
under Section 48(q)(1) and (3) of the Code allocated to the Partner pursuant to
Article IX hereof. Increases or decreases in the Capital Accounts of the
Partners to reflect a revaluation of Partnership property shall be made at the
sole and absolute discretion of the General Partner and in accordance with
Section 1.704-1(b)(2)(iv)(f) of the Regulations. A transferee of Units shall
succeed to the Capital Account relating to the Units transferred except to the
extent provided in applicable Regulations. The foregoing provisions and any
other provisions of this Partnership agreement relating to the maintenance of
Capital Accounts are intended to comply with Section 1.704-1(b)(2)(iv) of the
Regulations, and shall be interpreted and applied in a manner consistent with
such Regulations. To the extent that any provision of this Partnership Agreement
is inconsistent with such Regulation, such Regulation (as the same may be
amended or revised hereafter) shall control. If the General Partner shall
determine that it is prudent to modify the manner in which Capital Accounts, or
any debits or credits thereto, are computed or maintained in order to comply
with such regulations, the General Partner is authorized to make such
modifications pursuant to Article IX. Any references in this Partnership
Agreement to the Capital Account of a Partner shall be deemed to refer to such
Capital Account as the same may be credited or debited from time to time as set
forth above.
"CAPITAL CONTRIBUTION" of a Partner shall mean the amount of cash
contributed by such Partner to the Limited Partnership pursuant to Articles III
and XV hereof.
"CASH FLOW" in any fiscal year shall mean the net income in such period
from operations of the Limited Partnership determined in accordance with Federal
income tax principles consistently applied (not including Sale Proceeds or
Refinancing Proceeds) plus:
3
<PAGE>
a. depreciation;
b. amortization of capitalized costs;
c. other non-cash charges deducted in determining such net income, and
d. the net reduction in the amount of any reserves or escrows
described in "f" below;
minus the following:
e. principal payments on all secured and unsecured borrowings of the
Limited Partnership;
f. the amount of cash set aside for working capital, property
replacement reserves and any other reserves reasonably deemed necessary by
the General Partner; and
g. any other cash expenditures or escrows (except distributions or
payments to Partners) which have not been deducted in determining the net
income of the Limited Partnership and which were not funded by borrowings.
"CODE" shall mean the United States Internal, Revenue Code of 1986, the
Regulations promulgated thereunder and any corresponding provisions of
subsequent law.
"DEPRECIATION" means, for each fiscal year or other period, an amount equal
to the depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such year or other period, except that if the Gross
Asset Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year or other period bears to such beginning adjusted tax basis.
"DATALINC" means Datalinc, Ltd., a Florida limited partnership.
"DATALINC UNITS" means the Units owned by Datalinc as described in the
Memorandum. Holders of such Units are referred to herein as "DATALINC LIMITED
PARTNERS."
"DISTRIBUTION" shall mean any funds distributed to the Partners pursuant to
this Agreement.
"DOL" shall mean the United States Department of Labor.
"EA Units" means the Early Investor Units as described in the Memorandum.
Holders of such Units are referred to herein as "EA LIMITED PARTNERS."
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"GENERAL PARTNER" shall mean Fastcom, Inc., a Florida corporation, or any
Person or Persons who or which, at the time of reference thereto, have been
admitted as a successor to the interest of the General Partner or as an
additional General Partner.
4
<PAGE>
"GROSS ASSET VALUE" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the Partnership;
(ii) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined
by the General Partner, as of the following times: (a) the acquisition of
an additional interest in the Partnership (other than pursuant to Article
IV hereof) by any new or existing Partner in exchange for more than a de
minimus Capital Contribution; (b) the distribution by the Partnership to a
Partner of more than a de minimus amount of Partnership Network as
consideration for an interest in the Partnership if the General Partner
reasonably determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners in the Partnership;
and (c) the liquidation of the Partnership within the meaning of
Regulations (0)(0) 1.704-1(b)(2)-(ii)(g);
(iii) The Gross Asset Value of any Partnership asset distributed to
any Partner shall be the gross fair market value of such asset on the date
of distribution; and
(iv) The Gross Asset Value of any Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis
of such assets pursuant to IRC (0)(0)734(b) or 743(b), but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulation (0)(0)1.704-1(b)(2)(iv)(m) and this Section
hereof; provided, however, that Gross Asset Values shall not be adjusted
pursuant to this Section to the extent the General Partner determines that
an adjustment pursuant to this Section 1.20(iv) is necessary or appropriate
in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section.
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to this Section, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset
for purposes of computing Profits and Losses.
"GROSS INCOME" shall mean items of gross income which are included within
the definition of gross income for the purposes of Section 1.704-1(b)(2)(iv) of
the Regulations.
"LIMITED PARTNER" shall mean any Person who is a Limited Partner at the
time of reference thereto, including a Substituted Limited Partner. "Limited
Partners" shall refer to all Limited Partners at the time of reference thereto.
"LIMITED PARTNERSHIP" shall mean the limited partnership formed pursuant to
the Certificate of Limited Partnership filed on March 31,1994, as said limited
partnership may from time to time be constituted.
"MAJORITY VOTE" shall mean the affirmative vote or written consent of
Limited Partners then owning of record outstanding Units of any type within the
aggregate more than a fifty percent (50%) interest in the Distributions of Cash
Flow of the Partnership.
5
<PAGE>
"MEMORANDUM" shall mean the disclosure and other documents given to Limited
Partners in connection with their investment in the Partnership.
"MINIMUM GAIN" shall mean the aggregate gain (of whatever character), if
any, that would be realized by the Partnership with respect to each Partnership
asset if each Partnership asset was disposed of by the Partnership in a taxable
transaction in full satisfaction of any Non-recourse Debt of the Partnership
secured by such asset, and by then aggregating the amounts so computed. Such
gain shall be determined by reference to the Book Value of each such property or
asset (notwithstanding that the adjusted tax basis of such property or asset
differs from its Book Value) and in accordance with Section 1.704-1(b)(4)(c) of
the Treasury Regulations. A Partner's share of Partnership minimum gain shall
equal the excess of (A) the sum of the non-recourse deductions allocated to such
Partner and the aggregate distributions to such Partner of the proceeds of a
non-recourse liability that are allocable to an increase in partnership minimum
gain over (B) the sum of such Partner's aggregate share of net decreases in
partnership minimum gain and such Partner's aggregate share of decreases in
partnership minimum gain resulting from adjustments to the Book Value of
property. A Partner's share of a net decrease in partnership minimum gain for a
fiscal year shall equal an amount that bears the same relation to the net
decrease in partnership minimum gain during such year as the Partner's share of
partnership minimum gain at the end of the preceding fiscal year bears to the
partnership minimum gain at the end of such preceding year. A Partner's share of
any decrease in partnership minimum gain resulting from any adjustment in the
Book Value of property described in subparagraph (ii) of the definition of "Book
Value" shall equal the amount of the increase in such Partner's Capital Account
attributable to such adjustment to the extent of the reduction in partnership
minimum gain caused by such adjustment as determined under Section 1.704-
1T(b)(4)(iv)(f) of the Treasury Regulations.
"MIP SPECIAL LIMITED PARTNER UNITS" means the Management Incentive Plan
Special Limited Partner Units as described in the Memorandum. Holders of such
Units are referred to herein as "MIP SPECIAL LIMITED PARTNERS."
"NEGATIVE CASH FLOW" shall mean the net loss from operations of the Limited
Partnership determined in accordance with Federal income tax principles
consistently applied (not including Sale Proceeds or Refinancing Proceeds),
reduced by
a. depreciation;
b. amortization of capitalized costs;
c. other non-cash charges deducted in determining such net loss; and
d. the net reduction in the amount of any reserves or escrows
described in "f" below;
increased by the following:
e. principal payments on all loans, including but not limited to the
Construction Loan, Permanent Loan and optional Loans and any other
indebtedness of the Limited Partnership;
f. the amount of cash set aside for working capital, property
replacement reserves and any other reserves; and
6
<PAGE>
g. any other cash expenditures or escrows (except distributions or
payments to Partners, and escrows of Limited Partnership funds for property
taxes taken into account in computing net loss), which have not been
included in determining the net loss of the Limited Partnership and which
were not funded by borrowings.
"NETWORK" means the THRUCOMM Network as described in the Memorandum,
including all tangible and intangible assets related thereto.
"NETWORK MANAGEMENT AGREEMENT" shall mean the Management Agreement for the
development of the Network Management Agreement shall be entered into between
Fastcom, Inc., and the Limited Partnership, as more fully described in the
Memorandum.
"NETWORK MANAGEMENT FEE" shall mean the fee payable to the General Partner
as managing agent as set forth in Section 5.2 hereof and more fully described in
the Memorandum.
"NON-DEDUCTIBLE EXPENDITURES" shall mean all items of Limited Partnership
expenditure described in Code Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to the Regulations promulgated under Section
704(b) of the Code, including but not limited to any syndication expenses.
"NON-RECOURSE DEBT" or "NON-RECOURSE LIABILITY" shall mean indebtedness
secured by Partnership property for which neither the Partnership nor any
Partner has any personal liability and for which no Partner nor any other person
related to a Partner (within the meaning of Section 1.752-1T(h) and
1.704-1T(b)(4)(iv)(h) of the Regulations) has the economic risk of loss.
"NON-RECOURSE DEDUCTIONS" shall mean the excess, if any, of the net
increase in the amount of Minimum Gain during a partnership's taxable year, over
the aggregate amount of any distributions during such year of proceeds of
non-recourse liability that are allocable to an increase in Minimum Gain.
Section 1.704-1T(b)(4)(iv)(b) of the Regulations. The Non-recourse Deductions of
the Partnership for a taxable year shall consist first of depreciation or cost
recovery deductions with respect to items of Partnership property or other
assets to the extent of the increase in Minimum Gain attributable to any
Non-recourse Debt of the Partnership secured by such Partnership property or
assets and, to the extent necessary, a pro rata portion of the Partnership's
other items of loss, deduction and non-deductible expenditures under Section
705(a)(2)(B) of the Code (to the extent such non-deductible expenditures reduce
Capital Accounts). Non-recourse Deductions shall be determined in accordance
with the rules in Section 1.704-1T(b)(4)(iv) of the Regulations, and any
subsequent rule or regulation governing the determination of Non-recourse
Deductions.
"OFFERING" shall mean the offer by the Limited Partnership to sell the
Series 200 Units subject to the terms and conditions set forth herein.
"OPTIONAL LOANS" shall mean the optional loans referred to in Section 5.10
hereof.
"PARTNER" shall mean the General Partner or any Limited Partner and
"PARTNERS" collectively refers to the General Partner and the Limited Partners.
7
<PAGE>
"PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Non-recourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Non-recourse Debt were treated as Non-recourse Liability,
determined in accordance with Section 1.704- 1T(b)(4)(iv)(h) of the Treasury
Regulations.
"PARTNER NON-RECOURSE DEBT" has the meaning set forth in Section
1.704-1T(b)(4)(17v)(k)(4) of the Treasury Regulations.
"PARTNER NON-RECOURSE DEDUCTIONS" has the meaning set forth in Section
1.704- (b)(4)(iv)(h)(3) to the Treasury Regulations. The amount of Partner
Non-recourse Deductions with respect to a Partner Non-recourse Debt for a
Partnership fiscal year equals the excess, if any, of the net increase, if any,
in the amount of Partner Minimum Gain attributable to such Partner Non-Recourse
Debt during that fiscal year over the aggregate amount of any distributions
during that fiscal year to the Partner that bears the economic risk of loss for
such Partner Non-recourse Debt to the extent such distributions are from the
proceeds of such Partner Non-recourse Debt and are allocable to an increase in
Partner Minimum Gain attributable to such Partner Non-recourse Debt, determined
in accordance with Section 1.704-1T(b)(4)(iv)(h)(3) of the Treasury Regulations.
"PERSON" shall mean any individual, general partnership, limited
partnership, corporation, joint venture, trust, business trust, cooperative or
association and the heirs, executors, administrators, successors and assigns
thereof, where the context so admits.
"PREFERRED RETURN" shall mean a 15% per annum cumulative, non-compounded
Preferred Return on their Adjusted Capital Investment, commencing the date of
closing of the Series 100 Unit offering. However, the Preferred Return is only
payable if within three years from the Closing Date of the Series 100 Unit
offering the Partnership (or a successor entity thereto with essentially the
same business) has not done either of the following (a "Cut-Off Event"): a. Made
aggregate Distributions of any kind to such Partners in an amount equal to their
Adjusted Capital Investment, or b. Has not completed a successful public
offering. If a Cut-Off Event has occurred, the Partnership's obligation to make
a Preferred Return to the Series 100 Limited Partners will terminate. If the
Partnership has made a successful public offering by such date, but the market
value of securities owned by the Series 100 Limited Partners is less than their
Adjusted Capital Investment based upon the public offering price of such
securities (the "Difference"), the Series 100 Limited Partners will be issued
securities with a first priority dividend and other payment right over all other
securities holders equal to the Difference.
"QUALIFIED INCOME OFFSET ITEMS" shall mean unexpected adjustments,
allocations, or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5),
and (6) of the Regulations.
"REFINANCING" shall mean the replacement, increase, consolidation,
modification or extension, etc. of any indebtedness on the Network.
"REGULATIONS" shall mean regulations promulgated under the Code, as such
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).
"REFINANCING PROCEEDS" shall mean the proceeds from a Refinancing after
deducting the expenses incurred in connection with the receipt or collection
thereof, the amounts thereof which are applied in reduction of Limited
8
<PAGE>
Partnership liabilities and the amounts thereof which, in the sole discretion of
the General Partner, are set aside for working capital, property replacement
reserves and any other reserves reasonably deemed necessary by the General
Partner.
"SALE" shall mean a sale, condemnation, voluntary or involuntary
conversion, insured casualty or other disposition of the Network or any portion
thereof.
"SALE PROCEEDS" shall mean the proceeds from any Sale after deducting (a)
expenses incurred in connection with the receipt or collection thereof,
including, but not limited to, any brokerage commissions due to the General
Partner as more fully described in the Memorandum, (b) in the case of a
condemnation, voluntary or involuntary conversion and insured casualty, such
portion thereof as is required to repair, restore or replace the Network or any
portion thereof, (c) all amounts which are applied in reduction of Limited
Partnership liabilities and (d) all amounts which, in the sole discretion of the
General Partner, set aside for working capital, replacement reserves and any
other reserves reasonably deemed necessary by the General Partner. Such reserves
and any other reserves when the Partnership is liquidated shall be deemed Sale
Proceeds.
"SERIES 100 UNITS" means the Series 100 Units as described in the
Memorandum. Holders of such Units are referred to herein as "SERIES 100 LIMITED
PARTNERS."
"SERIES 200 UNITS" means the Series 200 Units as described in the
Memorandum. Holders of such Units are referred to herein as "SERIES 200 LIMITED
PARTNERS."
"SERIES 300 UNITS" means the Series 300 Units as described in the
Memorandum. Holders of such Units are referred to herein as "SERIES 300 LIMITED
PARTNERS."
