UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES ACT OF 1934
For the fiscal quarter ended July 31, 1997 Commission file number 0-14361
TROPIC COMMUNICATIONS, INC.
(Exact Name of Company as Specified in Its Charter)
Delaware 31-1166419
(State or other jurisdiction of (I. R. S.Employer I. D. Number)
incorporationor organization)
3021 Bethel Road, Suite 208, Columbus, Ohio 43220
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: (614) 538-0660
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
The Company has 33,239,166 shares of $0.15 par value common stock outstanding as
of September 30, 1997.
<PAGE>
<TABLE>
<CAPTION>
TROPIC COMMUNICATIONS, INC.
FORM 10-Q
For the Quarter Ended July 31, 1997
INDEX
Part I: Financial Information
<S> <C> <C>
Page
Item 1. Financial Statements
(a) Consolidated Balance Sheets as of July 31, 1997
and April 30, 1997 3
(b) Statement of Consolidated Operations for the Three
Months Ended July 31, 1997 and 1996 4
(c) Statement of Consolidated Cash Flow for the Three
Months Ended July 31, 1997 and 1996 5
(d) Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II: Other Information
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibit Index and Reports on Form 8-K 12
Signatures 17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I
Item 1. Financial Statements
TROPIC COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
July 31, April 30,
1997 1997
<S> <C> <C>
Assets:
Cash $ 1,519 $ 2,068
Deposits and accounts receivable (net of
allowance for doubtful accounts of $2,005
and $5,532, respectively) 16,827 25,396
Investment in leased equipment 13,500,220 -
Equipment notes and accrued interest receivable - 198,700
Leased property under capital lease, at
cost (net of accumulated amortization of
$41,711 and $3,567,799, respectively) 262,466 270,915
Property and equipment, at cost (net of
accumulated depreciation of $364,620 and
$363,686, respectively) 65,735 65,859
Cost in excess of net assets acquired (net of
accumulated amortization of $55,180 and
$50,552,respectively) 137,327 141,955
Investment in unconsolidated affiliates 903 903
Broadcast rights 35,661 46,449
Other assets 14,398 17,498
------------ ------------
Total Assets $ 14,035,056 $ 769,743
============ ============
Liabilities:
Accounts payable and accrued expenses $ 300,977 $ 281,821
Note and accrued interest payable - related
party 332,268 315,440
Notes and accrued interest payable 607,253 592,799
Note and accrued interest payable - leased
equipment investment 14,106,258 -
Broadcast rights 35,661 46,449
Capital lease obligations and accrued
interest payable - 198,700
Accrued officer compensation and
interest payable 156,315 147,240
Unearned income 1,366 1,766
------------ ------------
Total Liabilities 15,540,098 1,584,215
------------ ------------
Shareholders' Equity (Deficit):
Preferred stock, $0.01 par value, 1,000,000
shares authorized, none issued and outstanding - -
Common stock, $0.15 par value, 50,000,000 shares
authorized, 3,711,566 and 3,254,566 shares
issued, respectively) 556,735 556,735
Paid in capital 9,007,109 9,007,109
Retained deficit (11,057,298) (10,366,728)
------------ ------------
(1,493,454) (802,884)
Treasury stock, at cost, 2,400 shares (11,588) (11,588)
------------ ------------
Total Shareholders' Equity (Deficit) (1,505,042) (814,472)
------------ ------------
Total Liabilities and Shareholders' $ 14,035,056 $ 769,743
Equity (Deficit) ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TROPIC COMMUNICATIONS, INC. AND SUBSIDIARIES
Statement of Consolidated Operations
Three Months Ended July 31,
---------------------------
1997 1996
<S> <C> <C>
Revenues:
Rental income $ - $ 2,448
Commissions, fees, advertising
and other income 131,420 878,037
Interest income 2,839 350,888
------------ ------------
Total Revenues 134,259 1,231,373
------------ ------------
Cost and Expenses:
Marketing, administration and other
operating expenses 168,860 272,993
Advisory services - 50,250
Interest expense - related party 13,306 18,327
Interest expense 625,552 364,369
Depreciation and amortization of equipment 9,383 12,515
Amortization of cost in excess of net
assets acquired and other intangible assets 7,728 57,628
------------ ------------
Total Costs and Expenses 824,829 776,082
------------ ------------
Net Income (Loss) $ (690,570)$ 455,291
============ ============
Primary Net Loss Per Share $ (0.19)$ 0.13
============ ============
Fully Diluted Net Loss Per Share $ (0.19)$ 0.13
============= ============
Average Number of Common and
Common Equivalent Shares:
Primary 3,709,166 3,406,340
Fully diluted 3,709,166 3,406,340
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TROPIC COMMUNICATIONS, INC. AND SUBSIDIARIES
Statement of Consolidated Cash Flows
Increase in Cash and Cash Equivalents
Three Months Ended July 31,
---------------------------
1997 1996
<S> <C> <C>
Cash Flows From Operating Activities:
Rental receipts $ - $ 2,448
Commissions, fees and other receipts 98,242 46,801
Marketing, administrative and other
operating payments (98,524) (301,298)
Interest receipts - 2,929
Interest payments (1,284) (2,397)
------------ ------------
Net Cash Used For Operating
Activities (1,566) (251,517)
------------ ------------
Cash Flows From Investing Activities:
Purchase of property and equipment (810) (485)
Investment in unconsolidated subsidiaries - (300)
------------ ------------
Net Cash Used For Investing Activities (810) (785)
------------ ------------
Cash Flows From Financing Activities:
Proceeds from related party loans 2,515 -
Proceeds from issuance of stock - 375,250
Principal payments under other borrowings - (21,500)
Principal payments under officer loans - (11,500)
Principal payments under capital lease
obligations and other financing (688) (1,658)
------------ ------------
Net Cash Provided By Financing
Activities 1,827 340,592
------------ ------------
Net Increase (Decrease) in Cash and
Cash Equivalents (549) 88,290
Cash and Cash Equivalents at
Beginning of Period 2,068 14,021
------------ ------------
Cash and Cash Equivalents at
End of Period $ 1,519 $ 102,311
============ ============
.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
TROPIC COMMUNICATIONS, INC. AND SUBSIDIARIES
Statement of Consolidated Cash Flows
Reconciliation of Net Loss to
Net Cash Used For Operating Activities
Three Months Ended July 31,
---------------------------
1997 1996
<S> <C> <C>
Net income (loss) $ (690,570) $ 455,291
------------ ------------
Adjustment to reconcile net income (loss) to
net cash used for operating activities:
Expenses and revenues not affecting operating
cash flows:
Depreciation and amortization of
equipment and intangible assets 17,111 70,143
Leasing interest income (2,839) (350,110)
Leasing interest expense 2,839 350,110
Fee income recognized from stock retained
in unconsolidated affiliates - (800,000)
Changes in assets and liabilities:
Accrued interest income (3,562) 2,151
Accrued interest expense 28,698 30,189
Note, accounts and commissions
receivable 12,131 6,587
Other assets - (8,470)
Note and accounts payable, and
accrued expenses 635,026 (7,408)
Other (400) -
------------ ------------
Total Adjustments 689,004 (706,808)
------------ ------------
Net Cash Used for Operating Activities $ (1,566)$ (251,517)
============ ============
</TABLE>
Supplemental Cash Flow Information
Investment in Finance Assets. The Company acquires leases of equipment and
leases receivable partially by assuming existing financing. Also, the Company
may sell or dispose of such assets with a commensurate transfer of any related
financing to the transferee. During the three months ended July 31, 1997
leasehold tenancy positions terminated which reduced the gross value of Leased
Property Under Capital Lease by $3,518,537 and accumulated amortization by an
equivalent amount. There were no acquisitions or disposals of equipment lease
portfolio assets in the three months ended July 31, 1997.
On May 1, 1997 the Company acquired an interest in a leased paper processing
plant for $13,500,220 and issued a secured promissory note for 100% of the
purchase price of the investment (see Note 3).
See accompanying notes to consolidated financial statements.
<PAGE>
TROPIC COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Consolidated Financial Statements
The consolidated balance sheet as of July 31, 1997, the statement of
consolidated operations for the three months ended July 31, 1997, and the
statement of consolidated cash flows for the three months ended July 31, 1997,
have been prepared by the Company without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
July 31, 1997, and for all periods presented, have been made.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's April 30, 1997 and 1996, annual Report
to the Securities and Exchange Commission on Form 10-K.
Certain information and footnote disclosure contained in these financial
statements that are not historical facts are forward-looking statements as that
term is defined in the Private Securities Litigation Reform Act of 1995.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, the forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those projections.
2. Advertising Revenue and Barter Transactions
During the three months ended July 31, 1997 and 1996 the Company recognized
$81,419 and $77,357 of advertising revenue, respectively, which is included in
commissions, fees, advertising and other income. Such advertising revenue
included $41,842and $38,092 of barter transaction revenue in 1997 and 1996,
respectively. Also, the Company recognized $41,842 and $38,092 of barter
transaction expense, respectively, which is included in marketing,
administrative and other operating expenses. The amount of goods and services
which were received or used prior to the transmission of advertising was
insignificant as of the balance sheet date.
