UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
SCHEDULE TO
(RULE 14D-100)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
iLINC COMMUNICATIONS, INC.
(Name of Subject Company and Filing Person (Issuer))
12% Convertible Subordinated Notes Due 2012
(Title of Class of Securities)
451724108
(CUSIP Number of Class of Securities)
James M. Powers, Jr.
Chairman of Board of Directors, President and Chief Executive Officer
iLinc Communications, Inc.
2999 N. 44th Street, Suite 650
Phoenix, AZ 85018
(602) 952-1200
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Filing Person)
COPY TO:
Richard S. Roth, Esq.
Jackson Walker L.L.P.
1401 McKinney St, Suite 1900
Houston, TX 77010
(713) 752-4209
CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE
$5,625,000 $672.44**
* Calculated solely for purposes of determining the filing fee. THE TRANSACTION
VALUE ASSUMES THE EXCHANGE OF $5,625,000 IN PRINCIPAL AMOUNT OF THE 12%
CONVERTIBLE SUBORDINATED NOTES DUE 2012 THAT ARE SUBJECT TO THE EXCHANGE OFFER
AND THE AMENDMENT TO WARRANTS TO PURCHASE 5,625,000 SHARES OF COMMON STOCK OF
ILINC COMMUNICATIONS, INC., THE APPROXIMATE AGGREGATE VALUE OF WHICH AS OF MARCH
1, 2005 ($88,201) IS CALCULATED USING THE BLACK-SCHOLES OPTION PRICING MODEL.
** PREVIOUSLY PAID
[ ] Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
----------------------------------------- --------------------------------
Amount Previously Paid: Filing Party:
----------------------------------------- --------------------------------
Form or Registration No.: Date Filed:
----------------------------------------- --------------------------------
[ ] Check the box if the filing relates solely to preliminary communications
made before commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[ ] Third party tender offer subject to Rule 14d-1.
[X] Issuer tender offer subject to Rule 13e-4.
[ ] Going private transaction subject to Rule 13e-3.
[ ] Amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of the tender offer: [ ]
THIS AMENDMENT NO. 1 TO SCHEDULE TO AMENDS ONLY THE ITEMS SET FORTH BELOW.
ITEM 1. SUMMARY TERM SHEET.
The information set forth in the Supplement No.1 to the Offer to Exchange
("Summary"), dated March 10, 2005, and attached hereto as Exhibit (a)(1)(iv)
(the "Supplement"), is incorporated herein by reference.
ITEM 2. SUBJECT COMPANY INFORMATION.
(b) The information set forth in the Supplement ("Summary" and "Description of
Capital Stock") is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the Supplement ("The Exchange Offer" and
"Material United States Federal Income Tax Consequences") is incorporated herein
by reference.
ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the Supplement ("The Exchange Offer") is
incorporated herein by reference.
ITEM 10. FINANCIAL STATEMENTS.
(a) The information set forth in the Supplement ("Selected Historical Financial
Data") is incorporated herein by reference.
ITEM 12. EXHIBITS.
(a)(1)(iv) Supplement No. 1 to the Offer to Exchange dated March 10, 2005
(a)(1)(v) Amended Form of Letter of Transmittal
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
iLinc Communications, Inc.
By: /s/ James M. Powers, Jr.
---------------------------
Name: James M. Powers, Jr.
Title: Chairman of the Board of Directors, President and Chief Executive Officer
March 10, 2005
SUPPLEMENT No. 1 TO OFFER TO EXCHANGE DATED MARCH 1, 2005
iLINC COMMUNICATIONS, INC.
OFFER TO EXCHANGE
COMMON STOCK AND AMENDMENTS
TO $3.00 PER SHARE WARRANTS
FOR UP TO
$5,625,000 ORIGINAL PRINCIPAL AMOUNT OF
12% CONVERTIBLE SUBORDINATED NOTES DUE 2012
We are supplementing our Offer to Exchange dated March 1, 2005 as set forth in
this Supplement No. 1 to the Offer to Exchange.
We are offering to exchange 2,500 shares of our Common Stock ("Common
Stock") and to amend the exercise period, exercise price and redemption price of
outstanding $3.00 Warrants (as defined below) held by tendering holders for each
$1,000 original principal amount of currently outstanding 12% Convertible
Subordinated Notes, due 2012, of iLinc Communications, Inc., CUSIP No. 451724108
(the "Notes"). The Notes were issued in 2002 as part of a private placement (see
description below) of Notes and warrants to acquire shares of Common Stock on or
before March 29, 2005 with an exercise price of $3.00 per share (the "$3.00
Warrants"). Accrued and unpaid interest due on the outstanding Notes from
January 1, 2005 (the prior payment date) to March 29, 2005 equals $162,739.
Accrued and unpaid interest on tendered Notes from January 1, 2005 through the
date tendered Notes are accepted for payment in this Exchange Offer, will be
paid in cash to tendering Note holders.
Subject to the terms and conditions of the Exchange Offer, we will issue
shares of Common Stock in exchange for up to $5,625,000 aggregate principal
amount of Notes, representing 100% of the outstanding principal amount of Notes,
that are properly tendered and not withdrawn prior to the expiration of the
Exchange Offer. Under the existing terms of the Notes, each $1,000 original
principal amount of the Notes currently is convertible at the option of the
holder into 1,000 shares of Common Stock. The last reported sale price of the
Common Stock on March 9, 2005, the last trading day prior to the date of this
Supplement, was $0.40 per share. The 52-week range of the closing sales price of
Common Stock for the period ending the date of this document is $1.37 to $0.35
per share. Each Noteholder must elect to exchange his Note either in its
entirety or, if less than the full face value, in increments of at least
$25,000.