"SHARING RATIO" of any Limited Partner shall mean such Partner's pro rata
share of the Capital Contributions of all of the same class of Limited Partners.
"SUBSCRIPTION AGREEMENT" means the Subscription Agreement for the Series
300 Units.
"SUBSTITUTED LIMITED PARTNER" shall mean any person admitted to the Limited
Partnership as a Limited Partner pursuant to the provisions of Section 8.7
hereof.
"SYNDICATION EXPENSES" means all expenditures classified as syndication
expenses pursuant to Treasury Regulation Section 1.709-2(b). Syndication
Expenses shall be taken into account under this Agreement at the time they would
be taken into account under the Partnership's method of accounting if they were
deductible expenses.
"TAXABLE PROFITS" OR "TAX LOSSES" shall be synonymous with "NET PROFIT" or
"NET LOSSES" and shall mean for each fiscal year or other period, an amount
equal to the Partnership's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
9
<PAGE>
(i) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Taxable Profits or
Tax Losses pursuant to this section shall be added to such taxable income
or loss;
(ii) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Treasury Regulation Section 1.704-1(b) (2)(iv)(i), and not otherwise
taken into account in computing Taxable Profits or Tax Losses pursuant to
this section, shall be subtracted from such taxable income or loss;
(iii) Gain or loss resulting from any disposition of Partnership
Property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset Value
of the property disposed of, notwithstanding that the adjusted tax basis
for such property differs from its Gross Asset Value;
(iv) In lieu of the depreciation, amortization, and other cost
recovery deduction taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such fiscal year
or other period, computed in accordance herewith; and
(v) Notwithstanding any other provision of this section, any items
which are specially allocated pursuant to Article IX hereof shall not be
taken into account in computing Taxable Profits or Tax Losses.
"TAX-EXEMPT INVESTOR" shall mean: (a) pension plans (as that term is
defined in Section 3(2)(A) of ERISA), including qualified pension,
profit-sharing and other employer retirement benefits plans (including Keogh
[H.R. 10] Plans) and trusts, bank commingled trust funds for such plans and
Individual Retirement Accounts, and (b) permitted transferees and permitted
assigns of Units from a Person described in (a) above.
"TREASURY REGULATIONS" means the Income Tax Regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"UNIT" shall mean a limited partnership interest in the Limited
Partnership.
ARTICLE II
CONTINUATION; PURPOSES; AND TERM
2.1 CONTINUATION OF LIMITED PARTNERSHIP.
The Partners, by execution of this Agreement, agree to continue the limited
partnership previously formed under and subject to the Act and amend and restate
the original Agreement of Limited Partnership in its entirety as set forth
herein.
2.2 NAME AND PRINCIPAL PLACE OF BUSINESS.
The Limited Partnership shall conduct its business and promote its purposes
under the firm name and style Fastcom, Ltd., or such other name or names as the
General Partner hereinafter from time to time may select. The Limited
10
<PAGE>
Partnership's principal office for the transaction of business shall be
maintained at the address set forth above or such other place or places within
or outside the State of Florida as the General Partner hereinafter may select.
2.3 PURPOSES.
Except as otherwise expressly provided herein, the purposes of the Limited
Partnership shall be to acquire, own, develop, construct, improve, lease,
manage, operate, and otherwise deal with the Network, to own or lease such other
realty, personalty, fixtures or other tangible assets and any intangible assets
as reasonably may be related to the ownership or operation of the Network, and
to conduct such other business activities and operations as are consistent with
and reasonably related to the foregoing purposes, and in connection therewith,
to enter into contracts and leases, to borrow money necessary for the Limited
Partnership's business, to pledge, mortgage or otherwise encumber all or any
part of the Limited Partnership's assets.
2.4 TERM.
The term of the Limited Partnership shall commence as of the date hereof,
and shall continue and extend to and including December 31, 2039 verify, or
until such earlier date as the Limited Partnership shall be dissolved and
terminated pursuant to the provisions of Article XII hereof.
ARTICLE III
PARTNERS AND CAPITAL
3.1 GENERAL PARTNER'S AND DATALINC'S CAPITAL CONTRIBUTIONS.
The General Partner has contributed $100 in cash to the capital of the
Limited Partnership. Datalinc has contributed all rights, title and interest to
all tangible and intangible assets associated with THRUCOMM.
3.2 LIMITED PARTNERS' CAPITAL CONTRIBUTIONS.
The Limited Partnership intends to sell and issue up to 300 Series 200
Units and 200 Series 300 Units, and to admit as Limited Partners the Persons who
pay for such Units in accordance with the Memorandum and Subscription Agreement,
respectively. The General Partner is hereby authorized to raise capital for the
Limited Partnership by offering and selling such Units to qualified offerees.
The General Partner, in its sole discretion, may sell fractional Units.
3.4 TERMS OF OFFERING.
Except as otherwise provided in the Agreement, the General Partner shall
determine the terms and conditions of the Offering and is authorized and
directed to do all things which it deems to be necessary, convenient,
appropriate or advisable in connection therewith, including but not limited to,
the execution and performance of agreements with such persons concerning the
marketing of the Units on such basis and upon such terms as the General Partner
shall determine.
3.5 INTEREST AND RIGHT TO PROPERTY.
No Partner shall be paid interest on any Capital Contribution, nor shall
11
<PAGE>
any Partner have the right to take and receive property other than cash in
return for his or its Capital Contribution.
3.6 NO WITHDRAWAL FROM CAPITAL ACCOUNTS.
Except as otherwise expressly provided herein, no Partner shall be
permitted to make any withdrawals from his or its Capital Account.
3.7 NO INTEREST ON CAPITAL CONTRIBUTIONS.
No Partner shall receive any interest, salary, or draw with respect to his
Capital Contributions or his Capital Account or for services rendered on behalf
of the Partnership or otherwise in his capacity as a Partner, except as
otherwise provided in this Agreement.
3.8 MIP SPECIAL LIMITED PARTNERS.
The MIP Units shall be governed by the terms and conditions set forth
in Exhibit B attached hereto and incorporated by reference herein. MIP Special
Limited Partners have no voting rights in the Partnership.
ARTICLE IV
SPECIAL POWER OF ATTORNEY
4.1 Each Limited Partner and any affiliate thereof executing this Agreement
irrevocably constitutes all the General Partner(s), present or future, his
true and lawful attorney-in-fact in his name, place and stead to make,
execute, swear to,, acknowledge, deliver and file:
Any Agreement or Amended Certificate of Limited Partnership, as well as
amendments thereto, under the laws of the State of Florida, and under the laws
of any other state in which such Certificate or Agreement is required to be
filed;
Any other instrument which may be required to be filed by the Partnership
under the laws of any state or by any governmental agency, or which the General
Partner deems advisable to file;
Any documents which may be required to effect the continuation of the
Partnership, the admission of a Substitute Limited Partner, the election of a
Substitute General Partner or the dissolution and termination of the
Partnership, provided such continuation, admission, election, or dissolution and
termination are in accordance with the terms of the Partnership Agreement;
All documents, certificates or other instruments, if any, which may be
required for the organization of any new limited partnership occasioned by the
death, dissolution, withdrawal or cessation of existence, removal, adjudication
of incompetency, insanity, bankruptcy, or insolvency of the General Partner; and
All documents, certificates or other instruments which may be required to
reflect amendments authorized or required under the Partnership Agreement.
4.2 THE ABOVE POWER OF ATTORNEY:
Is a special power of attorney coupled with an interest, is irrevocable,
and shall survive the death of any Limited Partner;
12
<PAGE>
May be exercised by the General Partner for each Limited Partner by an
actual facsimile signature of the General Partner or by listing all of the
Limited Partners and executing any instrument with a single actual or facsimile
signature of the General Partner acting as attorney-in-fact for all of them (the
General Partner may act through any of its corporate officers);
Shall survive the delivery of an assignment by a Limited Partner of the
whole or any portion of his interest; except that where the assignee thereof has
been approved by the General Partner for admission to the Partnership as a
Substitute Limited Partner, the power of attorney shall survive the delivery of
such assignment for the sole purpose of enabling the General Partner to execute,
swear to or acknowledge and file any instrument necessary to effect such
substitution; and
Shall not constitute a waiver of, or be utilized to avoid the rights of the
Limited Partners, or in any manner inconsistent with the status of the
Partnership.
Upon request by the General Partner, the Limited Partners shall from time
to time execute any separate power of attorney that may be necessary or proper
to permit the above-listed powers to be exercised.
4.3 SEPARATE FORM.
Each Limited Partner hereby agrees to execute, acknowledge and deliver to
the General Partner, promptly upon request therefor by the General Partner, a
power of attorney in recordable form satisfactory to the General Partner
evidencing the foregoing appointment.
ARTICLE V
MANAGEMENT; RIGHTS OF GENERAL AND
LIMITED PARTNERS; FEES AND EXPENSES
5.1 MANAGEMENT.
Except as otherwise expressly provided herein and subject to the
restrictions contained in Section 5.4 hereof, the General Partner shall have the
exclusive right and power to manager operate and control the Limited
Partnership, to do all things necessary or appropriate to carry on its business
and purposes,, including, but not limited to,, the right to incur and satisfy
obligations relating to the formation and operation of the Limited Partnership,
and to exercise all rights and powers conferred upon the General Partner by law,
including, but not limited to, the right:
a. To plan, design, finance, lease and cause the Network to be
developed and completed;
b. To develop, construct, hold and dispose of the Network as well as
tangible and intangible property connected therewith in furtherance of the
development of the Network and the business of the Limited Partnership,
including but not limited to defending and/or settling litigation regarding
the Limited Partnership, the Network or any aspect thereof.
13
<PAGE>
c. To adjust, compromise, settle or refer to arbitration any claim in
favor of or against the Limited Partnership and to institute, prosecute and
defend any legal action or proceeding or any arbitration proceeding;
d. To enter into, make and perform any and all contracts and other
agreements in connection with the business and purposes of the limited
Partnership which the General Partner shall deem necessary or desirable and
in the best interests of the Limited Partnership, whether or not such
agreements shall be with persons affiliated with any Partner, including
without limitation, each and every such agreement referred to in or
contemplated by the Memorandum;
e. To obtain loans for the Limited Partnership's purposes and to
issue, accept, endorse and execute promissory notes, bonds or other
evidences of indebtedness and, as security therefor, to mortgage, pledge,
grant security interests in, or otherwise encumber its assets, including,
but not limited to, the Network; to obtain replacements of any debts and to
prepay, in whole or in part, refinance, recast, increase, modify,
consolidate or extend any obligation affecting the Limited Partnership;
f. To acquire and enter into any contract of insurance necessary or
proper for the protection of the Limited Partnership, the conservation of
the Network or any other purpose proper and beneficial to the Limited
Partnership;
g. To retain or employ and coordinate the services of all employees,
supervisors, accountants, attorneys, contractors and other persons or
entities necessary or appropriate to carry out the business and purposes of
the Limited Partnership, whether or not affiliated with the General
Partner;
h. To perform other obligations provided elsewhere in this Agreement
to be performed by the General Partner;
i. To open accounts and deposit and maintain funds in the name of the
Limited Partnership in banks, savings and loan associations or trust
companies; provided, however, that the Limited Partnership funds shall not
be commingled with the funds of any other person;
j. To exercise all rights and powers conferred upon the General
Partner by law;
k. To amend this Agreement to reflect the addition or substitution of
Limited Partners or the reduction of Capital Accounts upon the return of
capital to the Partners; and
l. To execute, acknowledge and deliver any and all instruments
necessary or desirable in effectuating the foregoing.
5.2 FEES.
The General Partner and its Affiliates shall be entitled to all fees
and compensation for services as described in the Memorandum. The General
Partner and its Affiliates may also enter into other contracts, commitments
or agreements with the Partnership, provided that the fees and prices
14
<PAGE>
charged in such transactions are at least as favorable as the fees and
charges being offered by non-affiliated comparable entities performing
similar functions.
5.3 REIMBURSEMENT FOR LIMITED PARTNERSHIP EXPENSES.
The Partnership shall bear all expenditures incident to its formation. The
Partnership shall reimburse the General Partner and/or Datalinc, except as
otherwise provided in the Memorandum, for (or pay directly) all actual and
direct expenditures incident to its formation, including the fees of the
attorneys and accountants who represent the General Partner in connection with
the review, negotiation and preparation of this Agreement, as well as any costs
incurred by the General Partner in connection with the creation and development
of the Partnership prior to execution hereof, all as further specified herein.
Subject to the restrictions concerning indemnification of the General
Partner as set forth herein, the General Partner shall be entitled to
reimbursement by the Limited Partnership for all out-of-pocket expenses
reasonably paid or incurred by it in connection with the discharge of its
obligations under this Agreement or otherwise reasonably paid or incurred by it
on behalf of the Limited Partnership.
5.4 RESTRICTIONS AND RIGHTS.
Notwithstanding the grant of authority to the General Partner under Section
5.1 hereof, without the following specified vote of Limited Partners, the
General Partner shall not:
a. Refinance, sell or contract to sell substantially all of the assets
of the Limited Partnership, including, but not limited to, the Network
(Vote of Limited Partners owning at least 2/3 of outstanding Units);
b. Do any act in contravention of this Agreement (unanimous);
c. Employ, or permit the Limited Partnership to employ, the funds or
assets of the Limited Partnership in any manner except for the exclusive
benefit of the Limited Partnership (unanimous); or
d. Receive any rebates or give-ups, directly or indirectly, or
participate in any reciprocal business arrangements which would circumvent
such prohibitions and any other prohibitions or restrictions contained
herein with respect to the Partnership's dealings with the General Partner
or its Affiliates (unanimous).
e. Materially alter the use of Proceeds set forth in the Memorandum
(Majority Vote).
5.5 LIMITATION OF TIME.
The General Partner shall not be required to devote all of its time or
business efforts to the affairs of the Partnership, but shall devote so much of
its time and attention to the Partnership as is reasonably necessary and
advisable to manage the affairs of the Partnership to the best advantage of the
Partnership.
15
<PAGE>
5.6 NON-EXCLUSIVITY.
Any Partner, whether General or Limited, may engage in or possess an
interest in other business ventures of every nature and description,
independently or with others, including, but not limited to, the ownership,
financing, operation, management, syndication, brokerage and development of
other similar business to that of the Partnership, and neither the Limited
Partnership nor any Partners thereof shall have any right by virtue of this
Agreement in such independent ventures or to the income, profits or losses
derived therefrom. The fact that a Partner, whether General or Limited, or any
member of his family or any Affiliate thereof, as the case may be, is employed
by, or is directly or indirectly interested in or connected with, any Person
with which the Limited Partnership transacts business shall not prohibit the
General Partner from dealing with such Person, and neither the Limited
Partnership nor any Partners thereof, as such, shall have any rights in such
Person, or to any income, profits or losses derived therefrom. The General
Partner shall not be obligated to present any particular investment opportunity
to the Limited Partnership even if such opportunity is of a character which, if
presented to the Limited Partnership could be taken by the Limited Partnership
and the General Partner shall have the right to take for its own account
(individually or as trustee), or to recommend to others any such particular
investment opportunity.