3. Investment in Leased Equipment and Notes Payable
On May 1, 1997 the Company acquired 100% of the capital stock of a
corporation owning a 10.47% interest in a leased paper processing plant. The
purchase price of the interest was $13,500,220 which was financed pursuant to
the terms of a secured promissory note due on March 1, 2001 with interest at the
rate of 17.723% per annum. In the first fiscal quarter ending July 31, 1997 the
Company recognized $50,000 of income and $606,037 of interest expense related to
this transaction. The Company expects to dispose of this interest as part of the
cessation of its equipment leasing business pursuant to the RALI Acquisition
undertaking.
4. Subsequent Events
On September 18, 1997, the Company issued 26,400,000 shares of its restricted
$.15 par value common stock in exchange for 100% of the issued and outstanding
capital stock of R.A. Logistics, Inc., a Delaware corporation ("RALI" and the
"RALI Acquisition"). RALI is a newly formed holding company owning 100% of the
issued and outstanding capital stock of two subsidiary corporations, B. Airways,
Inc. and B. Airways Air Cargo, Inc. both Florida corporations ("BAACI" and
"BAI", respectively). The consolidated net assets of RALI as of the date of
closing were approximately $279,500, unaudited. BAACI is a newly formed
corporation organized to operate as an air freight consolidator by Messrs Angel
Munoz and Ronald Vimo. BAACI provides air cargo consolidation services operating
from a shared warehouse facility located at the Miami International Airport.
BAACI consolidates air cargo for shipment via a Boeing 747-200 via approximately
4 round trips weekly between Miami International Airport and Central and South
America. The BAACI aircraft is provided at a rate of $4,750 per operating hour
plus fuel. Operating since September 2, 1997, BAACI had booked approximately
$1,708,700 in gross revenue through September 30, 1997. BAI is a non-operating
company having an application pending with the U.S. Department of Transportation
and the Federal Aviation Authority for operation as a Part 135 all cargo air
carrier. In addition, BAI
<PAGE>
has a $10,000 deposit on a purchase for a DC-3 aircraft which BAI anticipates
will be operated within the Caribbean Basin.
The Company anticipates that it will account for the acquisition based upon
the historic costs of the assets and liabilities of both the Company and RALI.
The following unaudited financial forecast summarizes a forecasted consolidated
condensed balance sheet, statement of operations and earnings per share for the
year ending September 18, 1998 (one year from the stock exchange date). The
results do not purport to be indicative of what will occur in the future.
<TABLE>
<CAPTION>
Forecasted Condensed Balance Sheet
<S> <C>
Assets $ 3,375,000
===============
Liabilities $ 2,000,000
Shareholders' Equity 1,375,000
---------------
Total Liabilities and
Shareholders' Equity $ 3,375,000
===============
Forecasted Condensed Statement of Operations
Net Sales $ 20,400,000
===============
Net Income $ 600,000
===============
Net Income per Common Share:
Primary $ 0.02
===============
Fully Diluted $ 0.02
===============
</TABLE>
The forecast assumes that the Company's debt is retired through either the
issuance of shares of the Company's equity securities or disposition of assets.
Therefore, continuing operations will be that of RALI's air cargo consolidation
and cargo air carrier services. The forecast is limited in scope to a projection
based upon the results of current operations which encompasses service being
limited to the use of the one Boeing 747-200 aircraft. The forecast does not
include an estimate of the revenue or expense which may be earned or incurred as
additional aircraft and routes are added nor does the forecast include an
estimate for the revenue or expense which may be incurred from the start of
business by B. Airways, Inc. as an operating all cargo air carrier.
Amendment to Articles of Incorporation and By-Laws.
On September 19, 1997, by an action by a majority of the shareholders of the
Company, the shareholders approved amending the Company's Articles of
Incorporation: (i) to change the par value of the Company's common stock from
fifteen cents per share to ninety cents per share; and (ii) to comport to the
non-U.S. citizen ownership and management requirements of the Federal aviation
laws. This amendment has not been finalized. Also, the Board of Directors
approved an amendment to the Company's By-Laws: (i) to change the beginning of
the Company's fiscal year from May 1 to January 1 of each calendar year; and,
(ii) to change the time for the Company's annual meeting of shareholder's from
last Thursday of October to the last Thursday of June of each calendar year.
As a result of the change in the par value of the Company's common stock the
3,711,566 shares $.15 par value common stock issued and outstanding as of April
30, 1997 and the 26,400,000 shares issued pursuant to the RALI Acquisition will
be changed into 618,594 shares and 4,400,000 shares, respectively, of $.90 par
value common stock (a 1-for-6 reverse split). This amendment will not require a
mandatory surrender and exchange of certificates, and certificates evidencing
the post-amendment shares will remain as validly issued and outstanding shares
of the common stock of the Company. The post-amendment shares will have the same
character and bear the same restrictions (if any) as the pre-amendment shares.
New ninety cent ($.90) par value shares will be issuable as a result of the
amendment and when issued in exchange for fifteen cent ($.15) par value shares
will be rounded down to the nearest whole share, thus no fractional common
shares will be issuable as a result of the amendment.
<PAGE>
Repayment of Notes.
Subsequent to the date of closing on the RALI Acquisition the Company entered
into various agreements for the repayment of various of the Company's
obligations. On September 19, 1997 the Company entered into an agreement with
CCJ Consultants, Inc. ("CCJ"), a related party, for the liquidation of the
Company's obligations to CCJ under its promissory note and warrants to CCJ dated
August 4, 1994 by the transfer to CCJ of all of the issued and outstanding
capital stock of a wholly-owned subsidiary of the Company. Also, on September
19, 1997 the Company entered into an agreement with Mr. John E. Rayl a
shareholder, director and the Treasurer of the Company (and also an officer of
CCJ) for the issuance of 900,000 shares of the Company's fifteen cent par value
common stock in liquidation of the Company's obligations to Mr. Rayl under its
promissory note to him dated September 15, 1994. The Company also entered into
an agreement with Firestar Holdings, Ltd. for the partial liquidation of all of
the Company's obligations to Firestar for the issuance of 190,000 shares of the
Company's fifteen cent par value common stock which was valued at $19,000. On
September 23, 1997, the Company entered into an agreement with Firestar
Holdings, Ltd. to complete the liquidation of the Company's obligations for the
issuance of 2,040,000 shares of the Company's fifteen cent par value common
stock.
Subscriptions to Common Stock.
In order to provide for sufficient working capital to complete the RALI
Acquisition, in August, 1997 the Company entered into agreements with three
investment companies for their purchase of up to 4,800,000 restricted shares of
the Company's $0.15 cent par value common stock at a price of ten cents ($0.10)
per share for a total aggregate investment of $480,000 plus an agreement for
payment of certain of the Company's obligations and contingent obligations in
the maximum aggregate amount of approximately $680,000 as of July 31, 1997. At
the time of the agreements the bid price of the Company's $0.15 par value common
stock, as quoted on the OTC Bulletin Board, was thirty-one ($0.31) cents per
share.
5. Related Party Transactions
As part of the RALI Acquisition, the Company also entered into Employment
Agreements effective September 2, 1997 with Angel Munoz, Ronald Vimo and Scott
Villanueva to serve as the Company's President, Vice-President and Secretary
respectively. In addition, these individuals have replaced three of the
Company's resigning members on its Board of Directors. Each of the Employment
Agreements are similar in terms and conditions, providing for, among other
things, for a term of five years, an annual base compensation of $175,000,
$175,000 and $85,000 respectively, for annual incentive compensation in an
aggregate amount (including base compensation) of 1% of consolidated gross
revenues and for the payment of other ordinary employee benefits including
medical, disability and life insurance and business and auto expense
reimbursement.
6. Employee Stock Option Plans
The following table sets forth: (1) the number of shares of the Company's
common stock issuable at July 31, 1997 pursuant to outstanding Options; (2) the
exercise price per share; (3) the aggregate exercise price: (4) the expiration
dates; and (5) the market values of such shares at July 31, 1997, based on $0.50
per share, which is the average of the high and low ask and bid prices on the
OTC Bulletin Board at July 31, 1997.
<TABLE>
<CAPTION>
Number of
Shares Market
Covered By Exercise Aggregate Value at
Outstanding Price Per Exercise Expiration July 31,
Plan Options Share Price Dates 1997
- --------------------------- ----------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Incentive Stock Option Plan 30,000 $0.3125 $9,375 07/15/03 $15,000
Incentive Stock Option Plan 67,167 $0.3125 $20,990 01/06/05 $33,584
</TABLE>
<PAGE>
All Options are currently exercisable. However, there were no Options
exercised during the current period.