As a part of a private placement in 2002 of the Notes, the investors
purchased units consisting of Notes and $3.00 Warrants to purchase one share of
Common Stock for each $1.00 original principal amount of Notes purchased. The
$3.00 Warrants currently expire on March 29, 2005. Those Noteholders who
participate in this Exchange Offer will receive, in addition to the
aforementioned Common Stock, an extension of the exercise period of their $3.00
Warrants to March 29, 2006, the exercise price will be reduced to $1.20 per
share and the redemption price will be reduced to $2.40 per share (the "$3.00
Warrant Amendments"). Should a Noteholder decline to participate in this
Exchange Offer, the exercise period of their $3.00 Warrants will expire by their
terms on March 29, 2005. Should a Noteholder elect to exchange a portion of
their Notes, then the $3.00 Warrant Amendments will apply only to a
corresponding portion of their $3.00 Warrants (such number of shares underlying
the $3.00 Warrants equal to the same percentage of the total original principal
amount of Notes held by a Noteholder represented by the amount of original
principal amount of Notes exchanged by such Noteholder in this Exchange Offer).
THE EXCHANGE OFFER WILL EXPIRE ON TUESDAY, MARCH 29, 2005, AT 5:00 P.M.,
EASTERN STANDARD TIME, UNLESS EXTENDED AS PROVIDED HEREIN (THE "EXPIRATION
DATE").
We will accept Notes validly tendered for exchange and not withdrawn as of
the Expiration Date, upon the terms and conditions set forth herein, by tender
of the Note and the accompanying amended letter of transmittal attached as
Exhibit "A" hereto (the "Amended Letter of Transmittal"). Our offer of exchange
is not conditioned upon the receipt of any minimum principal amount of Notes. We
may therefore accept any portion of the $5,625,000 aggregate principal amount of
Notes, and reserve the right to otherwise amend, extend or terminate the
Exchange Offer for a failure of a condition in our sole and absolute discretion.
Our offer to exchange and the Amended Letter of Transmittal together constitute
the "Exchange Offer." The principal amount of the Notes exchanged will be
exchanged for our Common Stock. Accrued and unpaid interest on tendered Notes
from January 1, 2005 through the date tendered Notes are accepted for payment in
this Exchange Offer will be paid in cash to tendering Note holders.
SEE "RISK FACTORS" AND "MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES" FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER IN
CONNECTION WITH THE EXCHANGE OFFER.
You may direct questions and requests for assistance or additional copies
of this Exchange Offer, the Letter of Transmittal and other related documents to
the Company at the address and telephone number set forth on the back cover
page.
The date of this Supplement No. 1 to the Offer to Exchange is March 10,
2005.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THIS TRANSACTION OR DETERMINED IF THIS
DOCUMENT IS ACCURATE OR COMPLETE.
For convenience, we use "Company," "we," "us," and "ours" to refer to iLinc
Communications, Inc. We are not and our Board of Directors is not making any
recommendation to you as to whether you should tender or refrain from tendering
your Notes. You must make the decision whether to tender your Notes and, if so,
the principal amount of Notes to tender.
IMPORTANT INFORMATION REGARDING THE OFFER
We are not aware of any jurisdiction where making the Exchange Offer is not
in compliance with applicable law. If we become aware that the Exchange Offer is
not in compliance with any jurisdiction's applicable state law, we will make a
good faith effort to comply with such state law. If with our good faith efforts,
we cannot comply with such state law, the Exchange Offer will not be made to
(nor will tenders be accepted from or on behalf of) the holders of Notes
residing in such jurisdiction. If any jurisdiction's securities or blue sky laws
require the Exchange Offer to be made by a licensed broker or dealer, the
Exchange Offer shall be deemed to be made on our behalf by one or more
registered brokers or dealers licensed under such jurisdiction's laws.
You should rely only on the information incorporated by reference or
provided in this Exchange Offer. We have not authorized anyone to provide you
with different information. You should not assume that the information in this
Exchange Offer or any supplement is accurate as of any date other than the date
on the cover of the document. By tendering your Note, you represent that you are
basing your decision solely on this Exchange Offer and your own examination of
our Company and the terms of the proposed exchange, including the merits and
risks involved. The contents of this Exchange Offer should not be construed as
legal, business or tax advice. You should consult your own attorney, business
advisor and tax advisor as to such matters.
CAUTION AS TO UNAUTHORIZED STATEMENTS
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING NOTES UNDER THE
EXCHANGE OFFER. WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE
CONTAINED IN THIS EXCHANGE OFFER OR IN THE LETTER OF TRANSMITTAL. DO NOT RELY ON
ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATIONS, IF GIVEN OR
MADE, AS HAVING BEEN AUTHORIZED BY US.
SUMMARY
The last sentence of the second full paragraph of the Summary section of
the Offer to Exchange is revised to read in its entirety as follows:
Accrued and unpaid interest on tendered Notes from January 1, 2005
through the date tendered Notes are accepted for payment in this
Exchange Offer will be paid in cash to tendering Note holders.
SELECTED HISTORICAL FINANCIAL DATA
The Selected Historical Financial Data section of the Offer to Exchange is
amended to include the following additional financial data.
ILINC COMMUNICATIONS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's earnings to fixed charges for
the periods indicated:
NINE MONTHS ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
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2004 2004 2003 2002
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Ratio of Earnings to
Fixed Charges (a) (a) (a) (a) (a)
(a) Due to the losses recorded for the nine months ended December 31, 2004 and
for fiscal years 2004, 2003 and 2002 the ratio coverage was less than 1:1.
The Company would have needed to generate additional earnings of $4.4
million, $2.3 million, $3.9 million and $1.1 million to achieve a ratio
coverage of 1:1 for the nine months ended December 31, 2004 and for fiscal
years 2004, 2003 and 2002.
(b) For the purposes of computing the consolidated ratio of earnings to fixed
charges, earnings consist of income before income taxes and extraordinary
items. Fixed charges consist of interest on all indebtedness, amortization
of debt discount and expense, and that portion of rental expense that we
believe to be representative of interest.
The following table sets forth the Company's book value per share at the
dates indicated:
DECEMBER 31, MARCH 31,
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2004 2004 2003 2002
-----------------------------------------------
Book Value Per Share $0.19 $0.15 $0.33 $0.19
===== ===== ===== =====
THE EXCHANGE OFFER
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
In the Offer to Exchange, the Expiration Date was incorrectly identified as
5:00 p.m. on Friday, March 29, 2005. The correct Expiration Date is 5:00 p.m. on
Tuesday, March 29, 2005.