5.7 NO LIABILITY AND INDEMNITY.
The General Partner or its Affiliates shall not be liable, responsible or
accountable to the Limited Partnership or any Partner for any act or omission
performed or omitted pursuant to the authority granted to it hereunder or by
law, or for a loss resulting from any mistake or error in judgment on its part
or from the negligence, dishonesty, fraud or bad faith of any employee, broker
or other agent of the Limited Partnership, provided that such act or omission,
such mistake or error in judgment or the selection of such employee, broker or
other agent as the case may be was made in good faith and did not result from
fraud, the misconduct or negligence of the General Partner or its Affiliates.
The General Partner may consult with legal counsel and any action taken or
omitted in good faith in reliance upon and in accordance with the opinion or
advice of such counsel shall be full protection and justification of the General
Partner with respect to the action so taken or omitted. The Limited Partnership
shall indemnify and save harmless the General Partner or its Affiliates from any
loss, damage, liability or expense incurred or sustained by them by reason of
any act performed by any omission by them for or on behalf of the Limited
Partnership and in furtherance of their interest, but this indemnity shall not
be applicable to loss, damage, liability or expense resulting from the fraud,
misconduct or negligence of the General Partner or its Affiliates, nor shall the
Limited Partners be required to make any Capital Contribution therefor to the
Limited Partnership.
Neither the General Partner or its Affiliates nor the Partnership shall
indemnify any Limited Partner for any reason.
5.8 RELIANCE BY THIRD PARTIES.
Third parties dealing with the Limited Partnership may rely conclusively
upon the power and authority of the General Partner to act as set forth herein
and shall not be required to inquire into or ascertain the authority of the
General Partner so to act.
16
<PAGE>
5.9 GENERAL AUTHORITY.
Except as otherwise provided in this Agreement and by the Act, the General
Partner shall have all the rights and powers and shall be subject to all the
restrictions and liabilities of a partner in a partnership without limited
partners under the laws of the State of Florida.
5.10 OPTIONAL LOANS.
Any Partner may, but is not obligated to, from time to time, make voluntary
loans to the Limited Partnership. Such loans shall bear interest at the prime
rate in effect from time to time plus 1% per annum and shall be repayable from
Cash Flow or Sale or Refinancing Proceeds when available.
5.11 REMOVAL OF GENERAL PARTNER.
a. Limited Partners holding at least 66-2/3% of the Units shall have the
right, exercisable by written notice to all Partners, to remove a General
Partner for good cause stated; provided, however, that the Limited Partners may
not remove a General Partner if such removal would cause or result in a default
by the Partnership under any loan agreement, promissory note, mortgage, security
agreement or other instrument evidencing Partnership indebtedness. For purposes
of this provision, "good cause" shall be limited to any action taken with
respect to the intentional misconduct or gross negligence of the General Partner
and which results in (i) a material violation of this Agreement; or (ii) a
material financial loss to the Partnership, provided any such matter is not
timely remedied by the General Partner.
b. In the event the General Partner shall be compelled to withdraw from the
Partnership pursuant to paragraph (a) of this Section 5.11, the Partnership
shall be dissolved. Notwithstanding the preceding sentence and the provisions of
Section 12.1, the Limited Partners may elect to continue the business of the
Partnership pursuant to the provisions of Article XII and subject to the rights
of the Limited Partners to appoint a successor General Partner under Section
12.2.
c. The General Partner removed from the Partnership pursuant to paragraph
(a) of this Section 5.11 shall retain its interest, if any, in the Partnership's
Profits and Losses, Cash Flow, Sale Proceeds, Refinancing Proceeds, and any
other allocations, payments or distributions hereunder to which it was entitled
as the General Partner, and from and after the effective date of the removal,
shall be a Limited Partner of the Partnership without voting rights. For all
purposes of this Agreement, the General Partner so removed shall be deemed to
have involuntarily withdrawn from the Partnership as the General Partner
effective as of the date of such removal, shall become a Limited Partner of the
Partnership, and such withdrawal shall not be deemed to have occurred in
violation of this Agreement.
5.12 NO ASSESSMENT.
No Limited Partner shall be subject to an assessment.
Except as provided in Section 9.6, no Partner with a deficit balance in its
Capital Account shall have any obligation to the Partnership or any other
Partner to restore said deficit balance. In addition, no venturer or partner of
any Partner shall have any liability to the Partnership or to any Partner for
any deficit balance in such venturer's or partner's Capital Account in the
17
<PAGE>
Partner in which it is a partner or venturer. Furthermore, a deficit Capital
Account of a Partner (or of a partner or venturer of a Partner) shall not be
deemed to be a liability of such Partner (or of such venturer or partner) or an
asset or property of the Partnership (or any Partner).
5.13 LIMITED LIABILITY.
Performance of one or more of the acts described in this Article V hereof
or elsewhere in this Partnership Agreement, including acting on any matter which
this Agreement provides is subject to the approval or disapproval of Limited
Partners, shall not in any way cause any Limited Partner to be deemed a General
Partner or impose any personal liability on any Limited Partner. No Limited
Partner or, in appropriate cases, former Limited Partner shall be liable for any
debts or obligations of the Partnership in excess of his Capital Contribution,
including any portion of such capital plus interest or any other amount which
has been returned to him and with respect to which, by the terms of the Florida
Revised Uniform Limited Partnership Act, he shall remain liable. All
undistributed Cash Flow or Sale Proceeds or Refinancing Proceeds which would
otherwise be distributed to the Limited Partners shall be available to creditors
to satisfy the debts and obligations of the Partnership until the time of actual
distribution.
All repayments of returns of capital made pursuant to this Article by
Limited Partners shall be made within ten (10) days after the General Partner
shall have repaid the share apportioned to the General Partner. Failure of any
Partner or former Partner to make repayment required under this Article shall
subject the defaulting person to payment of interest on the amount due from him
from the date of the General Partner's notice requiring such payment, at the
highest lawful rate allowed by law plus the costs and expenses,, including
reasonable attorney's fees, of collections.
The Capital Contributions of the Limited Partners shall be available for
the debts, liabilities or other obligations of the Partnership.
5.14 MEETINGS OF, OR ACTIONS BY, THE LIMITED PARTNERS.
a. Meetings of the Limited Partners to vote upon any matters as to which
the Limited Partners are authorized to take action under this Agreement may be
called at any time by the General Partner or by one or more Limited Partners
holding ten percent (10%) or more of the outstanding Units at a time and place
convenient by delivering written notice, either in person or by registered mail,
to the Limited Partners entitled to vote at such meeting to the effect that a
meeting will be held at a designated time and place, fixed by the General
Partner, convenient to the Limited Partners. However, upon receipt of a written
request either in person or by certified mail stating the purpose(s) of the
meeting the General Partner shall provide all Limited Partners within ten days
after receipt of said request, written notice (either in person or by certified
mail) of a meeting and the purpose of such meeting to be held on a date not less
than fifteen nor more than sixty days after receipt of said request and place
convenient to Limited Partners. All expenses of the meeting and notification
shall be borne by the Partnership.
b. Limited Partners shall be entitled to one (1) vote for each Unit held.
Limited Partners present in person or by proxy, holding in excess of fifty
percent (50%) of the Units, shall constitute a quorum at any meeting. Attendance
by a Limited Partner at any meeting and his voting in person shall revoke any
written proxy submitted with respect to any action proposed to be taken at such
18
<PAGE>
meeting. Any matters as to which the Limited Partners are authorized to take
action under this Agreement or under the law may be acted upon by the Limited
Partners without a meeting; and any such action shall be valid and effective as
action taken by the Limited Partners at a meeting assembled, provided that if
written consents to such action by the Limited Partners are signed by Limited
Partners who hold the number of Units required to authorize such action and that
they are delivered to the General Partner. In the event that there shall be no
General Partner, the Limited Partners may take action without a meeting by the
written consent of Limited Partners having a majority of the voting power of the
Limited Partners entitled to vote. All Partners shall be bound by actions taken
in accordance with the provisions of this Agreement at such meetings.
c. The General Partner shall be responsible for enacting all needed rules
of order for conducting all meetings and shall keep, or cause to be kept, at the
expense of the Partnership, an accurate record of all matters discussed and
action taken at all meetings or by written consent. The records of all said
meetings and written consent shall be maintained at the principal place of
business of the Partnership and shall be available for inspection by any Partner
at reasonable times.
5.15 AMENDMENTS.
a. This Agreement may be amended by the General Partner without any
additional consent of the Limited Partners whenever:
(i) There is a change in the name of the Partnership or the amount or
character of the contribution of any Partner (including withdrawal or
reduction) pursuant to this Agreement;
(ii) A Person is admitted as a Substitute Limited Partner;
(iii) There is an ambiguous, false, or erroneous statement in the
Agreement, as determined by the General Partner in its sole and absolute
discretion.
(iv) An amendment is required because of a judicial decision;
(v) In the opinion of the Auditor or counsel to the Partnership, it is
necessary or appropriate to add, correct, modify or supplement any
provision hereof to satisfy a requirement of the Code under Section 704 and
amendment does not reduce the obligations of the General Partner;
(vi) An amendment is required to correct obvious errors;
(vii) The amendment adds to the representations, duties or obligations
of the General Partner or surrenders any right or power granted to the
General Partner herein for the benefit of the Limited Partners; or
(viii) The amendment changes any provision required to be changed by
the staff of the Securities and Exchange Commission or other federal
agency, or by a state securities commissioner or similar "Blue Sky"
official, which change is deemed by such commissioner, agency, or official
to be for the benefit or protection of Limited Partners.
The General Partner will be fully authorized to act pursuant to the powers
of attorney in carrying out their rights and duties under this Section 5.15.
19
<PAGE>
b. Except as provided in Section 5.15(a), amendments will only be made with
the approval of the General Partner and Majority Vote of Limited Partners. No
amendment will be made under this Section 5.15 which would adversely affect the
Federal income tax treatment described to the Limited Partners in the Tax
opinion to be delivered to the Partnership or in effect convert a Limited
Partner into a General Partner or otherwise increase or extend the financial
obligations or liability of the Limited Partners or change the aggregate
percentage to the General Partner and the Limited Partners as a group of the
allocation of Taxable Income or Tax Loss and Distribution of Cash Flow, Sale
Proceeds or Refinancing Proceedings, from that disclosed to the Limited Partners
in the Memorandum (except to the extent additional Limited Partners are admitted
to the Partnership in accordance with this Agreement) without full disclosure to
the Partners and unless all of the Partners consent thereto.
5.16 NO THIRD PARTY RIGHTS.
The right of the Partnership to require any additional contributions or
loans under the terms of this Agreement including, but not limited to, the terms
of this Article V, shall not be construed as conferring any rights or benefits
to or upon any party not a party to this Agreement, including, but not limited
to, any holder of any obligations secured by a mortgage, deed of trust, security
interest or other lien or encumbrance upon or affecting the Partnership or any
interest of a Limited Partner therein or the Network or improvements on the
Network, or any part thereof or interest therein; and such provisions may be
amended at any time and from time to time without the approval or consent of
such other person.
ARTICLE VI
DEVELOPMENT, MARKETING AND FINANCING
6.1 DEVELOPMENT AND MARKETING.
The General Partner hereby is specifically authorized to enter into a
Management Agreement which shall incorporate such terms and conditions as are
more fully set forth in the Memorandum. 6.2 Funds for Development.
The funds for the development of the Network shall be provided by the
Limited Partnership from the proceeds of the Offering.
ARTICLE VII
RIGHTS OF LIMITED PARTNERS
7.1 NO RIGHT TO PARTICIPATE IN MANAGEMENT.
Limited Partners shall have no right to, nor shall they take any part in or
interfere in any manner with the conduct, control or management of the Limited
Partnership's business and shall have no right or authority to act for or bind
the Limited Partnership, said powers being vested solely and exclusively in the
General Partner. Except as otherwise expressly provided herein, the Limited
Partners shall have only those rights granted to limited partners pursuant to
the Act.
20
<PAGE>
7.2 RESTRICTIONS ON LIMITED PARTNERS.
No Limited Partner shall have the right or power to:
a. Withdraw or reduce his or its Capital Contribution to the Limited
Partnership;
b. Cause the termination and dissolution of the Limited Partnership by
court decree or otherwise;
c. Have priority over any other Limited Partner either as to the
return of Capital Contributions or as to distributions. Other than upon the
termination and dissolution of the Limited Partnership as provided by this
Agreement, there has been no time agreed upon when the Capital Contribution
of each Limited Partner may be returned; or
d. Bring an action for partition against the Limited Partnership.
ARTICLE VIII
TRANSFER OF PARTNERSHIP INTERESTS
8.1 WITHDRAWAL OF PARTNERS.
Except as otherwise provided herein or by the laws of the State of Florida,
no Partner may resign, withdraw or retire voluntarily from the Limited
Partnership or sell, transfer, assign or otherwise dispose of his or its
interest in the Limited Partnership.
8.2 ADDITIONAL LIMITED PARTNERS.
Except as otherwise provided herein, after the completion of the Offering
and the closing thereunder, the General Partner shall not have the right to
admit additional Limited Partners to the Limited Partnership.
8.3 TRANSFERS, RESIGNATION OR WITHDRAWAL BY GENERAL PARTNER.
Except as otherwise provided herein, the General Partner shall not have the
right to sell, assign, pledge, transfer, hypothecate or otherwise dispose of all
or any part of its interests in and to the Limited Partnership, its capital,
profits and losses, or to resign or withdraw as General Partner without a
Majority Vote. If during such period the General Partner attempts to make such a
sale, assignment, transfer or other disposition of its interest in the Limited
Partnership or any part thereof in violation of the provisions of this
Agreement, the other Partners, or any one of them, shall, in addition to all
rights and remedies which they may have in law or in equity, be entitled to a
decree or order restraining and enjoining such attempted sale, assignment,
transfer, or other disposition and the General Partner shall not plead in
defense thereto that there would be an adequate remedy at law, it being
recognized and agreed that the injury and damage resulting from such a breach
would be impossible to measure monetarily.
8.4 TRANSFERS BY LIMITED PARTNERS.
Each Limited Partner shall not, sell, assign, transfer, pledge,
hypothecate, grant a security interest in, encumber or in any other manner
21
<PAGE>
dispose of all or any part of his or its interest in and to the Limited
Partnership, its capital, profits and losses, without (a) the prior written
consent of the General Partner which can be withheld in its sole and absolute
discretion; (b) statement from the transferee of such Limited Partner's interest
that the transferee intends to hold such interest for investment purposes, and
(c) an opinion of his or it's counsel, in form and substance reasonably
acceptable to the General Partner, to the effect that such transfer shall not
(1) violate or cause the Limited Partnership or the General Partner to violate
any applicable Federal, state or local securities law, regulation or
interpretive ruling, and (2) shall not cause a termination of the Limited
Partnership for the purposes of any applicable Federal, state or local tax law,
regulation or interpretive ruling. In the event that any Limited Partner at any
time attempts to make a sale, assignment, transfer, pledge, hypothecation,
mortgage, encumbrance or other disposition of his or its interest in and to the
Limited Partnership, its capital, profits and losses, or any part thereof, in
violation of the provisions of this Agreement, the other Partners or any one of
them, shall in addition to all other rights and remedies which they may have in
law, in equity or under the provisions of this Agreement, be entitled to a
decree or order restraining and enjoining such attempted sale, assignment,
transfer, pledge, hypothecation, mortgage, encumbrance or other disposition, and
the offending Partner shall not plead in defense thereto that there would be an
adequate remedy at law, it being recognized and agreed that the injury and
damage resulting from such a breach would be impossible to measure monetarily.