7. Earnings Per Share
For the three months ended July 31, 1997 and 1996, primary and fully diluted
earnings per share amounts, are computed based on 3,709,166 and 3,405,289
shares, the weighted average number of common shares outstanding. Included in
the weighted average number of common shares outstanding at July 31, 1996 are
387,000 shares issued upon the exercise of stock options granted under
consulting agreements. If these shares had been issued at the beginning of the
period, primary and fully diluted income per share would have been $0.13.
The employee stock options granted are not included in primary or fully
diluted earnings per share for the three months ended July 31, 1997 due to their
anti-dilutive effect and in 1996 since the dilutive effect is less than 3%.
8. Investment in Unconsolidated Affiliates
In the first fiscal quarter of 1997, the Company was a party to two
consulting agreements from which a portion of its compensation was received in
shares of the common stock of the client company. The Company recognized
$335,000 and $465,000 of income with respect to these two transactions based on
the estimated fair market value of the shares received. During the fiscal
quarter ended April 30, 1997, one of the companies ceased operations and the
business prospects of the other have declined. In addition, as part of the RALI
Acquisition the Company agreed to dispose of all of its obligations to and
investment in these companies. Accordingly, in the quarter ended April 30, 1997,
the Company wrote off all of the previously recorded income.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The Company's substantial reductions in rental income, interest income,
interest expense and depreciation and amortization expense for the first three
months of fiscal 1998 compared to the same period of fiscal 1997 is a result of
a reduction, through normally scheduled payoff, in the number of lease
portfolios compared with the number of leases operative in the first nine months
of the prior fiscal year. The Company has not undertaken any new equipment lease
portfolio acquisitions in the first three months of 1998 or 1997. The change in
revenues from commissions, fees, advertising and other income can be attributed
to an increase of $800,000 for administrative and consulting fees recognized in
connection with mergers (see Note 8 - Notes to Consolidated Financial
Statements) consummated during the first fiscal quarter 1997. Marketing,
administrative and other expenses decreased approximately 38% in the three
months ended July 31, 1997 compared to the same period last year.
Liquidity and Capital Resources
During the three months ended July 31, 1997, the Company incurred a loss of
$690,570 which includes non-cash activity of $83,004 and approximately $606,000
in accrued interest expense related to leased equipment acquisition financing.
The result is a cash loss from operations of $1,566 which was funded from income
from operations, increases in accounts payable and additional unsecured short
term borrowings. Events occurring subsequent to the end of the current fiscal
quarter include the acquisition of R.A. Logistics, Inc., see Note 4 above and
the completion of agreements for repayment or provision for the liquidation of
most of the Company's current obligations. Future liquidity is anticipated to be
funded from the operations of the Company's air freight consolidation business.
From September 2, through September 24, 1997 the operation generated
approximately $1,700,000 in gross operating revenue and netted approximately
$130,000 of pre-tax operating income. The Company anticipates that it will
require additional financing and additional capital resources to fund the growth
and expansion of this business which will provided from revenues, bank and other
forms of short term borrowings which may include account receivable factoring or
other forms of secured debt financing and the sale of equity and/or debt
securities from time to time.
As part of the RALI Acquisition the Company acquired B. Airways, Inc. which
it intends to qualify as an all cargo air carrier pursuant to the applicable
federal laws and regulations. Upon qualification, this company will require
additional capital resources in order to acquire operating aircraft, parts and
equipment and to fund the pre-operating costs of adding operating aircraft
including but not limited to the costs and expenses associated with air crew
training and qualification, insurance, aircraft inspections and other costs.
Theses costs are substantial and the Company anticipates that it will require
additional capital resources which may be provided from secured debt financing
and from the sale of equity and/or debt securities from time to time. The
Company has no present commitments for such financing and there is no assurance
that financing will become available or if available will be available to the
Company on reasonably acceptable terms.
<PAGE>
<TABLE>
<CAPTION>
PART II
<S> <C>
Page
Item 4. Submission of Matters to Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10.95 Stock PurchaseAgreement between Dana
Credit Corporation ("Seller") and
Duluth Master Trust ("Buyer") dated
May 1, 1997 filed herewith as Exhibit
10.95 to Form 10-Q filed October 3,
1997, Commission file No. 014361.
Exhibit 10.96 Secured Recourse Note between Duluth
Master Trust and Duluth Lease, Inc.
("Co-borrowers") and Aim Financial
Corporation ("Lender")dated May 1,
1997 filed herewith as Exhibit 10.96
to Form 10-Q filed October 3, 1997,
Commission file No.014361.
Exhibit 11 Computation re: computation of
earnings per share. 13
(b) Reports on Form 8-K
None
</TABLE>
<PAGE>
Item 6.
(a) Exhibit 11. Earnings Per Share:
Computation of Primary Earnings Per Share. A computation of fully diluted
earnings per share is not presented as it is the same as the computation of
primary earnings per share.
<TABLE>
<CAPTION>
Primary Earnings Per Share:
Three Months Ended July 31,
---------------------------
1997 1996
<S> <C> <C>
Weighted average number of common shares
outstanding 3,709,166 3,406,340
Shares assumed to be issued upon exercising
of stock purchase rights in excess
of 20% repurchase limitation - -
----------- ------------
Average number of common and common
equivalent shares 3,709,166 3,406,340
=========== ============
Net income (loss) $ (690,570) $ 455,291
Increase in interest income (net of tax)
from assumed investment in certificates of
deposit and decrease in interest expense
(net of tax) from assumed of short-term
debt with assumed stock purchase rights'
proceeds in excess of 20% repurchase
limitation - -
----------- ------------
Adjusted net income (loss) $ (690,570) $ 455,291
=========== ============
Net income (loss) per common share $ (0.19) $ 0.13
=========== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fully Diluted Earnings Per Share:
Three Months Ended July 31,
---------------------------
1997 1996
<S> <C> <C>
Weighted average number of common shares
outstanding 3,709,166 3,406,340
Shares assumed to be issued upon exercising
of stock purchase rights in excess
of 20% repurchase limitation - -
----------- ------------
Average number of common and common
equivalent shares 3,709,166 3,406,340
=========== ============
Net income (loss) $ (690,570) $ 455,291
Increase in interest income (net of tax)
from assumed investment in certificates of
deposit and decrease in interest expense
(net of tax) from assumed of short-term
debt with assumed stock purchase rights'
proceeds in excess of 20% repurchase
limitation - -
------------ ------------
Adjusted net income (loss) $ (690,570) $ 455,291
=========== ============
Net income (loss) per common share $ (0.19) $ 0.13
=========== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Primary Earnings Per Share (Additional):
Three Months Ended July 31,
---------------------------
1997 1996
<S> <C> <C>
Weighted average number of common shares
outstanding 3,709,166 3,406,340
Shares assumed to be issued upon exercising
of stock purchase rights in excess
of 20% repurchase limitation 31,876 66,940
----------- ------------
Average number of common and common
equivalent shares 3,741,042 3,473,280
=========== ============
Net income (loss) $ (690,570) $ 455,291
Increase in interest income (net of tax)
from assumed investment in certificates of
deposit and decrease in interest expense
(net of tax) from assumed of short-term
debt with assumed stock purchase rights'
proceeds in excess of 20% repurchase
limitation - -
----------- ------------
Adjusted net income (loss) $ (690,570) $ 455,291
=========== ============
Net income (loss) per common share $ (0.18) $ 0.13
=========== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fully Diluted Earnings Per Share (Additional):
Three Months Ended July 31,
---------------------------
1997 1996
<S> <C> <C>
Weighted average number of common shares
outstanding 3,709,166 3,406,340
Shares assumed to be issued upon exercising
of stock purchase rights in excess
of 20% repurchase limitation 36,562 122,707
----------- ------------
Average number of common and common
equivalent shares 3,745,728 3,529,047
=========== ============
Net income (loss) $ (690,570) $ 455,291
Increase in interest income (net of tax)
from assumed investment in certificates of
deposit and decrease in interest expense
(net of tax) from assumed of short-term
debt with assumed stock purchase rights'
proceeds in excess of 20% repurchase
limitation - -
----------- ------------
Adjusted net income (loss) $ (690,570) $ 455,291
=========== ============
Net income (loss) per common share $ (0.19) $ 0.13
=========== ============
</TABLE>
Notes regarding the calculation of primary and fully diluted earnings per share
pursuant to Regulation S-K, CFR Section 229.601(b)(11):
For the three months ended July 31, 1997 shares issuable under stock purchase
rights are not are not included in primary or fully diluted earnings per share
since the inclusion is anti-dilutive and in 1996 since the dilutive effect is
less than 3%.
Included in the weighted average number of common shares at July 31, 1996 are
387,000 shares issued pursuant to exercise of stock options granted under
consulting agreements. If these shares had been issued at the beginning of the
period, primary and fully-diluted earnings per share would have been $0.13.
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TROPIC COMMUNICATIONS, INC.