The last sentence of the second paragraph of the Expiration Date;
Extensions; Amendment section of the Offer to Exchange is amended to read as
follows:
We expressly reserve the absolute right, in our sole discretion, to
amend the terms of the Exchange Offer in any manner provided that any
such amendment will be communicated in writing as promptly as
practicable to each Note holder; and to terminate the Exchange Offer
for a failure of a condition and not accept for exchange Notes
tendered pursuant thereto.
CONDITIONS
Subsections a. through c of the first paragraph of the Conditions section
of the Offer to Exchange are amended to read as follows:
a. any action or proceeding is instituted in any court or by or
before any governmental agency with respect to the Exchange Offer
which, in our reasonable judgment, will materially impair our
ability to proceed with the Exchange Offer or materially impair
the contemplated benefits of the Exchange Offer discussed in the
section of the Offer to Exchange titled Reasons for the Exchange
Offer;
b. any development in our business or our financial affairs has
occurred which, in our reasonable judgment, makes it impossible
to proceed with the Exchange Offer without violating contractual
agreements or materially impairs the contemplated benefits of the
Exchange Offer discussed in the section of the Offer to Exchange
titled Reasons for the Exchange Offer;
c. any law, statute, rule or regulation is proposed, adopted or
enacted, which, in our reasonable judgment, would materially
impair our ability to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer
discussed in the section of the Offer to Exchange titled Reasons
for the Exchange Offer; or
PROCEDURES FOR TENDERING NOTES
The last sentence of the third paragraph of the Procedures for Tendering
Notes section of the Offer to Exchange is amended to read as follows:
Any Notes received by the Company that are not properly tendered and
as to which the defects or irregularities have not been cured or
waived will be returned to the tendering noteholder, unless otherwise
provided in the Letter of Transmittal, promptly following the
Expiration Date.
DELIVERY OF SHARES OF COMMON STOCK
The Delivery of Shares of Common Stock section of the Offer to Exchange is
amended to read as follows:
For each $1,000 principal amount of outstanding Notes accepted for
exchange in the Exchange Offer, the tendering holder will receive
2,500 shares of the Company's Common Stock and the $3.00 Warrant
Amendments. The shares representing the Common Stock will be issued,
and the $3.00 Warrant Amendment Agreement will be signed by the
Company, promptly following the closing of the Exchange Offer and the
shares will be listed with the American Stock Exchange.
EXTENSION OF THE EXCHANGE OFFER; TERMINATION; AMENDMENT
The second sentence of the first paragraph of the Extension of the Exchange
Offer; Termination; Amendment section of the Offer to Exchange is amended to
read as follows:
We also expressly reserve the right, in our sole discretion, to
terminate the Exchange Offer for a failure of a condition and not
accept for exchange any shares not theretofore accepted for exchange
or exchanged for or, subject to applicable law, to postpone exchange
for shares upon conditions specified in a written notice of such
termination or postponement to the Depositary and making a public
announcement thereof.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The following sentence is added to the first paragraph of the Common Stock
section of the Offer to Exchange:
The rights of holders of Common Stock may not be modified otherwise
than by a vote of a majority or more of the outstanding shares of
Common Stock, voting as a class.
DESCRIPTION OF THE SERIES A PREFERRED STOCK
The following sentence is added to the first paragraph of the Common Stock
section of the Offer to Exchange:
There is no restriction on the repurchase or redemption of the Series
A Preferred Stock while there is any arrearage in the payment of
dividends on Series A Preferred Stock.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The Material United States Federal Income Tax Consequences section of the
Offer to Exchange is amended and restated in its entirety as follows:
The discussion set forth below is a summary of the material U.S.
federal income tax considerations relevant to holders ("Holders") who
exchange their Notes for Common Stock. This discussion is based on the
provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), final, temporary and proposed Treasury regulations thereunder
("Treasury Regulations"), and administrative and judicial
interpretations thereof, all as in effect on the date hereof and all
of which are subject to change (possibly on a retroactive basis).
The Company will not obtain any ruling from the Internal Revenue
Service with respect to the matters discussed below. In addition, the
Company will not obtain any tax opinion from counsel with respect to
the U.S. federal income tax consequences of the Exchange. The
following discussion does not constitute and is not intended to
constitute either a tax opinion or tax advice to any person. This
summary does not purport to address all of the material U.S. federal
income tax consequences that may be applicable to a holder of Notes.
Tax consequences which are different from or in addition to those
described herein may apply to Holders of Notes who are subject to
special treatment under the U.S. federal income tax laws, such as
foreign persons, tax-exempt organizations, financial institutions,
insurance companies, broker-dealers, Holders who hold their Notes as
part of a hedge, straddle, wash sale, synthetic security or conversion
transaction and persons who acquired their Warrants in compensatory
transactions. This discussion does not address foreign or state or
local tax considerations.
The discussion below only addresses the U.S. federal income tax
consequences of the exchange of Notes for Common Stock to U.S. holders
who hold their Notes and Warrants as capital assets within the meaning
of Section 1221 of the Code. As used herein, the term "U.S. holder"
means a beneficial owner of a note who or that is for U.S. federal
income tax purposes (i) a citizen or individual resident of the United
States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source, or
(iv) a trust if (A) a United States court is able to exercise primary
supervision over the administration of the trust and one or more
United States persons have the authority to control all substantial
decisions of the trust or (B) it validly elects to be treated as a
United States person for U.S. federal income tax purposes. As used
herein, the term "foreign holder" means a beneficial owner of a Note
that is not a United States person and is not a partnership for U.S.
federal income tax purposes. If a partnership (or any other entity
treated as a partnership for U.S. federal income tax purposes) holds
Notes or Warrants, the tax treatment of the partnership and a partner
in such partnership generally will depend on the status of the partner
and the activities of the partnership. Such partner should consult its
own tax advisor as to the application of the U.S. tax laws to its
particular situation.
THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES IS NOT A
SUBSTITUTE FOR AN INDIVIDUAL ANALYSIS OF THE U.S. FEDERAL INCOME TAX
CONSEQUENCES OF THE EXCHANGE TO A HOLDER. EACH HOLDER SHOULD CONSULT A
TAX ADVISER REGARDING THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN
TAX CONSEQUENCES OF THE EXCHANGE IN LIGHT OF SUCH HOLDER'S OWN
PERSONAL TAX SITUATION.