Any transfer made in violation of the provisions of this Agreement shall be void
ab initio. Further, no Limited Partner may sell, assign, transfer, pledge,
hypothecate, grant a security interest in, encumber or in any other manner
dispose of all or any part of his or its interest in the Partnership, its
capital, profits or losses except by delivery of the Unit Certificate
representing his interest in the Partnership as specified in Section 14.22.
8.5 WITHDRAWAL, DISSOLUTION OR BANKRUPTCY OF THE GENERAL PARTNER.
The withdrawal, dissolution or Bankruptcy of the General Partner shall
cause a dissolution of the Limited Partnership unless the remaining Partners
exercise the right set forth in Section 12.2 hereof. Except as provided in
Section 5.11, the entire interest of the withdrawn, dissolved or Bankrupt
General Partner in and to the Limited Partnership, its capital profits and
losses shall be reconstituted into an equivalent Limited Partner interest and
the legal representatives or successors-in-interest, as the case may be, of the
former General Partner shall be admitted to the Limited Partnership as a
Substituted Limited Partner upon compliance with Section 8.7 hereof; provided,
however, that in the event of the Bankruptcy of the General Partner, if such
representative or successor-in-interest shall not comply with Section 8.7
hereof, then the interest of the Bankrupt General Partner shall be dealt with in
accordance with applicable law at the earliest practicable time. Anything herein
contained to the contrary notwithstanding, such reconstituted interest shall not
affect the rights of the Limited Partners as to distributions or return of their
Capital Contributions or otherwise. Further, for a period of six months
following the withdrawal, dissolution or bankruptcy of the General Partner,
assuming the Limited Partners exercise their rights to continue the business of
the Partnership, the Partnership shall have the option to purchase the
reconstituted interest of the General Partner at fair market value based upon a
mutually agreeable M.A.I. appraisal of the Partnership's assets, including the
Network assuming the Network were sold at such price, thereby giving due effect
to the General Partner's residual 1% interest in proceeds of sale or
refinancing. The purchase price must be paid entirely in cash. Except as
22
<PAGE>
otherwise provided in this Agreement, or by the Act, an additional General
Partner shall be admitted to the Limited Partnership by Majority Vote of the
Limited Partners.
8.6 DEATH, ADJUDICATION OF INSANITY, DISSOLUTION OR BANKRUPTCY OF A LIMITED
PARTNER.
The death, adjudication of insanity, dissolution or bankruptcy of a Limited
Partner shall not cause a dissolution of the Limited Partnership.
8.7 SUBSTITUTED LIMITED PARTNERS.
Anything herein contained to the contrary notwithstanding,
a. No successor-in-interest of a Limited Partner and no assignee or
transferee of all or any part of a Limited Partner's interest in and to the
Limited Partnership, its capital, profits and losses, shall be admitted to
the Limited Partnership as a limited partner except upon
(i) submitting to the General Partner a duly executed and
acknowledged counterpart of the instrument or instruments making such
transfer, together with such other instrument or instruments,
including, but not limited to, a counterpart of this Agreement as it
then may have been amended, signifying such transferee's agreement to
be bound by all of the provisions of the Limited Partnership,
including, but not limited to Sections 3.9 and 3.10 and, the
restrictions upon transfers of interests therein and thereto, all of
the foregoing in such form and substance as shall be reasonably
satisfactory to the General Partner;
(ii) obtaining the General Partner's consent thereto which may be
withheld in its sole and absolute discretion; and
(iii) agreeing to bear all costs and expenses, including legal
fees of the Limited Partnership, incurred in effecting such
substitution.
Upon such transferee's compliance with the foregoing provisions, each
of the Partners shall take all actions reasonably required to effectuate
the recognition of the effectiveness of such transfer and the admission of
such transferee to the Limited Partnership as a Substituted Limited Partner
including, but not limited to, transferring such interest in and to the
Limited Partnership, its capital, profits and losses upon the books thereof
and executing, acknowledging and causing to be filed any necessary or
desirable amendment to this Agreement and the Certificate of Limited
Partnership.
b. The General Partner shall not consent to the assignment and
transfer of any Unit or the admission of any such assignee or transferee as
a substituted partner if such assignment, transfer or admission:
(i) would jeopardize the status of the Limited Partnership as a
partnership for Federal income tax purposes;
(ii) would cause a termination of the Limited Partnership within
the meaning of Section 708(b) of the Code;
23
<PAGE>
(iii) would violate, or cause the Limited Partnership to violate,
any applicable law or governmental rule or regulation; or
(iv) in the sole discretion of the General Partner would not be
in the best interest of the Partnership.
c. No assignment to a non-resident alien, minor or incompetent shall
be effective in any respect.
8.8 NON-COMPLYING ASSIGNMENTS.
Any assignment, sale, exchange or other transfer in contravention of any of
the provisions of this Article VIII shall be void and ineffectual, and shall not
bind or be recognized by the Limited Partnership.
8.9 CONSENT TO ADMISSION.
By executing or adopting this Agreement, each Limited Partner hereby
consents to the admission of Substituted Limited Partners by the General Partner
and to any assignee of his or its Unit becoming a Substituted Limited Partner.
8.10 OBLIGATIONS OF SUCCESSORS.
Any person who acquires an interest in the Limited Partnership by
assignment or is admitted to the Limited Partnership as a Substituted Limited
Partner shall be subject to and bound by all the provisions of this Agreement as
if originally a party to this Agreement.
8.11 ADMISSION OF SUCCESSOR OR ADDITIONAL GENERAL PARTNERS.
With the consent of the Limited Partners holding at least a majority of the
then outstanding Units, the General Partner may withdraw and designate one or
more persons to be its successor General Partner or at any time to be an
additional General Partner, in each case with such participation in such General
Partner's interest as the General Partner and such successor or additional
General Partner may agree upon, provided that the interests of the Limited
Partners in the Limited Partnership shall not be affected thereby. In the event
of the addition or substitution of the General Partner in accordance with the
provisions of this Section 8.11, the General Partner shall execute, file and
record with the appropriate governmental agencies such documents (including
amendments to this Agreement) as are required to reflect the substitution or
admission of such substituted or additional General Partner. Except as
hereinabove expressly provided, no additional General Partners shall be admitted
to the Limited Partnership.
8.12 NO PUBLIC TRADING OF UNITS.
No Units may be traded on an established securities market or readily
tradable on a secondary market (or the equivalent thereof) as such terms are
utilized in Code (0)(0) 7704(b), or any Regulations promulgated thereto or
legislative history in connection therewith. Any such trade will be deemed void
ab initio and will not be recognized by the General Partner, the Partnership or
the depository or any other agent of the Partnership or the General Partner.
24
<PAGE>
ARTICLE IX
ALLOCATION OF INCOME, LOSS AND DISTRIBUTIONS
9.1 GENERAL APPORTIONMENT PROVISIONS.
a. Except as provided in Section 9.1e or as may otherwise be provided in
this Article IX, during any month before the Closing Date (including the month
in which the Closing Date occurs), and thereafter, that portion of Taxable
Profits, Tax Loss and Non-recourse Deductions, tax preference items and tax
credits, if any ("other Partnership tax items"), allocable to the Limited
Partners as a group with respect to any month shall be allocated among them as
of the last day of each month of the Partnership's fiscal year in the ratio that
the number of Partnership Units owned by each Limited Partner bears to the total
number of Partnership Units owned by all Limited Partners as of that date.
During any calendar month prior to the Closing Date and including the month in
which the Closing Date occurs, a Limited Partner who is admitted to the
Partnership on any day in such month shall be deemed to have been admitted as of
the last day of such calendar month.
b. Any such allocations made to a particular class of Limited Partners
shall be made on the same basis in accordance with the ratio that the number of
Limited Partnership Units owned by each Limited Partner in such class bears to
the total number of Partnership Units owned by all Limited Partners in such
class.
c. That portion of the Partnership Taxable Profits, Tax Loss and other
Partnership tax items allocated among the Partners during any taxable year in
which there is a change in the percentage of such items allocated among the
Partners or any class of Partners shall be allocated so as to take into account
the varying interests of the Partners in such items during such taxable year;
that is, by taking the amount of such items for the entire taxable year and
prorating such items on a monthly basis among the Partners in accordance with
their varying percentages during such year. No interim closing of the
Partnership's books shall be required.
d. In the case of a transfer of Partnership Units:
(i) a substitute Limited Partner will be recognized as owning
transferred Partnership Units; and
(ii) an Assignee will be recognized as being entitled to receive
Distributions and allocations of Tax Profits, Tax Loss and other
Partnership tax items attributable to the assigned Partnership Units in the
same manner as a substitute Limited Partner would be so entitled with
respect to transferred Partnership Units, at the time determined in
accordance with the following:
Taxable Profits or Tax Losses from current operations for any year will be
allocated between a transferor and a transferee based upon the number of days
during the calendar year that each was recognized as the holder of a Unit,
without regard to whether Partnership operation during particular periods of
such year produced profit or loss. Cash distribution of Sale Proceeds and
Refinancing Proceeds, if any, arising from the sale or refinancing of a Network
will be distributed, and all related Taxable Profits or Tax Losses will be
allocated, to the persons recognized as holder of the Unit on the date on which
the sale or refinancing occurred. For this purpose, transfers will be recognized
25
<PAGE>
as of the date specified by the transferor and the transferee in the instrument
of assignment or, if no date is specified, the date of the last acknowledgment
of such instrument. The date of transfer and related matters shall be as set
forth in the Memorandum.
Neither the Partnership nor any General Partner shall incur any liability
for making allocation and distribution in accordance with the provisions of this
Article V, notwithstanding any General Partner or the Partnership has knowledge
of any transfer of ownership of any Unit.
e. Notwithstanding anything to the contrary herein, the General
Partner, after 60 days prior notice to the Limited Partners, but without
the vote or consent of any of the Limited Partners, may:
(i) adopt a convention other than a "record date" convention for
determining the recognition of the Limited Partners entitled to
Distributions that the General Partner, in its sole discretion,
determine is reasonable; and
(ii) allocate Taxable Profits, Tax Loss and other Partnership tax
items among the Limited Partners during the fiscal year of the
Partnership in a manner other than that set forth in this Section 9.1
that the General Partner, in its sole discretion, determines (a)
satisfies the requirements of Section 706 of the Code and any
Regulations promulgated thereunder, and (b) is consistent with the
Units owned by them.
f. With respect to Taxable Profits which results from discharge,
cancellation or forgiveness of indebtedness owed by the Partnership or
secured by Partnership assets, to the extent such Profits result from
deductions taken by the Partnership for depreciation or amortization it
shall be allocated to the Partners to whom such depreciation or
amortization was allocated and among the Partners in the same proportion in
which such depreciation or amortization was allocated among the Partners.
9.2 DISTRIBUTIONS.
a. All Distributions are subject to the payment of the operating expenses
of the Partnership and to the maintenance of the reserves in amounts determined
appropriate by the General Partner in its sole discretion. Such determinations
shall be binding upon the Partnership. Distributions prior to the Closing Date
shall be made 99% to Datalinc and 1% to the General Partner. Distributions after
that date shall be made as provided hereinafter.
b. Distributions from Operations. Distributions of Cash Flow from
operations or from other sources, as, when and to the extent available with
respect to each fiscal year of the Partnership or any portion thereof, shall be
distributed 100% to the Series 100 Limited Partners until such Limited Partners
have received Distributions of any type in an amount equal to their total cash
Capital Contributions plus the aggregate Preferred Return, if and when such
Preferred Return is payable; next, 100% to the Series EA Limited Partners until
such Limited Partners have received Distributions of any type in an amount equal
to 25% of the amount distributed pursuant to the preceding clause, excluding any
Distribution of the Preferred Return; next, 100% to the Series 200 Limited
Partners until such Limited Partners have received Distributions of any type in
an amount equal to their total cash Capital Contributions; next, 100% to the
Series 300 Limited Partners until such Limited Partners have received
26
<PAGE>
Distributions of any type in an amount equal to their total cash Capital
Contributions; next, 100% to the Datalinc Limited Partner until such Limited
Partner has received Distributions of any type in an amount equal to the
following amount: the aggregate total cash Capital Contributions of Series 100,
Series 200, and Series 300 Limited Partners divided by the aggregate percentage
interests of the Limited Partners in the Final Clause multiplied by 73.052%,
subject to increase with any unpurchased Series 300 Units or Managing Dealer
Units percentage interest reallocated to all Limited Partners, or the Datalinc
Limited Partner, respectively, as specified below, and subject to decrease by
any amount distributed pursuant to the Series 100 Preferred Return and Section
9.4 or to the ILC Limited Partner; next, 100% to the Managing Dealer Limited
Partner until such Limited Partner has received Distributions of any type in an
amount equal to the following amount: the aggregate total cash Capital
Contributions of Series 100, EA, 200, and 300 Limited Partners divided by the
aggregate percentage interests of the Series 100, EA, 200, and 300 Limited
Partners in the Final Clause multiplied by 2.171%, or such lesser percentage as
is actually owned by the Managing Dealer Limited Partners; next, 100% to the
General Partner until such General Partner has received Distributions of any
type in an amount equal to the following amount: the aggregate total cash
Capital Contributions of Series 100, EA, 200, and 300 Limited Partners divided
by the aggregate percentage interests of the Series 100, EA, 200, and 300
Limited Partners in the Final Clause multiplied by 1%; and thereafter (the
following being the "Final Clause"), assuming the sale of all Series 300 Limited
Partnership Units, 2.013% to the Series 100 Limited Partners, .503% to the EA
Limited Partners, 10.832% to the Series 200 Limited Partners, 9.524% to the
Series 300 Limited Partners, a maximum of 2.171% to the Managing Dealer Limited
Partners, such percentage as the ILC Limited Partner is entitled to pursuant to
the agreement attached hereto as Exhibit C (the oILC Distributiono), 1% to the
General Partner and 73.052% to Datalinc as Limited Partner. If any Series 300
Units have not been acquired, all Allocations or Distributions otherwise to be
made or paid to such Limited Partners shall be made or paid to all other Limited
Partners, pro-rata in accordance with their interest in the Final Clause. If the
Managing Dealer Units or ILC Units have not been acquired, all Allocations or
Distributions otherwise to be made or paid to the Managing Dealer Limited
Partner or ILC Limited Partner shall be made or paid to Datalinc.