(Registrant)
/s/ JOHN E. RAYL
Date: October 3, 1997 By:_____________________________
JOHN E. RAYL
Treasurer
(Principal Financial Officer)
EXHIBIT 10.95
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is dated as of the lst day
of May, 1997 by and between DANA CREDIT CORPORATION, a Delaware corporation
("Seller") and DULUTH MASTER TRUST, an Ohio Business Trust ("Buyer").
WHEREAS, Seller owns all of the issued and outstanding shares of common
stock (the "Stock") of PAPERMILL LEASING, INC., a Delaware corporation (formerly
known as Dana Leasing, Inc., which was formerly owned by DANA LEASE FINANCE
CORPORATION, a wholly owned subsidiary of Seller) (the "Corporation") , which
conducts no business other than (i) the leasing of the Undivided Interest (as
defined in the Lease) to Consolidated Paper of Wisconsin Rapids, Wisconsin
(successor in interest to Lake Superior Paper Industries) ("Lessee") pursuant to
that certain Facility Lease dated December 31, 1987, between Lessee and First
Bank National Association (formerly known as First National Bank of Minneapolis)
, not in its individual capacity, but solely as Owner Trustee ("Owner Trustee"),
as supplemented by Lease Supplement No. 1 on May 5, 1995, (the "Lease") and (ii)
the performance of its obligations under the Transaction Documents (as defined
in the Lease); and
WHEREAS, Seller is willing to sell the Stock of the Corporation to Buyer on
the terms and subject to the conditions set forth herein; and
WHEREAS, Buyer is willing to buy the Stock of the Corporation from Seller
on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
1. Defined Terms. All capitalized terms used herein and not otherwise
defined herein shall have the meaning ascribed to such terms in the Lease.
2. Purchase and Sale. On the Closing Date (as hereinafter defined) and
subject to the terms and conditions hereof, Seller agrees to sell, assign,
transfer and convey to Buyer, and Buyer agrees to purchase and acquire from
Seller, all of the Seller's right, title and interest in and to the Stock of the
Corporation for the Purchase Price (as hereinafter defined).
3. Conditions Precedent.
(a) The obligations of Buyer to purchase the Stock from Seller and
to pay the Purchase Price to Seller at Closing (as hereinafter defined) are
subject to the satisfaction of the following conditions precedent:
(i) Seller shall have delivered to Buyer the certificate
representing the Stock, duly endorsed in blank.
(ii) The representations and warranties of the Seller set
forth in Section 5 hereof shall be true and correct
on the Closing Date.
(iii) All corporate and other proceedings in connection
with the transactions contemplated hereby, and all
documents and instruments incident to such
transactions, including those to be delivered at
Closing pursuant to Section 4(b) hereof, shall be
reasonably satisfactory to Buyer and, if applicable,
shall have been delivered to Buyer.
(iv) The Corporation shall be in good standing under the
laws of the State of Delaware and shall have complied
with all applicable laws and governmental
regulations.
(v) There shall have been no loss, damage or destruction
of the Undivided Interest, the Facility or any part
of either thereof prior to the Closing.
Buyer shall have the right to waive any or all of the foregoing conditions
precedent; however, no waiver by Buyer of any condition precedent shall
constitute a waiver by Buyer of any other condition precedent.
(b) The obligations of Seller to sell the Stock to Buyer at Closing
is subject to the satisfaction of the following conditions precedent:
(i) Seller shall have received the Purchase Price from
Buyer.
(ii) The representations and warranties of the Buyer set
forth in Section 6 hereof shall be true and correct
on the Closing Date.
(iii) All corporate and other proceedings in connection
with the transactions contemplated hereby, and all
documents and instruments incident to such
transactions, including those to be delivered at
Closing pursuant to Section 4(c) hereof, shall be
reasonably satisfactory to Seller and, if applicable,
shall have been delivered to Seller.
Seller shall have the right to waive any or all of the foregoing conditions
precedent; however, no waiver by Seller of any condition precedent shall
constitute a waiver by Seller of any other condition precedent.
4. Closing.
(a) The closing of the transactions contemplated hereby ("Closing")
shall occur on May 1, 1997 at the offices of Winston & Strawn, 35 West Wacker
Drive, Chicago, Illinois, or at such other location or on such other date as
Seller and Buyer shall mutually agree (the "Closing Date").
(b) At the Closing, Seller shall deliver to Buyer:
(i) the certificate representing all of the Stock in
the Corporation, duly endorsed in blank;
(ii) the Certificate of Incorporation and all amendments
thereto, the By-laws, the minute books and all other
corporate records of the Corporation;
(iii) a certificate signed by a duly authorized officer of
Seller, dated the Closing Date, stating that (A) the
representations and warranties of Seller contained in
Section 5 hereof are true and correct on and as of
such date;(B) no event attributable to Seller has
occurred and is continuing which constitutes a default
or an event of default hereunder; and (C) to such
officer's knowledge, no Event of Default, Indenture
Event of Default or Event of Loss has occurred and is
continuing;
(iv) the Lease Transaction Documents and all supplements,
amendments, books, records, schedules, and ancillary
documents pertaining thereto in Seller's possession;
(v) letters of resignation of all officers and
directors of the Corporation;
(vi) a certificate of the Secretary or Assistant
Secretary of Seller, dated the Closing Date,
attaching and certifying as to (A) the Board of
Directors resolution duly authorizing the
execution, delivery and performance by it of this
Agreement, (B) its certificate of incorporation
certified as of a recent date by the Secretary of
State in the jurisdiction of its incorporation,
(C) its by-laws, and (D) the incumbency and
signature of persons authorized to execute and
deliver this Agreement on its behalf;
(vii) a good standing certificate from the appropriate
officer of the state of Seller's incorporation, dated
a recent date, as to the good standing of Seller as a
corporation in such state;
(viii)a good standing certificate from the appropriate
officer of the state of the Corporation's
incorporation, dated a recent date, as to the good
standing of the Corporation as a corporation in such
state; and
(ix) an opinion of in-house counsel to Seller, and of
Winston & Strawn, special counsel to Seller, in each
case in form and substance reasonably satisfactory to
Buyer.
(c) At the Closing, Buyer shall deliver to Seller:
(i) the purchase price for the Stock in the amount of
Thirteen Million, Five Hundred Thousand, Two Hundred
Twenty Dollars ($13,500,220.00) (the "Purchase
Price"), payable by wire transfer of immediately
available funds;
(ii) a certificate signed by a duly authorized officer
of Buyer, dated the Closing Date, stating that (A)
the representations and warranties of Buyer
contained in Section 6 hereof are true and correct
on and as of such date; and (B) no event
attributable to Buyer has occurred and is
continuing which constitutes a default or event of
default hereunder;
(iii) a certificate of the (Secretary or Assistant
Secretary) of Buyer, dated the Closing Date, attaching
and certifying as to (A) the trust agreement duly
authorizing the execution, delivery and performance by
it of this Agreement, (B) its certificate of formation
certified as of a recent date by the Secretary of
State in the jurisdiction of its formation, and (C)
the incumbency and signature of persons authorized to
execute and deliver this Agreement on its behalf;
(iv) a good standing certificate from the appropriate
officer of the state of Buyer's formation, dated a
recent date, as to the good standing of Buyer as a
business trust in such state;
(v) an opinion of Cloud, Koenig. & Owen special counsel to
Buyer, in each case in form and substance reasonably
satisfactory to Seller;
(vi) a non-consolidation opinion from Cloud, Koenig & Owen,
special counsel to Buyer, in form and substance
reasonably satisfactory to Seller; and]
(vii) a written commitment from AIM Financial Corporation
obligating it to provide Buyer funds sufficient to
duly discharge Buyer's obligations assumed pursuant to
Section 7(b) hereof.
(d) Notwithstanding the provisions of subparagraph (c)(i) of this
Section 4, the Purchase Price shall be adjusted by mutual agreement of Seller
and Buyer in the event that (i) the Closing shall occur on a day other than May
1, 1997, (ii) the aggregate amounts outstanding on the Closing Date under the
Notes from the Owner Trustee to the Loan Participants are other than
$18,078,032.77 (inclusive of accrued interest of $699,764.92), or (iii) Buyer
does not discharge its obligations set forth in Section 7(b) hereof.