EXCHANGE AS A REORGANIZATION
The federal income tax consequences of the exchange of Notes for
Common Stock and $3.00 Warrants for $1.20 Warrants pursuant to the
Exchange will depend on whether the Exchange is treated as a
"recapitalization" within the meaning of Section 368(a)(1)(E) of the
Code. The Exchange should constitute a recapitalization provided that
the Notes constitute "securities" for U.S. federal income tax purposes
("Tax Securities").
The term "securities" is not defined in the Code or the applicable
Treasury regulations and has not been clearly defined by judicial
decisions or administrative rulings. In general, the determination of
whether a debt instrument constitutes a Tax Security is based upon an
evaluation of all of the facts and circumstances, including the nature
of the debt instrument, the degree of participation and continuing
interest of holders of the debt instruments in the affairs of the
business and the extent of proprietary interest compared with the
similarity of the note to a cash payment. In making this
determination, courts have typically focused on the original term of
the debt instrument (i.e., the length of time between the issuance of
the debt instrument and its maturity). In general, (i) debt
instruments with an original term of 5 years or less are rarely
treated as Tax Securities; (ii) debt instruments with an original term
of 10 years or more are likely to be treated as Tax Securities; and
(iii) the classification as Tax Securities of debt instruments with an
original term of more than 5 but less than 10 years is uncertain. Debt
instruments (such as the Notes) that are convertible into stock of the
issuer may be more likely to be treated as securities than
nonconvertible debt instruments with otherwise similar terms because
of the holders' potential equity participation in the issuer. The
Notes have an original term in excess of ten years. Based upon an
evaluation of the factors relevant to the classification of Notes as
Tax Securities, the Company believes the Notes should be treated as
Tax Securities.
If the Notes are properly treated as Tax Securities, then the Exchange
should constitute a recapitalization under Section 368(a)(1)(E) of the
Code. In such a case, subject to the exceptions for amounts
attributable to interest and market discount discussed below, (i) no
gain or loss should be recognized by a U.S. Holder upon receipt of
Common Stock in exchange for a Note; (ii) the holding period of the
Common Stock should include the holding period of the Notes exchanged
therefore; and (iii) the adjusted tax basis of the Common Stock should
be the same as the adjusted tax basis of the Notes exchanged therefore
(less any basis attributable to accrued but unpaid interest).
Pursuant to the Exchange, a U.S. Holder's Warrants will be modified to
(i) extend the exercise period of the Warrants to March 29, 2006, (ii)
reduce the exercise price from $3.00 per share to $1.20 per share and
(iii) the redemption price will be reduced to $2.40 per share (such
modified Warrants to be referred to as the "$1.20 Warrants"). The
Company believes that such modification should be treated as a deemed
exchange by a U.S. Holder (who exchanges a Note for Common Stock) of
existing Warrants (the "$3.00 Warrants") for New Warrants for federal
income tax purposes.
Under Treasury Regulations, rights issued by a party to a
reorganization to acquire its stock are treated for purposes of
Sections 354 and 356 of the Code as securities with no principal
amount (the "Warrant Regulations"). Provided that the Exchange
qualifies as a recapitalization under Section 368(a)(1)(E) of the
Code, the Company should be treated as a "party to a reorganization"
under Section 368(b) of the Code. In such a case, the $1.20 Warrants
and the $3.00 Warrants should be treated as rights to acquire stock
under the Warrant Regulations. In a reorganization, holders of
securities generally recognize no gain or loss on the exchange of such
securities for stock or other securities. However, a security holder
will recognize gain on an exchange of securities to the extent that
the "principal amount" of the securities received exceeds the
"principal amount" of the securities surrendered. In such a case, the
amount of gain recognized by the security holder will be equal to the
fair market value of the excess principal amount. Since warrants have
no principal amount under the Regulations, no excess principal amount
should exist in connection with the exchange of the $1.20 Warrants for
the $3.00 Warrants by a U.S. Holder pursuant to the Exchange. Thus,
provided that the Exchange qualifies as a recapitalization under
Section 368(a)(1)(E) of the Code and that the modification of the
Warrants is properly treated as a deemed exchange of the $3.00
Warrants for the $1.20 Warrants for federal income tax purposes (i) no
gain or loss should be recognized by a U.S. Holder upon the receipt of
a $1.20 Warrant in exchange for an $3.00 Warrant; (ii) the holding
period of a $1.20 Warrant should include the holding period of an
$3.00 Warrant exchanged therefore; and (iii) the adjusted tax basis of
a $1.20 Warrant should be the same as the adjusted tax basis of an
$3.00 Warrant exchanged therefore. Alternatively, because the Old
Warrants expire by their terms on March 29, 2005, the Exchange may be
treated as the exchange by a U.S. Holder of a Note (a Tax Security)
for Common Stock and a $1.20 Warrant. In such event, provided that the
Exchange qualifies as a recapitalization under Section 368(a)(1)(E) of
the Code, the issuance of the $1.20 Warrant should be nontaxable under
the Warrant Regulations. In such a case, a U.S. Holder's tax basis in
the surrendered Note should be allocated between the Common Stock and
the New Warrant on the basis of their respective fair market values
and the U.S. Holder's holding period in the Common Stock and the New
Warrants should include the period of time that such holder held the
surrendered Note.
ACCRUED AND UNPAID INTEREST ON THE NOTES
Under the terms of the Exchange, the Company will issue a specified
number of shares of Common Stock to each U.S. Holder who tenders a
Note and will pay the accrued and unpaid interest on the Notes in
cash. Treasury Regulations provide that a payment on a debt obligation
will be allocated first to accrued and unpaid interest and then to
principal. In connection with the Exchange, the Company will allocate
the cash paid to the accrued and unpaid interest on the Notes and the
Common Stock to the Notes. The cash paid to a U.S. Holder in payment
of accrued and unpaid interest on the Notes will be taxable to the
U.S. Holder as ordinary interest income (provided that such interest
has not already been included in income by such U.S. Holder),
regardless of whether the Notes are capital assets in the U.S.