Series 100 Limited Partners will receive a 15% per annum cumulative,
non-compounded Preferred Return on their Adjusted Capital Investment, commencing
the date of closing of the Series 100 Unit offering. However, the Preferred
Return is only payable if within three years from the Closing Date of the Series
100 Unit offering the Partnership (or a successor entity thereto with
essentially the same business) has not done either of the following (a "Cut-Off
Event"): a. Made aggregate Distributions of any kind to such Partners in an
amount equal to their Adjusted Capital Investment, or b. Has not completed a
successful public offering. If a Cut-Off Event has occurred, the Partnership's
obligation to make a Preferred Return to the Series 100 Limited Partners will
terminate. If the Partnership has made a successful public offering by such
date, but the market value of securities owned by the Series 100 Limited
Partners if less than their Adjusted Capital Investment based upon the public
offering price of such securities (the "Difference"), the Series 100 Limited
Partners will be issued securities with a first priority dividend and other
payment right over all other securities holders equal to the Difference. The
term "Adjusted Capital Investment" means total cash Contributions of a Limited
Partner to the Partnership less Distributions of any kind from the Partnership.
27
<PAGE>
c. Distributions of Sale Proceeds and Refinancing Proceeds. Subject to
Sections 9.2(e) and 9.4 below, Sale Proceeds and Refinancing Proceeds shall be
distributed on a cumulative basis within 60 days after the Record Date for such
Distributions, shall be distributed 100% to the Series 100 Limited Partners
until such Limited Partners have received Distributions of any type in an amount
equal to their total cash Capital Contributions plus the aggregate Preferred
Return, if and when such Preferred Return is payable; next, 100% to the Series
EA Limited Partners until such Limited Partners have received Distributions of
any type in an amount equal 25% of the amount distributed pursuant to the
preceding clause, excluding any Distribution of the Preferred Return; next, 100%
to the Series 200 Limited Partners until such Limited Partners have received
Distributions of any type in an amount equal to their total cash Capital
Contributions; next, after taking into account Section 9.4 below, 100% to the
Series 300 Limited Partners until such Limited Partners have received
Distributions of any type in an amount equal to their total cash Capital
Contributions (provided that ; next, 100% to the Datalinc Limited Partner until
such Limited Partner has received Distributions of any type in an amount equal
to the following amount: the aggregate total cash Capital Contributions of
Series 100, Series 200, and Series 300 Limited Partners divided by the aggregate
percentage interests of the Limited Partners in the Final Clause multiplied by
73.052%, subject to increase with any unpurchased Series 300 Units or Managing
Dealer Units percentage interest reallocated to all Limited Partners, or the
Datalinc Limited Partner, respectively, as specified below, and subject to
decrease by any amount distributed pursuant to the Series 100 Preferred Return
and Section 9.4 and any ILC Distribution; next, 100% to the Managing Dealer
Limited Partner until such Limited Partner has received Distributions of any
type in an amount equal to the following amount: the aggregate total cash
Capital Contributions of Series 100, EA, 200, and 300 Limited Partners divided
by the aggregate percentage interests of the Series 100, EA, 200, and 300
Limited Partners in the Final Clause multiplied by 2.171%, or such lesser
percentage as is actually owned by the Managing Dealer Limited Partners; next,
100% to the General Partner until such General Partner has received
Distributions of any type in an amount equal to the following amount: the
aggregate total cash Capital Contributions of Series 100, EA, 200, and 300
Limited Partners divided by the aggregate percentage interests of the Series
100, EA, 200, and 300 Limited Partners in the Final Clause multiplied by 1%; and
thereafter (the following being the "Final Clause"), assuming the sale of all
Series 300 Limited Partnership Units, 2.013% to the Series 100 Limited Partners,
.503% to the EA Limited Partners, 10.832% to the Series 200 Limited Partners,
9.524% to the Series 300 Limited Partners, a maximum of 2.171% to the Managing
Dealer Limited Partners, a maximum of .01% to the MIP Special Limited Partners,
such percentage as the ILC Limited Partner is entitled to pursuant to the
agreement attached hereto as Exhibit C (the oILC Distributiono), 1% to the
General Partner and 73.042% to Datalinc as Limited Partner. If any Series 300
Units have not been acquired, all Allocations or Distributions otherwise to be
made or paid to such Limited Partners shall be made or paid to all other Limited
Partners, pro-rata in accordance with their interest in the Final Clause. If the
Managing Dealer Units, ILC Units, or MIP Special Limited Partner Units have not
been acquired, all Allocations or Distributions otherwise to be made or paid to
the Managing Dealer Limited Partner, the ILC Limited Partner and the MIP Special
Limited Partner shall be made or paid to Datalinc.
Series 100 Limited Partners will receive a 15% per annum cumulative,
non-compounded Preferred Return on their Adjusted Capital Investment, commencing
the date of closing of the Series 100 Unit offering. However, the Preferred
Return is only payable if within three years from the Closing Date of the Series
100 Unit offering the Partnership (or a successor entity thereto with
28
<PAGE>
essentially the same business) has not done either of the following (a "Cut-Off
Event"): a. Made aggregate Distributions of any kind to such Partners in an
amount equal to their Adjusted Capital Investment, or b. Has not completed a
successful public offering. If a Cut-Off Event has occurred, the Partnership's
obligation to make a Preferred Return to the Series 100 Limited Partners will
terminate. If the Partnership has made a successful public offering by such
date, but the market value of securities owned by the Series 100 Limited
Partners if less than their Adjusted Capital Investment based upon the public
offering price of such securities (the "Difference"), the Series 100 Limited
Partners will be issued securities with a first priority dividend and other
payment right over all other securities holders equal to the Difference. The
term "Adjusted Capital Investment" means total cash Contributions of a Limited
Partner to the Partnership less Distributions of any kind from the Partnership.
For purposes of determining the Cash Flow and Net Proceeds of Sales and
Refinancings to which the Partners are entitled, all prior Distributions of Cash
Available from operations and other sources and Net Proceeds of Sales and
Refinancings shall be considered as of the date of the proposed Distribution.
d. Repurchase of Series 200 Units. Series 200 Limited Partners have the
option to require the Partnership and/or Datalinc to repurchase any or all of
their Series 200 Units on December 31, 2000, if they have not received
Distributions of any type in an amount equal to their total cash Capital
Contributions on or before such date, in an amount equal to their Adjusted
Capital Investment on such date.
e. Zeroing Out the Capital Accounts. Notwithstanding the preceding
provisions of this Section 9.2, when the Partnership is wound up and dissolved
pursuant to Article XII and all of its remaining assets are to be distributed,
all items of income, gain, loss and deduction shall first be allocated to the
Partners' Capital Accounts under Sections 9.3 and 9.4, and other credits and
deductions to the Partners' Capital Accounts shall be taken before the final
Distribution is made. The final Distribution, when made, shall be made to the
Partners in accordance with and in an amount equal to their positive Capital
Account balances pursuant to Sections 9.4 and 12.3, thereby adjusting each
Partner's Capital Account to zero.
f. General and Limited Partner Priorities. Distributions to the General
Partner provided for in this Article IX shall be made at the same time as
Distributions are made to the Limited Partners.
g. Compensation Not to be Deemed Distributions. Any compensation paid to
the General Partner as set forth in the Memorandum shall not be deemed to be
Distributions for purposes of Article IX of this Partnership Agreement,
regardless of how such Distributions are characterized for federal income tax
purposes. As used in this subsection, the term "Compensation" shall mean any
monies paid to the General Partner and its Affiliates which are deductible for
federal income tax purposes.
9.3 ALLOCATION OF NET INCOME, GROSS INCOME, NET LOSS, NON-RECOURSE DEDUCTIONS,
AND OTHER PARTNERSHIP TAX ITEMS.
a. Taxable Profits, Tax Loss, and other Partnership tax items shall be
determined as of the end of each taxable year of the Partnership and allocated
as set forth in this Section 9.3.
29
<PAGE>
b. Prior to the Closing Date, and except as otherwise specifically
allocated pursuant to Section 9.3f hereof, all Taxable Profits, Tax Loss and
Non-recourse Deductions and other Partnership tax items shall be allocated 1% to
the General Partner and 99% to Datalinc as Limited Partner as required by the
Code. After the Closing Date, Taxable Profits, Tax Loss, Non-recourse Deductions
and other Partnership tax items shall be allocated as set forth below.
c. Taxable Profits of the Partnership not arising from a sale or
refinancing of Partnership Network shall be allocated to the Partners in
proportion to the Distributions of Cash Flow with respect to which such Taxable
Profits relate.
d. (i) Taxable Profits arising from a sale or refinancing of
Partnership Network which does not result in a "liquidation" within the
meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g) shall be
allocated to the Partners in proportion to the distributions of Net
Proceeds of Sales and Refinancing to which such Taxable Profits relate.
(ii) Taxable Profits arising from a sale or refinancing of Partnership
Network which results in a liquidation as set forth in Section 9.3(d)(i)
above shall be allocated as follows:
(a) First, to those Partners who have negative Capital Accounts
pro rata to the extent of such Partners' negative Capital Accounts;
(b) Then, to the Partners in amounts such that the positive
balance of each Partner's Capital Account is equal to the amount of
the Distributions of Net Proceeds of Sales and Refinancings to be made
to such Partner pursuant to Article 9.2(c); and
(c) 100% to the Series 100 Limited Partners until such Limited
Partners have received Distributions of any type in an amount equal to
their total cash Capital Contributions plus the aggregate Preferred
Return, if and when such Preferred Return is payable; next, 100% to
the Series EA Limited Partners until such Limited Partners have
received Distributions of any type in an amount equal to 25% of the
amount distributed pursuant to the preceding clause, excluding any
Distribution of the Preferred Return; next, 100% to the Series 200
Limited Partners until such Limited Partners have received
Distributions of any type in an amount equal to their total cash
Capital Contributions; next, 100% to the Series 300 Limited Partners
until such Limited Partners have received Distributions of any type in
an amount equal to their total cash Capital Contributions; next, 100%
to the Datalinc Limited Partner until such Limited Partner has
received Distributions of any type in an amount equal to the following
amount: the aggregate total cash Capital Contributions of Series 100,
Series 200, and Series 300 Limited Partners divided by the aggregate
percentage interests of the Limited Partners in the Final Clause
multiplied by 73.052%, subject to increase with any unpurchased Series
300 Units or Managing Dealer Units percentage interest reallocated to
all Limited Partners, or the Datalinc Limited Partner, respectively,
as specified below, and subject to decrease by any amount distributed
pursuant to the Series 100 Preferred Return and Section 9.4 or to the
ILC Limited Partner; next, 100% to the Managing Dealer Limited Partner
until such Limited Partner has received Distributions of any type in
an amount equal to the following amount: the aggregate total cash
Capital Contributions of Series 100, EA, 200, and 300 Limited Partners
30
<PAGE>
divided by the aggregate percentage interests of the Series 100, EA,
200, and 300 Limited Partners in the Final Clause multiplied by
2.171%, or such lesser percentage as is actually owned by the Managing
Dealer Limited Partners; next, 100% to the General Partner until such
General Partner has received Distributions of any type in an amount
equal to the following amount: the aggregate total cash Capital
Contributions of Series 100, EA, 200, and 300 Limited Partners divided
by the aggregate percentage interests of the Series 100, EA, 200, and
300 Limited Partners in the Final Clause multiplied by 1%; and
thereafter (the following being the "Final Clause"), assuming the sale
of all Series 300 Limited Partnership Units, 2.013% to the Series 100
Limited Partners, .503% to the EA Limited Partners, 10.832% to the
Series 200 Limited Partners, 9.524% to the Series 300 Limited
Partners, a maximum of 2.171% to the Managing Dealer Limited Partners,
such percentage as the ILC Limited Partner is entitled to pursuant to
the agreement attached hereto as Exhibit C (the oILC Distributiono),
1% to the General Partner and 73.052% to Datalinc as Limited Partner.
If any Series 300 Units have not been acquired, all Allocations or
Distributions otherwise to be made or paid to such Limited Partners
shall be made or paid to all other Limited Partners, pro-rata in
accordance with their interest in the Final Clause. If the Managing
Dealer Units or ILC Units have not been acquired, all Allocations or
Distributions otherwise to be made or paid to the Managing Dealer
Limited Partner or ILC Limited Partner shall be made or paid to
Datalinc.
Series 100 Limited Partners will receive a 15% per annum
cumulative, non-compounded Preferred Return on their Adjusted Capital
Investment, commencing the date of closing of the Series 100 Unit
offering. However, the Preferred Return is only payable if within
three years from the Closing Date of the Series 100 Unit offering the
Partnership (or a successor entity thereto with essentially the same
business) has not done either of the following (a "Cut-Off Event"): a.
Made aggregate Distributions of any kind to such Partners in an amount
equal to their Adjusted Capital Investment, or b. Has not completed a
successful public offering. If a Cut-Off Event has occurred, the
Partnership's obligation to make a Preferred Return to the Series 100
Limited Partners will terminate. If the Partnership has made a
successful public offering by such date, but the market value of
securities owned by the Series 100 Limited Partners if less than their
Adjusted Capital Investment based upon the public offering price of
such securities (the "Difference"), the Series 100 Limited Partners
will be issued securities with a first priority dividend and other
payment right over all other securities holders equal to the
Difference. The term "Adjusted Capital Investment" means total cash
Contributions of a Limited Partner to the Partnership less
Distributions of any kind from the Partnership.
If the total gain to be allocated under this Section 9.3(d)
includes any item of ordinary income arising under Code Sections 1245
or 1250, as amended, or any similar recapture provision, such items
shall be allocated among the Partners in the same amount (or ratable
proportion thereof if less) as the tax benefit which created such
recapture. If such total gain includes interest income on any deferred
sales proceeds, such interest income shall be allocated among the
Partners in the same proportion as the total gain is allocated under
this Section 9.3(d).
31
<PAGE>
For purposes of determining Capital Account balances, all
Distributions previously made as well as all other adjustments to
Capital Account balances pursuant to the definition thereof in Article
II and the other provisions of this Section 9.3 shall be taken into
account [other than an adjustment for the allocation of Taxable
Profits under this Section 9.3(d)].