(e) Notwithstanding the provisions of subparagraphs (c) (i) and
(d) of this Section 4, the Purchase Price shall be increased by an amount (the
"Additional Purchase Price") equal to (i) $400,000 if the Lessee shall deliver
the notice described in Section 13(a) of the Facility Lease of its election to
purchase the Undivided Interest for the amounts described in Section 13(b) of
the Facility Lease, or (ii) the amount described in the succeeding sentence if
any Person (including the Lessee) makes a bona fide offer prior to April 30,
1998, to purchase the Corporation's interest in the Undivided Interest. The
amount of the Additional Purchase Price described in clause (ii) of the
preceding sentence shall equal (A) $400,000, if the "Cash Portion of the Offer
Price,, (as defined below) is greater than or equal to $17,615,000, (B) $0 if
the Cash Portion of the Offer Price is less than or equal to $16,972,000 and (C)
the amount described in the succeeding sentence if the Cash Portion of the Offer
Price is greater than $16,972,000 but less than $17,615,000. The amount of the
Additional Purchase Price described in clause (C) of the preceding sentence
shall equal the product of $400,000 and a fraction, the numerator of which is
equal to the amount by which the Cash Portion of the Offer Price exceeds
$16,972,000 and the denominator of which is equal to $643,000. For purposes of
this subparagraph (e) of this Section 4, the term "Cash Portion of the Offer
Price,, shall equal the aggregate sales proceeds to be received pursuant to the
offer to purchase the Undivided Interest (which shall include the amount of cash
proceeds to be received by the Corporation, and the value of any other
consideration (including the assumption of debt) received by the Corporation,
but shall not include the aggregate amounts (including accrued interest) then
outstanding under the Notes from the Owner Trustee to the Loan Participants or
the amount of the obligations set forth in that certain Settlement Agreement
dated September 30, 1996, between the Corporation and the Lessee). Buyer shall
pay such Additional Purchase Price to Seller within 5 days of its receipt of any
such offer, and if not paid within such period, on such date Seller shall be
entitled to such amount plus interest at a rate per annum equal to fifteen
percent (15%) ("Late Payment Rate") from such date to the date of the payment to
Seller.
(f) The obligation to adjust the Purchase Price pursuant to
subparagraphs (d) and (e) of this Section 4 shall survive the consummation of
the transactions contemplated by this Agreement.
5. Representations and Warranties of Seller. Seller hereby represents and
warrants to Buyer, each of which shall survive the Closing, as follows:
(a) Seller is the lawful and beneficial owner and holder of record
of all of the Stock of the Corporation, free and clear of any and all pledges,
security interests, liens, other encumbrances of any kind or nature whatsoever
other than liens for current taxes, assessments or governmental charges or
levies not yet due. The delivery of the duly endorsed certificate representing
the Stock at the Closing by Seller to Buyer will transfer good and marketable
title to such Stock to Buyer, free and clear of any and all pledges, security
interests, liens, or other encumbrances of any kind whatsoever.
(b) Each of Seller and the Corporation is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of its incorporation, and has all requisite corporate power and authority to own
and lease and operate its properties and carry on its business as now conducted
and, with respect to Seller, to consummate the transactions contemplated hereby.
(c) This Agreement has been duly and validly authorized, executed,
and delivered by Seller and constitutes a legal, valid and binding obligation of
Seller, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, moratorium, fraudulent conveyance, and other
laws affecting the rights and remedies of creditors.
(d) The authorized capital stock of the Corporation consists of one
thousand (1000) shares of common stock, $1 par value, and one thousand (1000)
shares of said common stock of the Corporation are outstanding. The Stock
constitutes all of the issued and outstanding stock of the Corporation and is
validly issued, outstanding, fully paid and non-assessable.
(e) The assets of the Corporation consist of the beneficial interest
(the "Beneficial Interest") in the Trust, which Trust owns the Undivided
Interest equal to a 10.47120419% interest in the Facility.
(f) The Casualty Values, Basic Rent Percentages, Termination Values,
Special Termination Values and Agreed Fair Market Values under the Lease are all
as set forth on Schedule 1 attached hereto. The amortization schedules for the
Notes are set forth on Schedule 2 hereto.
(g) No event of default by the Corporation has occurred and is
continuing under the Lease Transaction Documents, and to Seller's knowledge, no
Event of Default, Indenture Event of Default or Event of Loss has occurred and
is continuing.
(h) A list of the operative documents relating to the Lease is set
forth on ' Schedule 3 (such documents, together with the Lease and the Notes
collectively referred to herein as the "Lease Transaction Documents"). Lease
Transaction Documents which Seller does not have a copy of are listed on
Schedule 4. The Beneficial Interest and Lease Transaction Documents constitute
all of the assets and liabilities of the Corporation. The Corporation owns good
and marketable title to the Beneficial Interest, free and clear of any and all
pledges, security interest, liens, or other encumbrances whatsoever, other than
liens for current taxes, assessments or governmental charges or levies not yet
due, liens created by the Transaction Documents or liens created or incurred by
Lessee. Each of Seller and the Corporation have fully performed all of its
respective obligations under the Lease Transaction Documents to which it is a
party in accordance with their respective terms.
(i) Assuming the accuracy of the representations and warranties of
Buyer set forth in Section 6 hereof, the execution, delivery and performance by
Seller hereof will not violate any provision of any law, any order of any court
or other agency of government, the Certificate of Incorporation or By-laws of
Seller or the Corporation, respectively, or any judgment, award or decree, or
any indenture or any agreement or other instrument to which Seller or the
Corporation, respectively, is a party or by which it or any of its properties or
assets is bound, or result in a breach of or constitute a default under
agreement to which Seller or the Corporation, respectively, is a party or by
which it is bound.
(j) The Corporation has no material liabilities or obligations of
any nature whatsoever, absolute or contingent, to any officer, consultant,
director, employee, contractor, shareholder, or agent of the Corporation or of
the Seller except as provided in the Lease Transaction Documents, and to the
extent such obligations or liabilities exist and are required to be satisfied
prior to the Closing Date, they have been paid or satisfied in full.
(k) There are no actions, suits or proceedings pending or, to the
knowledge of Seller, threatened against Seller or the Corporation, or in
connection with the Lease, the Beneficial Interest, the Undivided Interest, the
Facility or any Lease Transaction Documents, before any court or governmental
authority, that if determined adversely would have a material adverse effect on
the property or financial condition of the Seller or an adverse effect on the
property or financial condition of the Corporation or that would prevent or
hinder the consummation of the transactions contemplated by this Agreement.
(1) NOTWITHSTANDING ANY OTHER PROVISION CONTAINED HEREIN TO THE
CONTRARY, SELLER EXPRESSLY DISCLAIMS, AND SHALL NOT BE DEEMED TO HAVE MADE, ANY
REPRESENTATION, WARRANTY OR AGREEMENT, EXPRESS OR IMPLIED, AS TO CONDITION,
VALUE, DESIGN, OPERATION, MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS,
CONSTRUCTION, PERFORMANCE, OR FITNESS FOR USE OF THE FACILITY OR ANY PART
THEREOF (INCLUDING FITNESS FOR A PARTICULAR PURPOSE), AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF
OBLIGATIONS WITH RESPECT TO THE FACILITY OR ANY PART THEREOF BASED ON STRICT
LIABILITY IN TORT, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE
FACILITY OR ANY PART THEREOF OR ANY OTHER REPRESENTATION, WARRANTY OR AGREEMENT
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE FACILITY OR ANY PART
THEREOF.
(m) Seller has not directly or indirectly offered any security for
sale to, or solicited any offer to acquire any such security from, or sold any
such security to, any person in violation of the registration provisions of the
Securities Act of 1933 (as amended, the "Securities Act"), and Seller has not
taken any action which would subject any such interest to the registration
requirements of Section 5 thereof, and Seller will not directly or indirectly
make any such offer, solicitation or sale in violation of such provisions of the
Securities Act; provided, however, that the foregoing shall not be deemed to
impose on Seller any responsibility with respect to any such offer, sale or
solicitation by or on behalf of Buyer.
6. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Seller, each of which shall survive the Closing, as follows:
(a) Buyer is a business trust duly organized and validly existing
and in good standing under the laws of the state of its formation and has all
requisite power and authority to own, lease and operate its properties, to carry
on its business as now being conducted, and to consummate the transactions
contemplated hereunder.
(b) Assuming the accuracy of the representations and warranties of
Seller set forth in Section 5 hereof, the execution, delivery and performance by
Buyer hereof will not violate any provision of any law, any order of any court
or other agency of government, the trust agreement or other formation documents
of Buyer, or any judgment, award or decree, or any indenture or any agreement or
other instrument to which Buyer is a party or by which it or any of its
properties or assets is bound, or result in a breach of or constitute a default
under any agreement to which Buyer is a party or by which it is bound.
(c) This Agreement has been duly and validly authorized, executed,
and delivered by Buyer and constitutes a legal, valid and binding obligation of
Buyer, enforceable in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, moratorium, fraudulent conveyance, and other laws
affecting the rights and remedies of creditors.
(d) There is no action, suit or proceeding pending or, to the
knowledge of Buyer, threatened against Buyer before any court or governmental
authority.
(e) Buyer is not intending to purchase and will not purchase the
Stock with the assets of an employee benefit plan (or its related trust) as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended from time to time, or with the assets of any plan (or related trust)
as defined in Section 4975(e) (1) of the Code.
(f) Buyer is acquiring, and will acquire, the Stock for its own
account for investment and not with a view toward, or for sale, resale or other
transfer in connection with, any distribution thereof. Buyer understands and
agrees that sale, resale, transfer or other distribution of the Stock or any
portion thereof or beneficial interest therein may only be made in compliance
with the Securities Act and other applicable laws.