Holder's hands. Finally, as discussed above under "Exchange as a
Reorganization," even if the fair market value of the Common Stock
allocated to a Note is less than the principal amount of the Note, no
loss will be recognized by a U.S. Holder if the Exchange qualifies as
a nontaxable reorganization under Section 368(a)(1)(E) of the Code.
MARKET DISCOUNT
Any gain recognized by a U.S. Holder in connection with the Exchange
generally will be treated as ordinary income to the extent of such
holder's accrued market discount. Any remaining accrued market
discount on the Notes (to the extent not previously included by a U.S.
Holder as ordinary income) generally will be taxed as ordinary income
upon the U.S. Holder's sale or other disposition of the Common Stock
received in exchange for such Notes. In general, market discount is
the excess, as of the date of a U.S. Holder's acquisition of a Note,
of the Note's stated redemption price at maturity over the U.S.
Holder's tax basis in the Note, subject to a de minimis rule. Market
discount, if any, accrues ratably from the date the holder purchases a
note until its final maturity.
POSSIBLE TREATMENT OF EXCHANGE AS A DEEMED DISTRIBUTION
Section 305(a) of the Code provides the general rule that gross income
does not include the amount of any distribution of the "stock" of a
corporation made by such corporation to its "shareholders" with
respect to its stock. For purposes of Section 305, the term "stock"
includes rights to acquire stock and the term "shareholder" generally
includes a holder of rights or of convertible securities. Section
305(b) of the Code provides several exceptions to this general
nonrecognition rule pursuant to which taxable distributions will
result. Section 305(c) of the Code provides that a change in
redemption price, a difference between redemption price and issue
price, a redemption which is treated as a distribution to which
section 301 applies, or any transaction (including a RECAPITALIZATION)
having a similar effect on the interest of any shareholder may be
treated as a distribution with respect to any shareholder whose
proportionate interest in the earnings and profits or assets of the
corporation is increased by such change, difference, redemption, or
similar transaction. Thus, under certain circumstances, it is possible
for a recapitalization to be treated as resulting in a taxable
distribution under Section 305(c) for federal income tax purposes.
In general, a recapitalization should not be treated as a taxable
distribution under Section 305 of the Code if the recapitalization (i)
has a bona fide business purpose, (ii) is an isolated transaction and
(iii) is not part of a plan to increase periodically the proportionate
interest of any shareholder in the assets or earnings and profits of a
corporation. Based on the foregoing, the Company believes that the
Exchange should not be treated as a taxable distribution under Section
305 of the Code.
FAILURE TO QUALIFY AS A REORGANIZATION
If the Notes do not constitute Tax Securities, then the Exchange will
be a taxable transaction. In such a case, a U.S. Holder will recognize
gain or loss equal to the difference between the fair market value of
the Common Stock received and the U.S. Holder's adjusted tax basis in
the Notes surrendered. Furthermore, in such event, the deemed exchange
of the $3.00 Warrants for the $1.20 Warrants or the issuance of the
$1.20 Warrants (as the case may be) generally will also be taxable to
a U.S. Holder. The remainder of this tax discussion assumes that the
Exchange will be treated as a nontaxable reorganization for U.S.
federal income tax purposes.
NET OPERATING LOSSES
The Company currently has significant net operating losses ("NOLs")
for federal income tax purposes. The Company 's ability to use its
NOLs and certain other tax attributes to reduce future U.S. federal
income tax, if any, will be limited if the Company is treated as
having undergone an "ownership change" (i.e., a more than fifty
percentage point change in the ownership of the Company 's stock) in
connection with the Exchange or certain previous transactions
involving transfers of the Company's stock. Under Section 382 of the
Code, a corporation that undergoes an ownership change is subject to
limitations on the amount of its NOLs that may be used to offset the
corporation's federal income tax following the ownership change.
Under Section 382 of the Internal Revenue Code, following an
"ownership change," the amount of a loss corporation's income that can
be offset by pre-ownership change NOLs cannot exceed an annual amount
equal to the sum of (i) the value of the loss corporation's equity
immediately before the ownership change (excluding proscribed
contributions to capital) multiplied by a prescribed rate of return,
and (ii) recognized built-in gains, if any (as hereinafter described).
Moreover, no NOLs will survive if the loss corporation does not
continue its historic business or use a significant portion of its
assets in such a business during the two-year period beginning on the
date of the ownership change. If the loss corporation has more than
one line of business, continuity of business enterprise requires only
that it continue a significant line of business. The Company has not
determined (i) whether the Exchange will trigger an ownership change
under Section 382 of the Code or (ii) in the event of an ownership
change, the limitations (if any) that would be imposed on the use of
its NOLs.
CANCELLATION OF INDEBTEDNESS INCOME
If the fair market value of the Common Stock issued by the Company in
the Exchange is less than the principal amount of Notes exchanged
therefor, the Company will recognize cancellation of indebtedness
income. Based upon the terms of the Exchange set forth herein, it is
possible that the fair market value of the Common Stock issued in
exchange for a Note would be less than the principal amount of the
Note. In such a case, the Company will recognize cancellation of
indebtedness income in an amount equal to the difference between the
principal amount of the Notes surrendered and the fair market value of
the Common Stock allocated thereto (unless an exception to such
cancellation of indebtedness income applies).
OWNERSHIP OF COMMON STOCK
If a U.S. Holder exchanges Notes for Common Stock, there will be
additional tax consequences from holding such shares beyond the tax
consequences of the Exchange itself. Generally, any distributions made
with respect to shares of the Common Stock will be treated as ordinary
income to the extent of the Company's current or accumulated earnings
and profits. Amounts in excess of such earnings and profits generally
are treated as a tax-free return of capital to the extent of a U.S.
Holder's tax basis in the Common Stock, with any amounts received in
excess of such tax basis treated as proceeds from the sale of stock.
In general, a U.S. Holder will recognize gain or loss on a sale or
other disposition of the Common Stock (other than certain redemptions
taxed as distributions under Section 302 of the Code) to the extent of
the difference between the U.S. Holder's amount realized on the
disposition and the U.S. Holder's tax basis in such stock. Such gain
or loss generally should, subject to the market discount rules
discussed above, be treated as capital gain or loss, assuming that the
U.S. Holder holds the Common Stock as a capital asset.