If, prior to the allocation in Section 9.3(d)(ii)(b) above, a
Partner has a positive Capital Account balance ("Excess Capital
Account Balance") greater than the amount of Sales Proceeds or
Refinancing Proceeds to be distributed to such Partner resulting from
the transaction to which the allocation of such Taxable Profits
relates, then there shall be no additional allocation of Taxable
Profits to such Partner and the remaining Taxable Profits shall be
allocated to the other Partners such that their positive Capital
Account balances equals as closely as possible the amount of Sales
Proceeds or Refinancing Proceeds which would have been distributed to
such Partners if there were no Excess Capital Account Balance.
e. (i) Non-recourse Deductions and Tax Loss from a transaction not
constituting a dissolution of the Partnership as defined in Article
9.3(d)(i) shall be allocated 100% to the Series 100 Limited Partners until
such Limited Partners have received Distributions of any type in an amount
equal to their total cash Capital Contributions plus the aggregate
Preferred Return, if and when such Preferred Return is payable; next, 100%
to the Series EA Limited Partners until such Limited Partners have received
Distributions of any type in an amount equal to 25% of the amount
distributed pursuant to the preceding clause, excluding any Distribution of
the Preferred Return; next, 100% to the Series 200 Limited Partners until
such Limited Partners have received Distributions of any type in an amount
equal to their total cash Capital Contributions; next, 100% to the Series
300 Limited Partners until such Limited Partners have received
Distributions of any type in an amount equal to their total cash Capital
Contributions; next, 100% to the Datalinc Limited Partner until such
Limited Partner has received Distributions of any type in an amount equal
to the following amount: the aggregate total cash Capital Contributions of
Series 100, Series 200 Series 300 Limited Partners divided by the aggregate
percentage interests of the Limited Partners in the Final Clause multiplied
by 73.052%, subject to increase with any unpurchased Series 300 Units or
Managing Dealer Units percentage interest reallocated to all Limited
Partners, or the Datalinc Limited Partner, respectively, as specified
below, and subject to decrease by any amount distributed pursuant to the
Series 100 Preferred Return and Section 9.4 or to the ILC Limited Partner;
next, 100% to the Managing Dealer Limited Partner until such Limited
Partner has received Distributions of any type in an amount equal to the
following amount: the aggregate total cash Capital Contributions of Series
100, EA, 200, and 300 Limited Partners divided by the aggregate percentage
interests of the Series 100, EA, 200, and 300 Limited Partners in the Final
Clause multiplied by 2.171%, or such lesser percentage as is actually owned
by the Managing Dealer Limited Partners; next, 100% to the General Partner
until such General Partner has received Distributions of any type in an
amount equal to the following amount: the aggregate total cash Capital
Contributions of Series 100, EA, 200, and 300 Limited Partners divided by
the aggregate percentage interests of the Series 100, EA, 200, and 300
Limited Partners in the Final Clause multiplied by 1%; and thereafter (the
following being the "Final Clause"), assuming the sale of all Series 300
32
<PAGE>
Limited Partnership Units, 2.013% to the Series 100 Limited Partners, .503%
to the EA Limited Partners, 10.832% to the Series 200 Limited Partners,
9.524% to the Series 300 Limited Partners, a maximum of 2.171% to the
Managing Dealer Limited Partners, such percentage as the ILC Limited
Partner is entitled to pursuant to the agreement attached hereto as Exhibit
C (the oILC Distributiono), 1% to the General Partner and 73.052% to
Datalinc as Limited Partner. If any Series 300 Units have not been
acquired, all Allocations or Distributions otherwise to be made or paid to
such Limited Partners shall be made or paid to all other Limited Partners,
pro-rata in accordance with their interest in the Final Clause. If the
Managing Dealer Units or ILC Units have not been acquired, all Allocations
or Distributions otherwise to be made or paid to the Managing Dealer
Limited Partner or ILC Limited Partner shall be made or paid to Datalinc.
(ii) After giving effect to the allocations set forth in Section
9.3(f) hereof, Tax Loss from the sale or other disposition of all or
substantially all of the Network which results in a liquidation of the
Partnership (as such term is defined in Section 9.3d(i)) shall be allocated
as follows:
(a) first, among those Partners having positive Capital Accounts,
so as to bring, as nearly as possible, their Capital Accounts into,
and maintain their Capital Accounts in, the same ratios as the
Distributions that they would receive if an amount equal to the
aggregate amount of their Capital Accounts (determined prior to the
allocation of such loss), reduced (but not below zero) by such loss,
were distributed among them in the manner and order of priority
prescribed for a Distribution of Net Proceeds of Sales or Refinancings
under Section 9.2(c) hereof until no Partner has a positive Capital
Account; and
(b) 100% to the Series 100 Limited Partners until such Limited
Partners have received Distributions of any type in an amount equal to
their total cash Capital Contributions plus the aggregate Preferred
Return, if and when such Preferred Return is payable; next, 100% to
the Series EA Limited Partners until such Limited Partners have
received Distributions of any type in an amount equal to 25% of the
amount distributed pursuant to the preceding clause, excluding any
Distribution of the Preferred Return; next, 100% to the Series 200
Limited Partners until such Limited Partners have received
Distributions of any type in an amount equal to their total cash
Capital Contributions; next, 100% to the Series 300 Limited Partners
until such Limited Partners have received Distributions of any type in
an amount equal to their total cash Capital Contributions; next, 100%
to the Datalinc Limited Partner until such Limited Partner has
received Distributions of any type in an amount equal to the following
amount: the aggregate total cash Capital Contributions of Series 100,
Series 200, and Series 300 Limited Partners divided by the aggregate
percentage interests of the Limited Partners in the Final Clause
multiplied by 73.052%, subject to increase with any unpurchased Series
300 Units or Managing Dealer Units percentage interest reallocated to
all Limited Partners, or the Datalinc Limited Partner, respectively,
as specified below, and subject to decrease by any amount distributed
pursuant to the Series 100 Preferred Return and Section 9.4 or to the
ILC Limited Partner; next, 100% to the Managing Dealer Limited Partner
until such Limited Partner has received Distributions of any type in
33
<PAGE>
an amount equal to the following amount: the aggregate total cash
Capital Contributions of Series 100, EA, 200, and 300 Limited Partners
divided by the aggregate percentage interests of the Series 100, EA,
200, and 300 Limited Partners in the Final Clause multiplied by
2.171%, or such lesser percentage as is actually owned by the Managing
Dealer Limited Partners; next, 100% to the General Partner until such
General Partner has received Distributions of any type in an amount
equal to the following amount: the aggregate total cash Capital
Contributions of Series 100, EA, 200, and 300 Limited Partners divided
by the aggregate percentage interests of the Series 100, EA, 200, and
300 Limited Partners in the Final Clause multiplied by 1%; and
thereafter (the following being the "Final Clause"), assuming the sale
of all Series 300 Limited Partnership Units, 2.013% to the Series 100
Limited Partners, .503% to the EA Limited Partners, 10.832% to the
Series 200 Limited Partners, 9.524% to the Series 300 Limited
Partners, a maximum of 2.171% to the Managing Dealer Limited Partners,
such percentage as the ILC Limited Partner is entitled to pursuant to
the agreement attached hereto as Exhibit C (the oILC Distributiono),
1% to the General Partner and 73.052% to Datalinc as Limited Partner.
If any Series 300 Units have not been acquired, all Allocations or
Distributions otherwise to be made or paid to such Limited Partners
shall be made or paid to all other Limited Partners, pro-rata in
accordance with their interest in the Final Clause. If the Managing
Dealer Units or ILC Units have not been acquired, all Allocations or
Distributions otherwise to be made or paid to the Managing Dealer
Limited Partner or ILC Limited Partner shall be made or paid to
Datalinc.
f. the following special allocation rules shall apply notwithstanding
anything to the contrary in this Section 9.3:
(i) Organization and Offering Expenses. The Capital Account of
each Limited Partner shall be charged with the sales commissions which
are part of Organization and offering Expenses incurred with respect
to his Partnership Units. Syndication Expenses for any Partnership
fiscal year or other period shall be specifically allocated to the
Limited Partners in proportion to the Partnership Units purchased by
them in the offering. In the event the General Partner determine that
such result is not likely to be achieved through future allocations of
Syndication Expenses, the General Partner may specially allocate
Taxable Profits or Tax Loss so as to achieve the same effect on the
Capital Accounts of the Limited Partners;
(ii) Non-recourse Deductions Attributable to Partner Loans. The
loans, if any, made by the Partners to the Partnership pursuant to the
provisions of this Partnership Agreement, will be non-recourse loans
("Partner Non-recourse Debt"). Non-recourse Deductions attributable to
any such Partner Non-recourse Debt must be allocated to the Partner
who has made the loan because such Partner bears the economic risk of
loss for such loan. The amount of Non-recourse Deductions so allocated
will equal the excess, if any, of the amount of Minimum Gain
attributable to such Partner Non-recourse Debt, over the aggregate
amount of any distributions during such year to the Partner who bears
the risk of loss for such debt of proceeds of such debt that are
allocable to an increase in the Minimum Gain attributable to such
debt.
34
<PAGE>
(iii) Excess Loss Reallocation. if any allocation of Tax Loss or
Non-recourse Deductions allocable to a Limited Partner (a) would
reduce such Limited Partner's Capital Account balance then below zero
or (b) would increase the negative balance in such Limited Partner's
Capital Account at a time when another Limited Partner has a positive
Capital Account balance, then to the extent such allocation would
cause the negative Capital Account balance of such Limited Partner
(determined after taking into account all prior Distributions and all
prior allocations of Taxable Profits, Tax Loss and Non-recourse
Deductions), to exceed such Limited Partner's share of the
Partnership's Minimum Gain, at the close of the fiscal period in
respect of which the Tax Loss or Non-recourse Deductions, as the case
may be, is to be allocated, such excess shall be reallocated as
follows: (x) first, in the case of Tax Loss, pro rata to all Limited
Partners having positive Capital Account balances to the extent of and
in proportion to their respective Capital Account balances until such
Capital Account balances are reduced to zero and (y) second, in the
case of Non-recourse Deductions, pro rata to all Limited Partners
having positive Capital Account balances to the extent of and in
proportion to their respective Capital Account balances until such
Capital Account balances are reduced to zero. However, in no event
shall there be a reallocation of any item of income, gain, loss or
deduction allocated among the Limited partners pursuant to this
Partnership Agreement for prior years.
In the event that there are no Limited partners with positive
balances in their Capital Accounts, such Tax Loss and/or Non-recourse
Deductions shall instead be allocated to the General Partner, to the
extent permitted by the Regulations under Section 704(b) of the Code,
or if not so permitted, then such Tax Loss and/or Non-recourse
Deductions shall be allocated as otherwise required by such
Regulations. In computing a Partner's Capital Account balance for the
purposes of this subsection f(iii), the adjustment set out in
subsection f(viii) shall apply;
(iv) General Partner Gross Income Allocations. To the extent that
Tax Loss or Non-recourse Deductions are allocated to the General
Partner under Section 9.3f(iii), then items of Partnership gross
income shall be specifically allocated to such General Partner in the
amount of such Tax Loss or Non-recourse Deductions as quickly as
possible;
(v) Qualified Income Offset. Except as otherwise provided in (vi)
of this Section 9.3f, in the event any Partner receives or is
allocated, as the case may be, any Qualified Income Offset Items which
cause or increase a deficit balance in the Capital Account of such
Partner in excess of such Partner's share of the Partnership's Minimum
Gain and following the allocations in (vi) of this Section 9.3f, then
items of Partnership Gross Income shall be specifically allocated to
such Partner in an amount and manner sufficient to eliminate, to the
extent required by the Regulations, the deficit balance in such
Partner's Capital Account created by such Qualified Income Offset
Items as quickly as possible. Gross Income shall be allocated among
such partners in the proportion that the deficit balances attributable
to the Qualified Income Offset Items of each of them bears to the
deficit balance so attributable to all of them. This Section 9.3f(v)
35
<PAGE>
is intended to constitute a "qualified income offset" within the
meaning of Section 1.704 l(b)(2)(ii)(d) of the Regulations and shall
be interpreted consistently therewith;
(vi) Minimum Gain Chargeback. Notwithstanding any other
provisions of this Section 9.3f, if there is a net decrease in Minimum
Gain during any Partnership fiscal year, each partner must be
allocated items of income and gain for such year in proportion to, and
to the extent of, an amount equal to the greater of (i) the portion of
such partner's share of the net decrease in partnership Minimum Gain
during such year that is allocable to the disposition of the
Partnership Property subject to non-recourse liabilities of the
Partnership; or (ii) the deficit balance in such partner's capital
account at the end of such year determined without regard to any
allocation of partnership items that would otherwise be allocated for
such year and excluding the portion of such deficit balances that must
be restored to the Partnership upon liquidation.
Allocations and the items to be allocated under this Section
9.3f(vi) shall be made and determined in accordance with Section
1.704-1T(b)(4)(iv) of the Regulations. This Section 9.3f(vi) is
intended to constitute a "minimum gain chargeback" within the meaning
of Section 1.704-1T(b)(4)(iv)(e) of the Regulations and shall be
interpreted consistently therewith;
(vii) Subject only to Section 9.3f (i) through (vi) in no event
shall the General Partner be allocated less than 1% of Taxable Profits
and Tax Loss of the Partnership (and each item of Partnership income,
gain, loss and deduction included therein) under this Section 9.3;
(viii) For purposes of determining the balances in the Partners'
Capital Accounts with respect to items (iii), (v) and (vi) in this
Section 9.3f, such Capital Accounts shall be: (a) reduced by
Distributions made prior to and contemporaneous with any allocation;
(b) reduced at the end of each Partnership fiscal year by such
Partner's Qualified Income Offset Items in accordance with the
requirements for the alternate test of economic effect under Section
1.704-1(b)(2)(ii)(d) of the Regulations (or any corresponding
provisions of succeeding regulations); (c) increased to the extent
that such partner is treated as obligated to restore a deficit balance
in his Capital Account upon liquidation as provided under Section
1.704-1(b)(2)(ii)(c) of the Regulations; and (d) increased to the
extent of his distributive share of the Partnership's Minimum Gain
which such Partner is treated as obligated to restore pursuant to the
penultimate sentence of Section 1.7041T(b)(4)(iv)(f) of the
Regulations.
g. If the taxing authorities ignore the characterization of the amounts
paid to the General Partner as compensation pursuant to Article IX hereof, and
refuse to treat such payments as either guaranteed payments within the meaning
of Section 707(c) of the Code, or payments made to the General Partner other
than in its capacity as partner within the meaning of Section 707(a) of the
Code, and, as a result such payments are charged to its Capital Account, then
the General Partner shall be allocated the first available Taxable Profits of
the Partnership in an amount equal to the amount so charged, and the General
Partner's Capital Account shall be adjusted to reflect the payment of such
amount.
36
<PAGE>
h. Any allocation of Taxable Profit or Tax Loss which is required to be
allocated among the Partners to take into account the disparity between the fair
market value of a Partnership asset and its adjusted basis (e.g., allocations
under Section 704(c) of the Code), shall be allocated among the Partners in
accordance with the requirements of the Code and the Regulations promulgated
thereunder.
i. No Tax Loss shall be allocated to the Limited Partners to the extent
such Tax Loss results from (i) a casualty loss which is uninsured or which
exceeds the amount of applicable insurance, (ii) liability to the Partnership
which results from negligence or intentional action or inaction on the part of
any entity, or (iii) loss which causes the Partnership to become insolvent or
which accrues after the Partnership has become insolvent. All such Tax Loss
shall be allocated to the General Partner.
9.4 MISCELLANEOUS ALLOCATION AND DISTRIBUTION MATTERS.
It is intended that the allocation rules set forth in Section 9.3, together
with Article XII hereof, shall result in the Capital Accounts of the Partners
equaling zero following the complete winding up of the Partnership and the
Distributions provided for in Section 9.2. The allocation provisions of this
Partnership Agreement in Section 9.3 shall be construed in such a way by the
General Partner in order to validate the Distributions provided for in Section
9.2.(c) Upon liquidation of the partnership.