(g) Buyer has not directly or indirectly offered any security for
sale to, or solicited any offer to acquire any such security from, or sold any
such security to, any person in violation of the registration provisions of the
Securities Act, and Buyer has not taken any action which would subject any such
interest to the registration requirements of Section 5 thereof, and Buyer will
not directly or indirectly make any such offer, solicitation or sale in
violation of such provisions of the Securities Act; Provided, however, that the
foregoing shall not be deemed to impose on Buyer any responsibility with respect
to any such offer, sale or solicitation by or on behalf of Seller.
7. Certain Obligations.
(a) Except as otherwise provided in Section 8 hereof, if the
transactions contemplated hereby are consummated and Buyer or the Corporation
shall receive any amount under the Lease Transaction Documents or otherwise
relating to the transactions contemplated thereby to which Seller is properly
entitled as indemnitee or otherwise with respect to the period on or prior to
the Closing on the Closing Date ("Prior Claims"), Buyer or the Corporation shall
promptly remit such amount to Seller (together with, to the extent not paid over
within ten business days after receipt of such payment and determination that
Seller is entitled to the same, interest at a rate per annum equal to the Late
Payment Rate from such date to the date of payment to Seller) and until so
delivered to Seller any such amount shall be held in trust for the benefit of
Seller. Except as otherwise provided in Section 8 hereof, if the transactions
contemplated hereby are consummated and Seller shall receive any amount relating
the Lease Transaction Documents or otherwise relating to the transactions
contemplated thereby (other than any amount received in respect of a Prior
Claim) to which Buyer or the Corporation is entitled thereunder with respect to
the period after the Closing on the Closing Date, Seller shall promptly upon
receipt of such payment remit such amount to the Corporation or Buyer (together
with, to the extent not paid over within ten business days after receipt of such
payment and the determination that Buyer or the Corporation is entitled to the
same, interest at the Late Payment Rate from such date to the date of payment to
Buyer or the Corporation), and until so delivered to the Buyer or the
Corporation any such amount shall be held in trust by Seller for the benefit of
the Buyer or the Corporation, as the case may be.
(b) Buyer shall pay, and hereby assumes the obligations of the
Corporation (and of Dana Lease Finance Corporation as guarantor of certain of
the obligations of the Corporation) pursuant to that certain Settlement
Agreement dated September 30, 1996 between the Corporation and the Lessee,
including the obligations to make the payments referred to in Sections 7 and 8
thereof if and to the extent such payments are due.
(c) Buyer shall cause the Corporation to comply with its obligations
under and shall not take any action in violation of Sections 3(b), 12(b), 12(c)
and 19(f) of the Financing Agreement, Sections 12.12, 12.13 and 4.01 of the
Indenture or under the Trust Agreement without the prior written consent of
Seller and shall not otherwise take any action or permit any action to be taken
which would trigger liability under Dana Lease Finance Corporation's guaranty of
the obligations of the Corporation.
8. Certain Tax Matters.
(a) Buyer and Seller recognize and agree that as between themselves, for
purposes of federal, state and local tax laws only, (i) Seller will, if the
transactions contemplated hereby are consummated, continue to be entitled to all
benefits accrued and all rights vested, and shall, as between the parties to
this Agreement, remain liable for all tax obligations incurred by the
Corporation of any nature whatsoever, in each case with respect to the period
ending as of the time of Closing on the Closing Date (the "Pre-Closing Period"),
including without limitation rights to indemnification by Lessee for taxes
relating to such Pre-Closing Period under the Lease Transaction Documents; and
(ii) if the transactions contemplated hereby are consummated, the Corporation
and Buyer shall be entitled, respectively, to all benefits accrued and all
rights vested and shall, as between the parties to this Agreement, be liable for
all tax obligations incurred by the Corporation, in each case with respect to
the period after the PreClosing Period (the "Post-Closing Period"), and shall be
entitled, without limitation, to all rights, if any, to indemnification for
taxes relating to such Post-Closing Period under the Lease Transaction
Documents. Buyer and Seller agree that, in all matters relating to any such
rights and obligations, each shall act in a manner consistent with, and not in
derogation of, any rights of Seller, Buyer or the Corporation hereunder or under
the Lease Transaction Documents with respect to the Pre-Closing Period or the
Post-Closing Period, as the case may be, and Buyer shall, with respect to the
rights of Seller, cause the Corporation to act in a manner consistent with the
foregoing. Any refunds, credits or other tax savings with respect to taxes
properly attributed to the Pre-Closing Period shall be the property of the
Seller and shall be paid over to the Seller by the Buyer or the Corporation.
(b) Neither Seller nor the Buyer represents or warrants to the other
party, and no inference shall be drawn from any provisions hereof that either
party represents or warrants to the other party, that the transactions
contemplated by the Lease Transaction Documents will have any particular federal
or state income tax or other tax consequences.
(c) Seller shall have the exclusive obligation and authority to file
or cause to be filed all U.S. federal and state tax returns that are required to
be filed with respect to the income, properties and operation of the Corporation
or predecessors thereto, and pay any tax shown to be due thereon, for all
taxable years or other taxable period ending prior to the Closing on the Closing
Date. Buyer shall have the exclusive obligation and authority to file or cause
to be filed all tax returns that are required to be filed with respect to the
income, properties, and operation of the Corporation or any successor thereto,
and pay any tax shown to be due thereon, for any taxable year or other taxable
period after the Closing on the Closing Date. Buyer and Seller agree that (i)
the sale and purchase of the Stock pursuant to this Agreement will be reported
for all income tax purposes as a sale by the Seller and a purchase by the Buyer
of all of the issued and outstanding common stock of the Corporation for the
Purchase Price, and consistent with the Corporation being the owner of the
Undivided Interest on the Closing Date, and (ii) that neither Seller nor Buyer
shall make an election, or request that the other party make an election,
pursuant to Section 338(h) (10) of the Code or otherwise, to treat such
transaction as a sale by the Corporation of any or all of its assets, or to
treat the Corporation as not owning the Undivided Interest on the Closing Date.
(d) Seller and its duly appointed representative shall have the
exclusive authority to control any audit or examination by any taxing authority,
exercise control over the contest rights of the Lessee set forth in the Lease
Transaction Documents, initiate any claim for refunds, amend any tax return, and
accounts, resolve and defend against any assessment for additional taxes, notice
of tax deficiency or other adjustment of taxes of or relation to any liability
of the Corporation for taxes for any Pre-Closing Period, and Seller shall be
entitled to any tax refund relating to any PreClosing Period. Buyer and its duly
appointed representative shall have the exclusive authority to control any audit
or examination by any taxing authority, exercise control over the contest rights
of the Lessee set forth in the Lease Transaction Documents, initiate any claim
for refunds, amend any tax return, and accounts, resolve and defend against any
assessment for additional taxes, notice of tax deficiency or other adjustment of
taxes of or relation to any liability of the Corporation for taxes for any
Post-Closing Periods.
(e) Following the Closing Date, Buyer shall make available to Seller
such information and data in the custody of Buyer or the Corporation which
relates to the Corporation and is required by Seller in order to discharge its
obligations hereunder with respect to completing tax returns relating to the
Corporation for the Pre-Closing Period. Buyer and Seller shall also provide each
other with such assistance as may reasonably be requested by either of them in
connection with the preparation of any other tax return or report, any audit or
other examination by any taxing authority, or any judicial or administrative
proceedings relating to any tax liability. The party requesting assistance
hereunder shall reimburse the other for reasonable out-of-pocket expenses
incurred in providing such assistance.
9. Indemnification.
(a) Seller hereby agrees and undertakes to indemnify and hold Buyer, its
officers, directors, shareholders, employees, representatives and agents
(hereinafter the "Buyer Indemnitees") harmless from and against, and will
reimburse each Buyer Indemnitee on demand for, any payment, loss, cost or
expense (including, without limitation, reasonable counsel fees and expenses)
made or incurred by or asserted against any such Buyer Indemnitee at any time
arising out of (i) any and all liabilities, obligations, claims, damages or
deficiency resulting from any omission, misrepresentation, breach of a
representation or warranty, or failure to perform any term, provision, covenant
or agreement on the part of Seller contained in this Agreement, or from any
misrepresentation in, or omission, from or act or failure to act in connection
with, any certificate, document, statement or other instrument furnished or to
be furnished to Buyer pursuant to this Agreement; or (ii) any and all
liabilities, obligations, claims, damage or deficiency arising out of or related
to any violation, omission, act or failure to act, by the Corporation for the
PreClosing Period.