HOLDERS WHO DO NOT PARTICIPATE IN THE EXCHANGE OFFER
U.S. Holders of Notes who elect not to participate in the Exchange
Offer and do not exchange their Notes for Common Stock should not
recognize gain or loss as a consequence of the Exchange Offer.
However, U.S. Holders who do not participate in the Exchange Offer
will have taxable ordinary interest income upon the receipt of cash
from the Company in payment of accrued and unpaid interest on the
Notes (provided that such interest has not already been included in
income by such U.S. Holder).
U.S. BACKUP WITHHOLDING AND INFORMATION REPORTING REQUIREMENTS
Information reporting generally will apply to payments of dividends on
the Common Stock and proceeds from the sale or redemption of Common
Stock or warrants made to a U.S. Holder, other than an exempt
recipient, including a corporation, a payee that is not a United
States person that provides an appropriate certification and certain
other persons. If information reporting applies to any such payment, a
payor will be required to withhold backup withholding tax from the
payment if the holder fails to furnish its correct taxpayer
identification number or otherwise fails to comply with, or establish
an exemption from, such backup withholding tax requirements. U.S.
Holders should consult with their tax advisors as to their ability to
qualify for an exemption from backup withholding and the procedure for
obtaining such an exemption. In general, any amount withheld from a
payment under the backup withholding rules is allowable as a
refundable credit against a holder's U.S. federal income tax
liability, provided that the required information is timely furnished
to the IRS.
THE ABOVE DESCRIPTION IS NOT A SUBSTITUTE FOR AN INDIVIDUAL ANALYSIS
OF ALL OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO A
HOLDER RELATING TO THE EXCHANGE OF THE NOTES AND $3.00 WARRANTS AND
THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE COMMON STOCK AND
$1.20 WARRANTS. A HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX
ADVISOR CONCERNING THE TAX CONSEQUENCES, INCLUDING THE APPLICABILITY
OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, TO SUCH HOLDER OF THE
EXCHANGE AND OF OWNING THE COMMON STOCK AND $1.20 WARRANTS.
AMENDED LETTER OF TRANSMITTAL
ILINC COMMUNICATIONS, INC.
EXCHANGE OFFER
SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE
AND MODIFICATION OF $3.00 WARRANTS
FOR UP TO
$5,625,000 ORIGINAL PRINCIPAL AMOUNT OF
12% CONVERTIBLE REDEEMABLE SUBORDINATED NOTES
--------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M. (EST),
MARCH 29, 2005, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------
ADDRESS FOR TRANSMITTAL:
iLinc Communications, Inc.
2999 N. 44th Street, Suite 650
Phoenix, AZ 85018
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE COMPANY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Page 1 of 8
By execution hereof, the undersigned acknowledges receipt of the Offer
to Exchange, dated March 1, 2005, of iLinc Communications, Inc., a Delaware
corporation (the "Company"), Supplement No.1 to the Exchange Offer dated March
10, 2005 (together the "Exchange Offer")and this Amended Letter of Transmittal
and the instructions hereto (the "Amended Letter of Transmittal"), which
together constitute the Company's offer (the "Offer") to exchange 2,500 shares
of the Company's Common Stock, par value $.001 per share (the "Common Stock"),
for each $1,000 original principal amount of 12% Convertible Redeemable
Subordinated Notes, issued by the Company (the "Notes"), validly tendered.
Subject to the terms and conditions of the Offer, the Company will issue shares
of Common Stock in exchange for up to $5,625,000 aggregate principal amount of
the Notes. The Company reserves the right to extend or terminate the Offer, in
its sole and absolute discretion, for a failure of a condition, and to otherwise
amend the Offer in any respect. The term "Expiration Date" shall mean 5:00 p.m.
(Eastern Standard Time), on March 29, 2005, unless the Offer is extended as
provided in the Exchange Offer, in which case the term "Expiration Date" shall
mean the latest date and time to which the Offer is extended. Capitalized terms
used but not defined herein shall have the same meaning given them in the
Exchange Offer.
The term "Holder" with respect to the Offer means any person in whose
name Notes are registered on the books of the Company. The undersigned has
completed, executed and delivered this Letter of Transmittal to indicate the
action the undersigned desires to take with respect to the Offer. Holders who
wish to tender their Notes must complete this Letter of Transmittal in its
entirety.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
DESCRIPTION OF NOTES TENDERED
---------------------------------------- -------------------------------------- --------------------------------------
Print Name and Address of Holder Principal Amount of Notes Currently Principal Amount of Notes Tendered*
Held (if amount is less than the whole)
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
* Notes may be tendered in whole or in part in denominations of $25,000 and integral multiples thereof
Page 2 of 8
TRANSMITTAL LETTER AND SUBSCRIPTION AGREEMENT
DATE: _____________________________
iLinc Communications, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Re: Transmittal of Convertible Note in Exchange for Common Stock
and Amendment to the $3.00 Warrant
Gentlemen:
The undersigned ("we" or "our") is the holder of a 12% Convertible
Unsecured Subordinated Note due 2012 (the "Note") in the original principal sum
of [$________________________], that was issued by iLinc Communications, Inc.
(formerly called "EDT Learning, Inc.") (the "Company"). We are in receipt of the
Company's Exchange Offer concerning the Company's Exchange Offer of 2,500 shares
of the Company's Common Stock ("Common Stock") and to amend the exercise period
and exercise price of the outstanding $3.00 Warrants (as defined below) for each
$1,000 of original principal amount, using a conversion price of $0.40 per
share. We acknowledge that under the existing terms of the Notes, each $1,000 of
original principal amount of the Note currently is convertible into only 1,000
shares of Common Stock, using the conversion price of $1.00.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, TRANSFER AND EXCHANGE THE NOTES TENDERED
HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE COMPANY WILL
ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL
LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE NOTES TENDERED
HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL,
UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY
TO BE NECESSARY OR DESIRABLE TO COMPLETE THE TRANSFER AND EXCHANGE OF THE NOTES
TENDERED HEREBY.