The percentage interest of the Series 100/Series EA in the aggregate and
200 Limited Partners set forth in this Article 9 is subject to adjustment
immediately prior to the commencement of a successful public offering for the
Partnership and/or its business as follows: First, determine the Market
Capitalization of the entity offering the securities post-IPO as follows: If 1/3
of the Issuer is sold to the public for $15,000,000, then the Market Cap would
be $45,000,000. Subtract the amount of money raised in the IPO from the Market
Cap to get the Pre-IPO Valuation. (This example: $45,000,000 - $15,000,000 =
$30,000,000). Then subtract from the Pre-IPO Valuation the value of any other
businesses included in the Issuer, including but not limited to, the business of
Datalinc, Ltd., as determined by the lead underwriter in the IPO in its sole and
absolute discretion (which determination shall be binding on all parties hereto)
to get the Pre-IPO Valuation of the Business of the Partnership. (This example:
assume valuation of other businesses is $8,000,000). Multiply the Pre-IPO
Valuation of the Business of the Partnership (This example: $30,000,000 -
$8,000,000 = $22,000,000) by 70% to get the Discounted Pre-IPO Valuation of the
Business of the Partnership. (This example: $22,000,000 x 70% = $15,400,000). If
less than $18,000,000, multiply 16 2/3% (assuming sale of all Series 200 Units)
by [$18,000,000 divided by the Discounted Pre-IPO Valuation of the Business of
the Partnership] to determine the Adjusted Ownership Percentage of Series 200
Units. (This example: $18,000,000 divided by $15,400,000 = 1.17 x 16 2/3% =
19.48%). This provision only applies if the Discounted Pre-IPO Valuation of the
Business of the Partnership is less than $18,000,000. Any increase in the
Adjusted Ownership Percentage of Series 200 Units above 16 2/3% shall result in
a corresponding decrease in the relevant percentage ownership of the Business of
the Partnership of the Datalinc Limited Partner. This adjustment shall only be
used to determine the percentage ownership of the Series 200 Limited Partners in
the entity issuing securities in the IPO.
37
<PAGE>
9.5 OPTIONAL REVALUATION OF PARTNERSHIP PROPERTY.
Upon the occurrence of (i) a contribution of money or property to the
Partnership (after the initial admittance of the Limited Partner) by a new or
existing partner as consideration for an interest in the Partnership, (ii) a
distribution of money or property by the Partnership to a retiring or continuing
Partner as consideration for an interest in the Partnership, or (iii) in
connection with the liquidation of the Partnership, the General Partner may
elect to increase or decrease the respective Capital Accounts of all Partners to
reflect a revaluation of Partnership property on the books of the Partnership;
provided:
a. Such adjustments must be based on the fair market value of the property
on the date of adjustment;
b. The adjustments reflect the manner in which the unrealized income, gain,
loss or reduction inherent in such property (that has not been reflected in the
Capital Accounts of the Partners previously) would be allocated among the
Partners under this Section 9.4 if there were a taxable disposition of such
property for such fair market value on the adjustment date;
c. Thereafter, the Capital Accounts of the Partners are adjusted in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g) for
allocations to them of depreciation, depletion, amortization and gain or loss,
as computed for book purposes, with respect to such property; and
d. Thereafter, the Partners' distributive shares of depreciation,
depletion, amortization and gain or loss, as computed for tax purposes, with
respect to such property shall be determined so as to take account of the
variation between the adjusted tax basis and the book value of such property in
the same manner as under Code Section 704(c) and Treasury Regulations Section
1.704-1(b)(4)(i).
9.6 GENERAL PARTNER'S CONTRIBUTION TO CAPITAL.
a. Upon a "liquidation" of the Partnership within the meaning of Section
1.704- 1(b)(2)(ii)(g) of the Regulations and after the application of Sections
9.2 and 9.3 for all fiscal years of the Partnership, including the year in which
such "liquidation" occurs, to the extent any General Partner has a negative
Capital Account, such General Partner shall contribute cash to the Partnership
in an amount equal to the lesser of (i) its negative Capital Account or (ii) the
product of (x) a fraction, the numerator of which is that General Partner's
negative Capital Account balance and the denominator of which is the total
negative Capital Account balances of all the General Partners, and (y) 1.01% of
the Original Capital Investment of the Limited Partners, within the time period
prescribed by Section 1.704-1(b)(2)(ii)(b)(3) of the Regulations. The proceeds
of any such contribution shall be distributed to the Limited Partners with
positive Capital Accounts in proportion thereto as specified in Section 9.2(d),
9.4 and 12.3.
b. In the event a General Partner is required to contribute to the capital
of the Partnership because of a liquidation under the Regulations that does not
result in a dissolution and winding up, the amount of such contribution may be
distributed to that General Partner after such contribution as long as that
General Partner acknowledges its obligation under Section 9.6a to make up
deficits in its Capital Account in the Partnership.
38
<PAGE>
9.7 LIMITED PARTNERS' CONSENT TO DISTRIBUTIONS AND ALLOCATION METHODS.
The methods hereinabove set forth in this Article IX by which Distributions
and allocations of income, gain, loss, deductions, tax credits and other tax
items are made and apportioned are hereby expressly consented to by each Limited
Partner as an express condition to becoming a Limited Partner.
9.8 LIQUIDATION DISTRIBUTION.
In the event that the Partnership is terminated, Distributions shall be
applied in the manner set forth in Articles 9.2(d), 9.4 and XI hereof.
9.9 GENERAL PARTNER'S OPINION FINAL.
The opinion of the General Partner shall be final and conclusive with
respect to all disputes as to computation and determinations required to be made
under this Article and Articles X and XII.
9.10 AUTHORITY TO VARY ALLOCATIONS TO PRESERVE AND PROTECT PARTNERS' INTENT;
OTHER AUTHORITY.
a. It is the intent of the Partners that each Partner's distributive share
of income, gain, loss, deduction, or credit (or item thereof) shall be
determined and allocated in accordance with this Article to the fullest extent
permitted by Section 704(b) of the Code. In order to preserve and protect the
determinations and allocations provided for in this Article, the General Partner
is authorized and directed to allocate income, gain, loss, deduction, or credit
(or item thereof) arising in any year differently than otherwise provided for in
this Article to the extent that allocating income, gain, loss, deduction, or
credit (or item thereof) in the manner provided for in this Article would cause
the determinations and allocations of each Partner's distributive share of
income, gain, loss, deduction, or credit (or item thereof) not to be permitted
by Section 704(b) of the Code and Treasury Regulations promulgated thereunder.
b. In making any allocation (the "new allocation") under the foregoing
paragraph, the General Partner is authorized to act only after having been
advised by counsel specializing in tax matters (the "Special Tax Counsel") that
under Section 704(b) of the Code and the Treasury Regulations thereunder, (i)
the new allocation is necessary, and (ii) the new allocation is an appropriate
modification of the allocations otherwise provided for in this Article in order
to assure that, either in the then current year or in any preceding year, such
Partner's distributive share of income, gain, loss, deduction, or credit (or
item thereof) is determined and allocated in accordance with this Article to the
fullest extent permitted by Section 704(b) of the Code and the Treasury
Regulations thereunder.
c. If the General Partner is required to make any new allocation in a
manner less favorable to any Partner than is otherwise provided for in this
Article, the General Partner is authorized and directed to do so, insofar as it
is advised by Special Tax Counsel that it is permitted by Section 704(b) of the
Code to allocate income, gain, loss, deduction, or credit (or item thereof)
arising in later years in a manner so as to bring the allocations of income,
gain, loss, deduction, or credit (or item thereof) to such Partners on a present
value basis as nearly as possible to the allocations thereof otherwise
contemplated by this Article.
39
<PAGE>
d. New allocations made by the General Partner in reliance upon the advice
of Special Tax Counsel and allocations made by the General Partner under the
previous paragraph in reliance upon the advice of Special Tax Counsel shall be
deemed to be made in good faith pursuant to the fiduciary obligation of the
General Partner to the Partnership and the Partners, and no such allocation
shall give rise to any claim or cause of action by an Partner. Any modification
made pursuant to this Section shall be deemed to be a complete substitute for
any allocation made pursuant to the Partnership Agreement, and approval of any
such change by the Limited Partners is not required.
e. The General Partner may similarly amend this Agreement to permit the
Partnership to comply with any Department of Labor regulations concerning Plan
Assets.
ARTICLE X
AMOUNTS WITHHELD
All amounts which the Partnership is required by law to withhold pursuant
to the Code or any provision of any state or local tax law with respect to any
payment or distribution to the Partnership or the Unit Holders shall be treated
as amounts distributed to the Unit Holders pursuant to Article IX for all
purposes under this Agreement. The General Partner may allocate any such amounts
among the Units Holders in any manner that is in accordance with applicable law.
ARTICLE XI
RECORDS AND BOOKS OF ACCOUNT; FISCAL YEAR;
BANKING; REPORTS TO PARTNERS
11.1 RECORDS AND BOOKS OF ACCOUNT.
The General Partner shall maintain or cause to be maintained, at the
Limited Partnership's principal office or at such other place or places as the
General Partner from time to time may determine, full and accurate records and
books of account of the Limited Partnership's business. Such records and books
of account shall be maintained on the method of accounting determined by the
General Partner to be most advantageous to the Limited Partnership. Each Partner
shall have the right of inspection and copying of such records and books of
account, at his or its expense.
11.2 FISCAL YEAR.
The fiscal year of the Limited Partnership shall be the calendar year.
11.3 BANKING.
An account or accounts in the name of the Limited Partnership shall be
maintained at such financial institution(s) as the General Partner may select.
All uninvested funds of the Limited Partnership shall be deposited in an account
of the Partnership at such financial institution(s). All funds so credited to
the Limited Partnership in any such account shall be subject to withdrawal by
checks made in the name of the Limited Partnership and signed by the General
Partner or such person or persons as the General Partner may from time to time
designate.
40
<PAGE>
11.4 REPORTS TO PARTNERS
a. As soon as reasonably practical, but in no event later than ninety (90)
days after the close of each fiscal year of the Limited Partnership, the General
Partner shall cause to be prepared and furnished to each Partner:
(i) The information necessary for the preparation by such Partner of
his or its Federal, state and other income tax returns;
(ii) The amount in the Capital Account of such Partner as of the last
day of such fiscal year;
(iii) An income statement and balance sheet of the Limited Partnership
as of the last day of such fiscal year, which shall be prepared by a
certified public accountant and
(iv) Such other information as the General Partner deems reasonably
necessary for the Partners to be advised of the current status of the
Limited Partnership and its business.
ARTICLE XII
DISSOLUTION; LIQUIDATION; AND TERMINATION
12.1 DISSOLUTION.
The Limited Partnership shall be dissolved upon the first to occur of any
of the following events:
a. The expiration of the term provided for in Section 2.4 hereof;
b. The withdrawal, dissolution or Bankruptcy of a or the last remaining
General Partner unless the Limited Partnership's business is continued as
provided in Section 12.2 hereof;
c. The sale of all or substantially all of its assets, including, but not
limited to, the Network, and the collection and distribution of the proceeds
thereof;
d. The unanimous consent thereto of all Partners.
12.2 RIGHT TO CONTINUE THE LIMITED PARTNERSHIP'S BUSINESS.
The withdrawal, dissolution or Bankruptcy of the last remaining General
Partner shall cause a dissolution of the Limited Partnership unless the
remaining Limited Partners acting by Majority Vote exercise the right, but not
the obligation exercisable within sixty (60) days from such withdrawal,
dissolution or Bankruptcy to admit a new General Partner to the Limited
Partnership upon such terms and conditions as they shall agree, and to elect to
continue the Limited Partnership's business, in a reconstituted form as herein
provided. If there is an event of withdrawal of a General Partner at a time when
there is at least one other General Partner, the business of the Partnership may
be carried on by the remaining General Partner. If the remaining General Partner
or General Partners do not so elect, the business of the Partnership may
41
<PAGE>
nonetheless be carried on if, within ninety (90) days after the withdrawal, all
Partners agree in writing to continue the business of the Partnership and to
appoint one or more additional General Partners if necessary or desired. If,
pursuant to the foregoing, the Limited Partnership shall not be dissolved but
shall continue, the interest therein and thereto of the withdrawn, dissolved or
Bankrupt General Partner shall be reconstituted into a Limited Partner's
interest with otherwise equivalent benefits, shall pass to such former General
Partner's successor-in-interest or legal representative, and such reconstituted
limited partnership shall have the exclusive right to use the Limited
Partnership's firm name and style.
12.3 LIQUIDATION.
a. Upon the dissolution of the Limited Partnership, the General Partner
shall take or cause to be taken a full account of the Limited Partnership's
assets and liabilities as of the date of such dissolution and shall proceed with
reasonable promptness to liquidate the Limited Partnership's assets and to
terminate its business. The cash proceeds from the liquidation, as and when
available therefor, shall be applied and distributed in the following order:
(i) to the payment of all taxes, debts and other obligations and
liabilities of the Limited Partnership, including the necessary expenses of
liquidation, but excluding therefrom secured creditors whose obligations
continue in existence after the liquidation of the Limited Partnership
assets; provided however, that all debts and other obligations and
liabilities of the Limited Partnership as to which personal liability
exists with respect to any Partner shall be satisfied or a reserve
established therefor, prior to the satisfaction of any debt or other
obligation or liability of the Limited Partnership as to which no such
personal liability exists for either the Limited Partnership or any
Partner; provided however, that where a contingent debt, obligation or
liability exists, a reserve, in such amount as the General Partner deems
reasonable, shall be established to meet such contingent debt, obligation
or liability, which reserve shall be distributed as provided in this
paragraph (a) only upon the termination of such contingency; and
(ii) all remaining proceeds in liquidation of the Limited Partnership
shall be distributable pursuant to the provisions of Section 9.2, 9.3 and
9.4 hereof.
b. The General Partner shall administer the liquidation of the Limited
Partnership and the termination of its business. The General Partner shall be
allowed a reasonable time for the orderly liquidation of the Limited
Partnership's assets and the discharge of liabilities to creditors, so as to
minimize losses resulting from the liquidation of the Limited Partnership's
assets.
c. Anything herein contained to the contrary notwithstanding, the General
Partner shall not be personally or otherwise liable for the return of the
Limited Partners' Capital Contributions, or any part thereof. Any such return
shall be made solely from the Limited Partnership's assets.
d. Except as otherwise provided herein, no dissolution or termination of
the Limited Partnership shall relieve, release or discharge any Partner, or any
of his or its successors, assigns, heirs or legal representatives, from any
previous breach or default of, or any obligation theretofore incurred or accrued
42
<PAGE>
under any provision of this Agreement, and any and all such liabilities, claims,
demands or causes of action arising from any such breaches, defaults and
obligations shall survive such dissolution and termination.
e. Each Limited Partner shall look solely to the assets of the Limited
Partnership for the return of his Capital Contributions, and if the Limited
Partnership property remaining after the payment or discharge of the debts and
liabilities of the Limited Partnership is insufficient to return the Capital
Contributions of each Limited Partner, such Limited Partner shall have no
recourse against the General Partner or any other Limited Partner. The winding
up of the affairs of the Limited Partnership and the distribution of its funds
shall be conducted exclusively by the General Partner, except as provided
herein, who are hereby authorized to do any and all acts and things authorized
by law for such purposes.