(b) Buyer hereby agrees and undertakes to indemnify and hold Seller,
its officers, directors, shareholders, employees, representatives and agents
("Seller's Indemnitees") harmless from and against, and will reimburse each
Seller's Indemnitee on demand for, any payment, loss, cost or expense
(including, without limitation, reasonable counsel fees and expenses) made or
incurred by or asserted against any such Seller Indemnitee at any time arising
out of (i) any and all liabilities, obligations, claims, damages or deficiency
resulting from any omission, misrepresentation, breach of a representation or
warranty, or failure to perform any term, provision, covenant or agreement on
the part of Buyer contained in this Agreement, or from any misrepresentation in,
or omission, from or act or failure to act in connection with, any certificate,
document, statement or other instrument furnished or to be furnished to Seller
pursuant to this Agreement; or (ii) any and all liabilities, obligations,
claims, damage or deficiency arising out of the Corporation's performance or
failure to perform or acts or events relating to the PostClosing Period (except
to the extent attributable to acts of or omissions by the Corporation, or events
which occurred, in the PreClosing Period).
(c) The obligations to indemnify and hold harmless pursuant to this
Section 9 shall survive the consummation of the transactions contemplated by
this Agreement.
10. Miscellaneous.
(a) Each of the parties represents and warrants to the other party
that has not engaged a broker in connection with the transactions contemplated
by this Agreement, and no person or entity engaged by such party has any valid
claim against any of the parties hereto for a brokerage commission, finders fee,
or other like payment.
(b) Except as otherwise stated in this Agreement, each party agrees
to be responsible for its own legal expenses and all other expenses incurred by
such party in connection with the negotiation, preparation and execution of this
Agreement.
(c) This Agreement constitutes the entire understanding of the
parties hereto with respect to the subject matter hereof, and supersedes all
other agreements, including without limitation that letter agreement dated as of
April 17, 1997 between Dana Lease Finance Corporation and Tropic Communications
Inc. and no provision hereof shall be amended or waived in the absence of a
writing duly executed by the parties hereto.
The provisions of this Agreement are severable.
(d) The section headings contained in this Agreement are for
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
(e) Each notice required or permitted hereunder shall be in writing
and shall be deemed to have been duly given if delivered or mailed (registered
or certified mail, postage prepaid, return receipt requested), to the parties at
the following addresses:
If to Seller: Dana Credit Corporation
Courier: 1801 Richards Road Toledo, Ohio 43607
Attn: Operations
Mail: P. 0. Box 906 Toledo, Ohio 43697
Attn: Operations
If to Buyer: Duluth Master Trust
Suite 208
3021 Bethel Road
Columbus, Ohio 43221
Attn: Co-Trustees
All such notices shall be deemed to have been given upon receipt, as established
in the case of mailed notice by the return receipt.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois, without regard to its conflicts of law
rules.
(g) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all of which will constitute one and the
same instrument.
(h) This Agreement shall not be assignable by either party without
the express written consent of the other party. Subject to the immediately
preceding sentence, this Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the parties hereto.
(i) Except for the notice of name change and address for contacts to
be delivered by the Seller to the Owner Trustee simultaneously with the
consummation of the transactions contemplated herein, Buyer and Seller agree
that (A) during the period prior to September 1, 1997 to hold confidential in
accordance with this paragraph (i) the consummation of the transactions
contemplated herein and the transfer of the Stock to Buyer and (B) with respect
to any information delivered pursuant to this Agreement, and any other
information obtained by Buyer or Seller as a result of any examination or
discussion contemplated under this Agreement, to the extent that such
information has not theretofore otherwise been disclosed in such a manner as to
render such information generally available to the public and that such
information has been clearly marked or labeled as being confidential
information, each party hereto will employ reasonable procedures designed to
maintain the confidential nature of the information therein contained, provided,
that anything herein contained to the contrary notwithstanding, each party
hereto may disclose or disseminate such information to: (a) its Affiliates and
its and their directors, employees, agents, attorneys and accountants who would
ordinarily have access to such information in the normal course of the
performance of their duties; (b) such third parties as each party hereto may, in
its discretion, deem reasonably necessary or desirable in connection with or in
response to (i) compliance with any law, ordinance or governmental order,
regulation, rule, policy, subpoena, investigation, regulatory authority
(including, without limitation the National Association of Insurance
Commissioners) request or requests, or (ii) any order, decree, judgment,
subpoena, notice of discovery or similar ruling or pleading issued, filed,
served or purported on its face to be issued, filed or served (x) by or under
authority of any court, tribunal, arbitration board of any governmental agency,
commission, authority, board or similar entity or (y) in connection with any
proceeding, case or matter pending (or on its face purported to be pending)
before any court, tribunal, arbitration board or any other governmental
authority; (c) to any prospective successor or assign which has agreed with such
party that, upon disclosure of such information, such prospective successor or
assign shall be bound by the provisions hereof; (d) any Person in order to
enforce the rights of any party hereto under this Agreement; and (e) any Person
if such information is publicly available or readily ascertainable from public
sources; and, provided further, that no party hereto shall be liable to any
Person for damages for any failure by such party to comply with the provisions
of this paragraph, except in any case involving gross negligence, willful
misconduct or fraudulent misconduct.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
Seller and by Buyer as the date first above written.
DANA CREDIT CORPORATION,
as Seller
By:
Name:
Title:
DULUTH MASTER TRUST,
as Buyer
By:
Name:
Title:
EXHIBIT 10.96
SECURED RECOURSE NOTE
$13,500,220.00
Chicago, Illinois
May 1, 1997
FOR VALUE the undersigned DULUTH MASTER TRUST, an Ohio business trust
(-Borrower'), and DULUTH LEASE, INC., a Delaware corporation ("Co-Borrower"),
promise to pay to the order of AIM FINANCIAL CORPORATION (together with any
other holder hereof, "Lender") at its office at 30 North LaSalle Street, Suite
4030, Chicago, Illinois 60602-2588 or at such other place as Lender may from dm
to time d te in writing, without grace, the principal sum of Thirteen Million
Five Hundred Thousand Two Hundred Twenty and 00/100 Dollars ($13,500,220.00),
together with interest on the unpaid balance of the principal from time to time
outstanding at rate equal to seventeen and seven hundred twenty-three hundredths
percent (17.723 %) per annum (the 'Loan Rate-).
After the earlier of (i) the Maturity Date (as hereafter defined), whether
by acceleration or otherwise, or (d) the occurrence of any Event of Default (as
hereafter defined) the total unpaid indebtedness hereunder shall bear interest
at the rate of eighteen percent (I 8 %) per annum (the "Default Rate").
Commencing on September 1, 1997, and semi-annually thereafter through and
including March 1, 2001 (the 'Maturity Date'), Borrower, and when applicable
Co-Borrower, shall make successive semi-annual installment payments of principal
and interest in an amount as set forth in Exhibit A hereto ("Debt Amortization
Schedule")
The entire balance of this Note than outstanding, plus any accrued and
unpaid interest thereon shall be due and payable on March 1, 2001, or such
earlier date on which said amount shall become due and payable on account of
acceleration by Lender or otherwise pursuant to the terms hereof of the Loan and
Security Agreement defined below. Borrower and Co-Borrower promise to pay to
Lender principal and interest in the amounts and at the times provided above.
This Note is referred to in the DULUTH MASTER TRUST and DULUTH LEASE, INC.
Loan and Security Agreement attached hereto as Exhibit 1. (hereinafter the 'Loan
and Security Agreement') and evidences that portion of the Indebtedness made by
Lender to Borrower and Co-Borrower thereunder. This Note is entitled to the
benefits provided for in the Loan and Security Agreement and is secured by all
rights, title and interest in and to all chattel paper, the Equipment and/or
assets more particularly described in the Facility Lease and Lease Supplement
No. I attached hereto as Exhibit 2, as well as all rights and remedies accruing
under the Loan and Security Agreement including, but not limited to, all monies
due or will become due. The Loan and Security Agreement provides for the
acceleration of the maturity of this Note upon the occurrence of certain events
and other pertinent terms. All payments made hereunder shall.-be applied first
to interest, second to late charges or other charges as provided in the Loan and
Security Agreement and third to principal. All amounts owing under this Note
shall be payable in lawful money of the United States of America which, as at
the time of payment, shall be legal tender for the payment of public and private
debts and shall be payable without relief or benefit of any valuation, stay,
appraisement, extension or redemption laws now or hereafter existing. Unless
otherwise defined herein, capitalized terms used herein shall have the same
meanings to such terms in the Loan and Security Agreement.
Borrower and Co-Borrower agree to pay all amounts due, or to become due,
under this Note, without regard to whether Borrower and Co-Borrower have
received payments from the Lessee identified in the Facility Lease and Lease
Supplement No. 1 which secure this Note
In the event any payment of principal and interest due hereunder is not
paid within five (5) Business Days after its originally scheduled due date then
Borrower and Co-Borrower agree that the Note shall be in default and further
agree that the term of the Note shall be accelerated causing the entire amount
set forth in the Note to become due and payable. In addition, the Borrower and
Co-Borrower agree to pay interest on the unpaid accelerated balance at the
Default Rate as defined in the Loan and security Agreement, with said interest
beginning to accrue on the scheduled due date and continuing until the date
payment of such amount is made.