The undersigned understands that tender of Notes pursuant to any one of
the procedures described in "The Exchange Offer -- Procedures for Tendering
Notes" in the Exchange Offer and in this Amended Letter of Transmittal, and the
Company's acceptance for exchange of such tendered Notes, will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Offer. The undersigned recognizes that, under
certain circumstances set forth in the Exchange Offer, the Company may not be
required to accept for exchange any of the Notes tendered hereby.
We understand, subject to the terms and conditions of the Exchange
Offer and the consummation of that Exchange Offer, that the Company will
extinguish our Notes and issue to us shares of Common Stock at the exchange rate
indicated above in full payment of all (or that portion indicated below), of the
principal balance of our Note. We understand that we may withdraw our offer of
exchange any time prior to the expiration of the Exchange Offer. We understand
that the Exchange Offer will expire on Tuesday, March 29, 2005, at 5:00 p.m.,
Eastern Standard Time, unless extended or earlier terminated as provided in the
Exchange Offer. We understand that the Company's right to accept the Notes and
issue Common Stock is not subject to the receipt of any minimum amount of
principal, or number of Notes or Note Holders in the Company's sole and absolute
discretion.
We acknowledge that we received a warrant (the "Warrant") in
association with the issuance of our Note and as part of our investment in the
Company in 2002, and that our Warrant will expire on March 29, 2005 (the $3.00
Warrant). In addition to the Common Stock exchanged for our Note, we understand
that the Company will extend the term of our existing $3.00 Warrant until March
29, 2006, will reduce the exercise price of our $3.00 Warrant from $3.00 per
share to $1.20 per share and the redemption price will be reduced to $2.40 per
share.
Page 3 of 8
We understand that should we elect to exchange only a portion of our
Note in increments of $25,000, then (i) our Note will be modified to reduce the
principal balance of the Note by the amount exchanged, and the remaining balance
shall remain outstanding on the same terms; and, (ii) our $3.00 Warrant will be
modified to extend the expiration date of our $3.00 Warrant until March 29,
2006, and the exercise price will be reduced to $1.20 per share, but the number
of shares that may be purchased will be reduced so that the remaining Warrant
permits purchase of as many common shares as the amount exchanged of our Note
bears to the original principal balance of our Note on a share for share basis
using $1.00 per share. By way of example but not limitation, we understand that
if an investor who had invested $100,000 in the Private Placement (receiving a
$100,000 Note and $3.00 Warrant for 100,000 shares), elects to exchange only
$75,000 of that original principal balance then (i) their note will be reduced
leaving a principal balance of $25,000, and (ii) their $3.00 Warrant will be
modified to extend the term, but also modified so that is represents the right
to purchase only 75,000 shares at the reduced price of $1.20 per share.
Therefore, please accept this transmittal letter as evidence of our
tender of our Note in accordance with the terms and conditions of the Exchange
Offer. We have indicated below the face value of the note that we wish to tender
to the Company for exchange into Common Stock (Check One).
___ The undersigned wishes to tender the Note in its entirety.
OR
___ The undersigned wishes to tender $_______________________
($25,000 increments) of the face value of the Note.
We understand that the closing of the Exchange Offer will take place
following Expiration of the Exchange Offer and upon acceptance by the Company of
the Notes tendered, if any, which shall take place at the Company's corporate
offices in Phoenix, Arizona the day after the Expiration Date.
We acknowledge that a prospectus is presently available providing for
the resale of the underlying shares of Common Stock, but would be available only
if the Notes had been converted on its original terms. However, because
additional shares are being issued upon conversion, that prospectus will not be
available to cover the resale of the Common Stock issued as a result of the
Exchange Offer. Therefore, the undersigned acknowledges that the Common Stock
that may be receive upon exchange of the Note will not be registered under the
Securities Act of 1933 (the "1933 Act") or qualified under applicable state
securities laws. We acknowledge that resale of the Common Stock may be
immediately available under Rule 144(k) because the required holding period
proscribed by Rule 144 permits inclusion of the period of time that the Note was
held, which is more than 2 years.
We acknowledge that the issuance of Common Stock is being made pursuant
to an exemption from registration as may be provided by Section 4(2) of the 1933
Act and/or Regulation D promulgated thereunder, together with all applicable
state securities law qualification exemptions. The undersigned represents that
the Common Stock is being obtained for our own account, for investment purposes
only and not with a view to resale or other distribution, except by selling,
transferring or disposing of the Common Stock upon full compliance with all
applicable provisions of the 1933 Act, the Securities Exchange Act of 1934 (the
"Exchange Act"), the Rules and Regulations promulgated by the United States
Securities and Exchange Commission (the "Commission") thereunder, and any
applicable state securities laws. The undersigned further understands and agrees
that (i) these securities may be sold only if they are subsequently registered
under the 1933 Act and qualified under any applicable state securities laws or,
in the opinion of the Company's counsel, an exemption from such registration and
qualification is available; (ii) any routine sales of these securities made in
reliance upon Rule 144 promulgated by the Commission under the 1933 Act can be
effected only in the amounts set forth in and pursuant to the other terms and
conditions, including applicable holding periods, of Rule 144; and (iii) the
Company is under no obligation to assist the undersigned in complying with any
exemption from registration under the 1933 Act, except as otherwise described in
the Exchange Offer.
Page 4 of 8
The undersigned represents and warrants that he has received the
Company's Exchange Offer, together with all the exhibits attached thereto. In
addition, the we are aware that the Company files annual reports on Form 10-K,
quarterly reports on Form 10-Q, special reports on Form 8-K, proxy statements,
and other information with the Commission that we can access without charge by
visiting the Commission's website, which is found at www.sec.gov or at the
Company's web site found at www.ilinc.com. We acknowledge that we have been
granted a reasonable period of time during which we have had the opportunity to
obtain such additional information as we deemed necessary to permit us to make
an informed decision with respect to the exchange of the Note and the receipt of
the Common Stock.