12.4 LIMITED PARTNERS' RIGHTS.
If necessary, a special liquidator may be appointed by Limited Partners
owning more than fifty percent (50%) of the Limited Partnership Units of the
Partnership. In connection with any such winding up and liquidation, an
independent certified public accountant retained by the Partnership shall, if
requested by Limited Partners owning more than fifty percent (50%) of the Units
of the Partnership, audit the Partnership as of the date of termination, and
such audited statement shall be furnished to all Partners.
12.5 GAINS OR LOSSES IN PROCESS OF LIQUIDATION.
Any gains or losses on disposition of the Network in the process of
liquidation shall be credited or charged to the Partners in the manner specified
in Article IX. No property shall be distributed in kind.
12.6 INSTRUMENTS OF TERMINATION.
Upon the termination of the Partnership, the General Partner (or special
liquidator, as the case may be) shall make such filings and do such other acts
as shall be required by the Partnership Law, and the Partners hereby agree to
execute and deliver to the General Partner (or special liquidator, as the case
may be) such certificates or documents as shall be. so required.
12.7 TIME OF LIQUIDATION.
A reasonable time shall be allowed for the orderly liquidation of the assets of
the Partnership and the discharge of liabilities to creditors so as to enable
the General Partner to minimize the losses attendant upon a liquidation.
12.8 NO RIGHT OF PARTITION.
The Partners and Assignees and their estates or representative upon death
or the receiver upon bankruptcy or dissolution shall have no rights to receive
Partnership Property in kind, nor shall such Partners or Assignees have the
right to partition, sale, or appraisal of the Partnership's Network, whether or
not upon dissolution and termination of the Partnership, notwithstanding any
provision of law to the contrary.
Notwithstanding the foregoing, if any Partner shall be indebted to the
Partnership, then until payment of such amount by him, the liquidator shall
43
<PAGE>
retain such Partner's distributive share of Partnership Properties or assets and
apply the income therefrom to the liquidation of such indebtedness and the cost
of operation of such Properties or assets during the period of such liquidation;
however, if at the expiration of six (6) months after the statement for which
provision is made herein has been given to such Partner, such amount has not
been paid or otherwise liquidated, the liquidator may sell the interest of such
Partner at public or private sale at the best price immediately obtainable which
shall be determined in the sole judgment of the liquidator. So much of the
proceeds of such sale as shall be necessary shall be applied to the liquidation
of the amount then due under this Article, and the balance of such proceeds, if
any, shall be delivered to such Partner.
12.9 TERMINATION.
Upon compliance with the foregoing plan of liquidation and distribution, the
General Partner shall file or cause to be filed a Certificate of Cancellation of
the Certificate of Limited Partnership as well as any and all other documents
required to effectuate the dissolution and termination of the Limited
Partnership and the Limited Partnership thereupon shall be terminated.
ARTICLE XIII
PARTNERSHIP STATUS
Anything in this Agreement to the contrary notwithstanding, it is expressly
intended that the entity formed hereby be a partnership as determined by the
applicable provisions of the Code, the rules and regulations promulgated
thereunder, and other laws pertaining thereto, and that in every respect all of
the terms and provisions hereof shall at all times be so construed and
interpreted as to give effect to this intent. In the event that the Internal
Revenue Service of the United States or any governmental authority having
jurisdiction shall in any way or at any time determine that any provision or
provisions of this Agreement affects the status of this entity, the General
Partner shall amend or modify the terms and provisions of this Agreement to the
extent necessary to comply with the rules, regulations and requirements of the
Internal Revenue Service of the United States or any other government authority
having jurisdiction, in order that the entity formed hereby be treated as a
partnership, be taxable as such, and the Partners hereof taxable as partners of
a partnership; which modification or amendment shall be retroactively applied to
the date of this Agreement.
ARTICLE XIV
GENERAL PROVISIONS
14.1 NOTICES.
Except as otherwise provided herein, any notice, payment, distribution or
other communication which shall be required to be given to any Limited Partner
in connection with the business of the Partnership shall be duly given if
delivered personally in writing, or if sent by mail or telegraph, to the last
address furnished by such Limited Partner. Written notice to the General Partner
or the Partnership shall be given when actually received at the principal office
of the Partnership.
44
<PAGE>
14.2 SURVIVAL OF RIGHTS.
This Agreement shall be binding upon and inure to the benefit of the
Partners and their respective heirs, legatees, legal representatives, successors
and assigns.
14.3 HEADINGS.
The headings of the Articles and subparagraphs of this Agreement are for
convenience only and shall not be deemed part of the text of this Agreement.
14.4 AGREEMENT IN COUNTERPARTS.
This Agreement, or any amendment thereto, may be executed in multiple
counterparts, each of which shall be deemed an original agreement, and all of
which shall constitute one agreement, by each of the parties hereto on the dates
respectively indicated in the acknowledgments of said parties, notwithstanding
that all of the parties are not signatories to the original or the same
counterpart, to be effective as of the day and year first above written. For
purposes of recording a Certificate of Limited Partnership, a second signature
page and acknowledgment page may be attached to each counterpart hereof, and the
second signature page and the acknowledgment page pertaining thereto may be
detached from the counterpart, when executed, and attached to another
counterpart, which other counterpart may thereafter be filed as the Certificate
of Limited Partnership.
14.5 GOVERNING LAW.
This Agreement is enforceable in accordance with its terms and shall be
governed, construed and enforced according to the laws of the State of Florida.
All Limited Partners consent to the jurisdiction of state and federal courts in
Florida and appoint the Secretary of State of Florida as agent for service of
process.
14.6 (RESERVED)
14.7 VALIDITY.
Should any portion of this Agreement be declared invalid and unenforceable,
then such portion shall be deemed severable from this Agreement and shall not
affect the remainder hereof.
14.8 AMENDMENT.
Except as otherwise provided in this Agreement, this Agreement may be amended by
a vote of the General Partner and a Majority Vote of Limited Partners at a
meeting called pursuant to this Agreement.
14.9 PRONOUNS.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
45
<PAGE>
14.10 RIGHT TO RELY UPON THE AUTHORITY OF THE GENERAL PARTNER.
The General Partner shall be authorized to bind the Partnership by its
signature alone, which may be a facsimile signature, and persons dealing with
the Partnership may rely upon the representation of the General Partner that
such General Partner has the authority to make any commitment or undertaking on
behalf of the Partnership. No person dealing with the General Partner shall be
required to determine its authority to make such commitment or undertaking, nor
to determine whether the General Partner concurs in the commitment or
undertaking or any other fact or circumstance bearing upon the existence of its
authority. In addition, no purchaser of any property or interest therein owned
by the Partnership shall be required to determine the sole and exclusive
authority of the General Partner to sign and deliver on behalf of the
Partnership any instrument of transfer with respect thereto or to see to the
application or distribution of revenues or proceeds paid or credited in
connection therewith, unless such purchasers shall have received written notice
from the Partnership respecting the same.
14.11 LOAN RESTRICTIONS.
A creditor who makes a non-recourse loan to the Partnership must not have,
or acquire, at any time as a result of making the loan, any direct or indirect
interest greater than 20% in the profits, capital or property of the Partnership
other than as a secured creditor.
14.12 MERGER.
This Agreement contains the entire understanding among the parties and
supersedes any prior understanding and agreements between them respecting the
matters described herein.
14.13 ARBITRATION.
Any controversy or claim arising out of or relating to this Agreement or
any provision thereof shall be settled by binding arbitration at Tampa, Florida,
in a manner agreed upon by the General Partner and any Limited Partners directly
affected, or if not otherwise agreed upon, then in accordance with the rules of
the American Arbitration Association in effect at that time. Judgment upon the
award so rendered may be entered in any court having competent jurisdiction
thereover. The costs of the arbitration shall be borne by the non-prevailing
party, including the cost of experts, evidence and legal counsel (and all
employees and assistants) of the prevailing party.
14.14 TAX MATTERS PARTNER.
a. The General Partner is hereby designated as the Tax Matters Partner of
the Partnership, as provided in regulations pursuant to Section 6231 of the Code
(the "Tax Matters Partner"). Each Partner, by the execution of this Agreement,
consents to such designation of the Tax Matters Partner and agrees to execute,
certify, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents as may be necessary or appropriate to evidence
such consent.
46
<PAGE>
b. The duties of the Tax Matters Partner may include the following:
(1) To the extent and in the manner provided by applicable law and
regulations, the Tax Matters Partner shall furnish the name, address,
profits, interest and taxpayer identification number of each Partner to the
Secretary of the Treasury or his delegate (the "Secretary").
(2) To the extent and in the manner provided by applicable law and
regulations, the Tax Matters Partner shall keep each Partner informed of
the administrative and judicial proceedings for the adjustment at the
Partnership level of any item required to be taken into account by a
Partner for income tax purposes (such administrative proceeding being
referred to hereinafter as a "Tax Audit" and such judicial proceeding being
referred to hereinafter as "Judicial Review").
(3) If the Tax Matters Partner, on behalf of the Partnership, receives
a notice with respect to the Partnership tax audit from the Secretary, the
Tax Matters Partner shall, within 30 days of receiving such notice, forward
a copy of such notice to the Partners who hold or held an interest (through
their Interests) in the profits or losses of the Partnership for the
Partnership taxable year to which the notice relates.
c. The Tax Matters Partner is hereby authorized, but not required:
(1) To enter into any settlement agreement with the Internal Revenue
Service or the Secretary with respect to any Tax Audit or Judicial Review,
in which agreement the Tax Matters Partner may expressly state that such
agreement shall bind the other Partners, except that such agreement shall
not bind any Partner who (within the time prescribed pursuant to the Code
and Treasury Regulations thereunder) files a statement with the Secretary
providing that the Tax Matters Partner shall not have the authority to
enter into a settlement agreement on behalf of such Partner;
(2) In the event that a notice of a final administrative adjustment at
the Partnership level of any item required to be taken into account by a
Partner for tax purposes (a "Final Adjustment") is mailed to the Tax
Matters Partner, to seek Judicial Review of such Final Adjustment,
including the filing of a petition for readjustment with the Tax Court, the
District Court of the United States for the district in which the
Partnership's principal place of business is located, or the Court of
Claims;
(3) To intervene in any action brought by any other Partner for
Judicial Review of a Final Adjustment;
(4) To file a request for an administrative adjustment with the
Secretary at any time and, if any part of such request is not allowed by
the Secretary, to file a petition for Judicial Review with respect to such
request;
(5) To enter into an agreement with the Service to extend the period
for assessing any tax which is attributable to any item required to be
taken into account by a Partner for tax purposes, or an item affected by
such item; and
47
<PAGE>
(6) To take any other action on behalf of the Partners or the
Partnership in connection with any administrative or judicial tax
proceeding to the extent permitted by applicable laws or regulations.
d. The Partnership shall indemnify and reimburse the Tax Matters Partner
for all expenses, including legal and accounting fees, claims, liabilities,
losses and damages incurred in connection with any Tax Audit or Judicial Review
with respect to the tax liability of the Partners. The payment of all such
expenses shall be made before any distributions are made of Cash Available for
Distribution or any discretionary reserves are set aside by the General Partner.
Neither the General Partner, any Affiliate, nor any other person or entity shall
have any obligation to provide funds for such purpose. The taking of any action
and the incurring of any expense by the Tax Matters Partner in connection with
any such proceeding, except to the extent required by law, is a matter in the
sole discretion of the Tax Matters Partner, and the provisions on limitations of
liability of General Partner and indemnification set forth in this Agreement
shall be fully applicable to the Tax Matters Partner in its capacity as such.
14.15 BINDING EFFECT.
Except as otherwise provided in this Agreement, every covenant, term, and
provision of this Agreement shall be binding upon and inure to the benefit of
the Partners and their respective successors and assigns.
14.16 CONSTRUCTION.
Every covenant, term, and provision of this Agreement shall be construed
simply according to its fair meaning and not strictly for or against any
Partner.
14.17 SEVERABILITY.
Every provision of this Agreement is intended to be severable. If any term
or provision hereof is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity or legality of the
remainder of this Agreement.
14.18 INCORPORATION BY REFERENCE.
Every exhibit, schedule, and other appendix attached to this Agreement and
referred to herein is hereby incorporated into this Agreement by reference.
14.19 ADDITIONAL DOCUMENTS.
Each Partner, upon the request of any General Partner, agrees to perform
all further acts and execute, acknowledge, and deliver any documents that may be
reasonably necessary, appropriate, or desirable to carry out the provisions of
this Agreement.
14.20 WAIVER OF ACTION FOR PARTITION.
Each of the Partners irrevocably waives any right that he may have to
maintain any action for partition with respect to any of the Partnership
Network.
48
<PAGE>
14.21 SOLE AND ABSOLUTE DISCRETION.
Except as otherwise provided in this Agreement, all actions which any
General Partner may take and all determinations which any General Partner may
make pursuant to this Agreement may be taken and made at the sole and absolute
discretion of such General Partner.
14.22 CERTIFICATES REPRESENTING UNITS.
The Partnership shall issue Certificates representing the Units to all
Limited Partners.
ARTICLE XV
ADDITIONAL CAPITAL CONTRIBUTIONS,
FINANCING AND ASSESSMENTS
15.1 The General Partner may permit persons (including persons who are
concurrently admitted as Limited Partners, pursuant to the provisions of this
Agreement) to make additional Capital Contributions at such times, through sale
of Units or otherwise, in such amounts and form and for such consideration as
the General Partner and the Majority Vote of the Limited Partners , and to
receive therefor, additional Units. Contributions to the Partnership's capital
may be made in any of the following forms: cash, notes or relinquishment of
legal rights or reduction of Partnership obligations pursuant to notes,
debentures, bonds and other kinds of debt obligations issued by the Partnership.
15.2 All Units offered pursuant to this Article XV shall be initially offered
pro rata to all existing Limited Partners in accordance with their Sharing
Ratio. Any Units not purchased by the existing Limited Partners within thirty
(30) days of notice of the right to purchase the Units may be offered by the
General Partner to any person or entity in its sole discretion.
15.3 The General Partner or its Affiliates, or both, may, in addition to any of
its previous Capital Contributions, make additional Contributions in cash to the
capital of the Partnership in the manner specified in this Article, provided
such additional Contributions shall be regarded as in payment of Limited
Partners' Units and not of General Partner's Units. In addition, the General
Partner may purchase those fractional interests in the Partnership attributable
to the unpaid obligations by Limited Partners by paying such obligations and
assuming said fractional interests.
15.4 Fractional Limited Partnership Units may be issued at the sole discretion
of the General Partner.
15.5 Consistent with the foregoing, after the expenditure or commitment of the
Original Invested Capital, additional Partnership activities may be financed by
any method which the General Partner believes to be appropriate under the
circumstances, by borrowing funds, utilizing Partnership revenues and other
accepted methods of financing.
49
<PAGE>
IN WITNESS WHEREOF, the Partners have hereunto set their hands and seals the day
and year first above written.
GENERAL PARTNER:
FASTCOM MANAGEMENT, INC.
By:
DATALINC, LTD.
50
<PAGE>