Borrower and Co-Borrower agree that following the transfer of Dana Lease
Finance Corporation's interest in Papermill Leasing, Inc. f/k/a/ Dana Leasing,
Inc. to Duluth Master Trust, should a third party assume Borrower's and
Co-Bormwer's obligations due under this Note, purchase Duluth Leasing, Inc.'s
interest in Duluth Master-.Trust, or in any other way become obligated to make
the payments set forth in Exhibit A of this Note with the intention of making
the payments as set forth in Exhibit A, said third party, prior to -forwarding
funds required pursuant to the payment or payments then due, shall pay
$1,000,000.00 to AIM Financial Corporation. Borrower and Co-Borrower agree that
they have not anticipated payment of this Note in a manner consistent with
Exhibit A, and that Exhibit A has been drafted merely to facilitate the logical
depreciation of the Equipment and/or assets which secure the Note. The Borrower
and Co-Borrower further understand and agree that Lender has provided the funds
required by Borrower and Co-Borrower through short-term financing arrangements
with Lender's financial institution and that extending the pay-out of this Note,
under terms similar to those set forth in Exhibit A, will require Lender to
alter its arrangement with its financial institution and will increase Lender's
costs by $1,000,000.00.
Borrower and Co-Borrower waive presentment and demand for payment,
dishonor, notice of dishonor, protest and notice of protest of this Note. The
provisions of this Note shall be binding upon Borrower and Co-Borrower and their
successors and assigns and shall inure to the benefit of Lender and its
successors and assigns.
THE LOAN EVIDENCED HEREBY. HAS BEEN MADE, AND THIS NOTE HAS BEEN DELIVERED AT
CHICAGO, ILLINOIS AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF ILLINOIS AND THE VALIDITY, INTERPRETATION, ENFORCEMENT-AND
EFFECT OF THEREOF SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS.
BORROWER AND CO-BORROWER HEREBY KNOWINGLY, WILLINGLY AND VOLUNTARILY CONSENT TO
THE JURISDICTION AND VENUE OF ALL -STATE AND FFDERAL COURTS IN SAID STATE
LOCATED IN COOK COUNTY, ILLINOIS. BORROWER AND CO-BORROWER HEREBY KNOWINGLY AND,
VOLUNTARILY WAIVE ANY RIGHT TO PERSONAL SERVICE OF PROCESS IN ANY ACTION BROUGHT
IN CONNECTION WITH OR ARISING OUT OF THIS NOTE AND CONSENT TO,-SERVICE OF
PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO
THE LAST KNOWN ADDRESS OF THE BORROWER AND CO-BORROWER WHICH SERVICE SHALL BE
DEEMED TO HAVE OCCURRED 'TEN (10) DAYS FROM THE DATE OF MAILING. THE BORROWER
AND CO-BORROWER KNOWINGLY WILLINGLY AND VOLUNTARELY WAIVE ANY RIGHT TO ASSERT
THAT ANY ACTION BROUGHT IN CONNECTION WITH OR ARLSING.,OUT.-OF THIS NOTE IN SUCH
COURT IS IN AN IMPROPER VENUE.
If this Note is not dated when executed by Borrower and Co-Borrower,
Lender is hereby authorized, without notice to Borrower and Co-Borrower to date
this Note as of the date when the loan evidenced hereby is made. Wherever
possible each provision of this Note shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Note
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
Note.
DULUTH MASTER TRUST
DULUTH LEASE, INC.
<PAGE>
ASSIGNMENT AGREEMENT
Duluth Master Trust, an Ohio business trust, ('Assignor'), with its
principal place of business located at 3021 Bethel Road, Suite 208, Columbus,
Ohio 43220, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and provided by AIM Financial Corporation,
('Assignee'), with its principal place of business at 30 North LaSalle Street,
Suite 4030, Chicago, Illinois 60602-2588, hereby and pursuant to the Duluth
Master Trust and Duluth Lease, Inc. Low and Security Agreement (hereinafter
referred to as the Lease and Security Agreement") (as defined below) assigns,
transfers, and sets over to Assignee, its successors and assigns, all of
Assignor's rights, title and interest in and to all chattel paper, the Facility
Lease dated December 31, 1987 and the Lease Supplement No. I dated May 5, 1995,
both entered into by and between Lake Superior Paper Industries, as Lessee, and
First Bank National Association f/ka First National Bank of Minneapolis, acting
in its capacity as Owner Trustee, as Owner, as well as all rights and remedies
accruing under said Facility Lease and Lease Supplement, including, but not
limited to, all monies due or to become due under and all Equipment and/or
assets more particularly described in the Facility Lease and Lease Supplement
No. 1, of which Assignor is lessor, assignee or secured party. A copy of the
Loan and Security Agreement is attached hereto as Exhibit 1. A copy of the
Facility Lease and Supplement No. 1 is attached hereto Exhibit 2.
This Assignment is made pursuant to the provisions of the Master Trust and
Duluth Lease, Inc. Lease and Security Agreement, dated as of May 1, 1997,
between Assignor and Assignee. Unless otherwise defined herein, capitalized
terms used herein shall have the same meanings herein ascribed to such terms in
the Loan and Security Agreement. Subject to the terms and conditions of the Loan
and Security Agreement, this Assignment shall be irrevocable with respect to the
Facility Lease and Lease Supplement No. I assigned hereunder until such time as
all obligations of Assignor to Assignee under the Note have been satisfied in
full. With respect to the Facility Lease and Lease Supplement No. 1, Assignor
shall not have, in whole or in part, any right of abatement, reduction, setoff,
defense, counterclaim, interruption, deferment or recoupment for any claim
against Assignee or the holder of any Note. This Assignment shall not relieve
Assignor from any of its duties and obligations under the Facility and Lease
Supplement No. I attached hereto as Exhibit 2.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be executed in
its name by its duly authorized representative on the 1st day of May1997.
DULUTH MASTER TRUST
DULUTH LEASE, INC.
<PAGE>
ASSIGNMENT AGREEMIENT
Duluth Master Trust, an Ohio business trust, ("Assignor') with its
principal place of business located at 3021 Bethel Road, Suite 208, Columbus,
Ohio 43220, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and provided by AIM Financial Corporation,
('Assignee'), with its principal place of business at 30 North LaSalle Street,
Suite 4030, Chicago, Illinois 60602-2588, hereby and pursuant to the Duluth
Master Trust and Duluth Leasing, Inc. Loan and Security Agreement (as denoted
below) assigns, transfers, and sets over to Assignee, its successors and
assigns, all of Assignor's rights, title and interest in and to the proceeds,
any insurance policies including, but not limited to, any commercial property
coverage insurance policy now in effect as to the Equipment and/or assets more
particularly described in Facility . Lease and Lease Supplement No. 1. A copy of
the Loan and Security Agreement is attached hereto as Exhibit 1. Copies of the
above-referenced Facility Lease and Lease Supplement No. I as well as the
effective insurance policy are attached hereto and collectively as Exhibit 1.
This Assignment is made pursuant to the provisions of the Duluth Master
Trust and Duluth Lease, Inc. Loan and Security Agreement, dated as of May 1,
1997. Unless otherwise defined herein, capitalized terms used herein shall have
the same meanings herein ascribed to such terms in the Loan and Security
Agreement. Subject to the terms and conditions of the above-referenced Loan and
Security Agreement, this Assignment shall be irrevocable with respect to the
insurance policies now in effect with regard to the Equipment more particularly
described in the Facility Lease and Lease Supplement No. 1, assigned hereunder,
until such time as all obligations of Assignor to Assignee under the Note have
been paid in full. With respect to the insurance policies now in effect with
regard to the Equipment more particularly described in the Facility Lease and
Lease Supplement No. 1, Assignor shall not have, in whole or in part, any right
of abatement, reduction, setoff, defense, counterclaim, interruption, deferment
or recoupment for any claim against Assignee or the holder of any note(s). This
Assignment shall not relieve Assignor from any of its duties and obligations
under the Facility Lease and Lease Supplement No. 1 attached hereto as Exhibit
2.
IN WITNESS WHEREOF, Assignor has caused, this Assignment to be executed in
its name by its duly authorized representative on the 1st day of May, 1997.
DULUTH MASTER TRUST
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL SUMMARY INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE STATEMENT OF CONSOLIDATED OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000791027
<NAME> Tropic Communications, Inc.
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<EXCHANGE-RATE> 1
<CASH> 1,519
<SECURITIES> 13,500,220
<RECEIVABLES> 18,832
<ALLOWANCES> (2,005)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 734,532
<DEPRECIATION> (406,331)
<TOTAL-ASSETS> 14,035,056
<CURRENT-LIABILITIES> 15,540,098
<BONDS> 0
0
0
<COMMON> 556,735
<OTHER-SE> (2,061,777)
<TOTAL-LIABILITY-AND-EQUITY> 14,035,056
<SALES> 0
<TOTAL-REVENUES> 134,259
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 185,971
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 638,858
<INCOME-PRETAX> (690,570)
<INCOME-TAX> 0
<INCOME-CONTINUING> (690,570)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (690,570)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