In connection with the subscription being made hereby, we warrant and
represent that:
a. If the undersigned is not an individual, it has not been
organized for the purpose of participating in the Exchange
Offer;
b. We have not received any general solicitation or advertising
regarding the Exchange Offer or been furnished with any oral
representation or oral information in connection with the
Exchange Offer which is not set forth in any of the
Information Documents;
c. We possesses the ability to bear the economic risk associated
with the Exchange Offer;
d. We have had substantial experience in previous private and
public purchases of speculative securities and we are not
relying on the Company, or its attorneys with respect to
economic or other considerations involved in this investment;
We are providing the following financial information to the Company to
permit a determination of our status as an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D promulgated under the 1933 Act. We have
INITIALED the paragraphs below that describe the suitability requirement under
which we intend to qualify. Upon request of the Company, we will provide
information to document the representations provided below. (ONLY ONE PARAGRAPH
NEED BE INITIALED).
_____ 1. The undersigned is NOT an Accredited Investor or Qualified
Non-Accredited Investor.
OR
_____ 2. Individual Net Worth Suitability. The undersigned
represents and warrants that his or her individual net worth
or joint net worth with his or her spouse, at the time of the
prospective purchase, exceeds $1,000,000. THIS SUITABILITY
REQUIREMENT MAY BE SELECTED ONLY BY A NATURAL INDIVIDUAL(S),
AND NOT BY A CORPORATION, PARTNERSHIP, TRUST, ESTATE,
UNINCORPORATED ASSOCIATION OR OTHER ENTITY.
OR
_____ 3. Individual Net Income Suitability. The undersigned
represents and warrants that his or her individual net income
was in excess of $200,000 in each of the calendar years 2003
and 2004, or his or her joint income with his or her spouse
was in excess of $300,000 in each of those years and he or she
reasonably expects his or her net income to reach such level
in the year calendar 2005. THIS SUITABILITY REQUIREMENT MAY BE
SELECTED ONLY BY A NATURAL INDIVIDUAL(S), AND NOT BY A
CORPORATION, PARTNERSHIP, TRUST, ESTATE, UNINCORPORATED
ASSOCIATION OR OTHER ENTITY.
OR
_____ 4. Certain Qualified Organizations.
The Investor represents and warrants that it is (check one):
____ A corporation, partnership, Massachusetts or similar
business trust, or organization described in Section
501(c)(3) of the Internal Revenue Code (tax exempt
organization), not formed for the specific purpose of
acquiring the securities offered, having total assets
in excess of $5,000,000.
Page 5 of 8
____ Any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person as described in Section
230.506(b)(2)(ii) of the 1933 Act.
____ A bank, savings and loan association or other similar
institution as defined in Sections 3(a)(2) and
3(a)(5)(A) of the 1933 Act, respectively, whether
acting in its individual or fiduciary capacity.
____ An insurance company as defined in Section 2(13) of
the 1933 Act.
____ An investment company registered under the Investment
Company Act of 1940.
____ A business development company as defined Section
2(a)(48) of the Investment Company Act of 1940 or
private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of
1940.
____ A Small Business Investment Company licensed by the
U.S. Small Business Administration under Sections
301(c) or (d) of the Small Business Investment Act of
1958.
____ A broker or dealer registered pursuant to Section 15
of the Exchange Act, as amended.
____ Any plan established and maintained by a state, its
political subdivisions, or any agency or
instrumentality of a state or its political
subdivisions for the benefit of its employees, if
such plan has total assets in excess of $5,000,000.
____ Any employee benefit plan within the meaning of the
Employment Retirement Income Security Act of 1974, as
amended ("ERISA"), if the investment decision is made
by a plan fiduciary, as defined in Section 3(21) of
ERISA, which is either a bank, savings and loan
association, insurance company, or registered
investment advisor, or if the employee benefit plan
has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made
solely by persons that are accredited investors.
NOTE: If you claim suitability under this paragraph 4, the
Company may require that you provide appropriate information
supporting your claim to status as a Qualified Organization.
OR
_____ 5. Entity Suitability.
The undersigned represents and warrants that it is a
corporation, a partnership, an unincorporated association or
other similar entity, and that each owner of an equity
interest in the entity satisfies the suitability requirements
of either paragraphs (2), (3) or (4) above.
NOTE: If you claim suitability under this paragraph (5), you
must submit a list of each of the owners with an equity
interest in the entity, setting forth the address, telephone
number and social security or tax identification number and
list for EACH such owner the information required under
paragraphs (2), (3) or (4) above. These separate pages must be
validly signed by or on behalf of each such owner or
beneficiary.
OR
Page 6 of 8
_____ 6. Officer, Director, Manager, Member Suitability.
The undersigned represents and warrants that it, he or she is
an officer, director, manager, member or general partner of
the Company, or an officer, director, manager, member or
general partner of a general partner of the Company.
We represent and warrant that the information set forth herein as well
as all other information which we are furnishing to the Company with respect to
our financial condition and business and investment experience is accurate and
complete as of the date hereof and we covenant that, in the event a material
change should occur in such information, we will immediately provide the Company
with such revised or corrected information.
The undersigned acknowledges and agrees that they have full power and
authority to enter into this agreement. None of the provisions hereof shall be
modified, discharged or terminated except by an instrument in writing signed by
the party against whom any waiver, change discharge or termination is sought.
This agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the internal laws of the State of
Delaware. This agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which shall constitute the same instrument.
Except as otherwise provided herein, this agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, legal representatives and assigns. If the
undersigned is more than one person, the obligations of each undersigned shall
be joint and several and the agreements, representations, warranties and
acknowledgments herein contained shall be deemed to be made and binding upon
such undersigned and his heirs, executors, administrators, successors, legal
representatives and assigns.
Page 7 of 8
Name of Entity (if applicable):_________________________________________________
Signature:_____________________________________ Signature:_____________________
Name:_____________________________________ Name:__________________________
Title (if applicable):__________________________________________________________
Street Address:_________________________________________________________________
City: __________________________ State: _______________ Zip: _______
Telephone: (_________)__________________________________________________________
Social Security or Federal Tax ID Number: ______________________________________
Date of Organization (if applicable): __________________________________________
***DO NOT WRITE BELOW DOTTED LINE***
................................................................................
ACCEPTED ON BEHALF OF THE COMPANY:
BY:_________________________________
Name: James M. Powers, Jr.
Title: President
Date: __________________________
Page 8 of 8