Money search lands Internet firm in court
From the Atlanta Business Chronicle
Michael Wall Staff Writer
bizjournals.com
Lynxus Inc., a fast-growing Atlanta-based Internet service provider, has gone to court against a company that claims it is entitled to acquire a 49 percent stake in Lynxus.
The problem is that Lynxus wants to sell the stake to other investors, according to a complaint filed April 15 in Fulton Superior Court. Lynxus asked the court to decide who has the rights to the equity.
Lynxus operates a "filtered" Internet service that blocks out more than 95 percent of sites run by hate groups, cults, anarchists, drug advocates and pornographers. Its Web site (http://www.lynxus.com) bills itself as "The Family Friendly Internet Service Provider."
The company was founded by two dads, CEO Tom Arcuragi and President Michael Hamilton, in response to the "trash" their kids were accessing on the Web, according to a press release issued by the company.
A year and a half after the company's launch, Lynxus provides service to 10 markets, specifically Raleigh-Durham, N.C.; Minneapolis/St. Paul, Minn.; Cincinnati; Phoenix; Las Vegas; Nashville, Tenn.; Los Angeles; Houston; Boston and Atlanta.
In January 1998, Hamilton set a brisk pace for the company's expansion, telling Atlanta Business Chronicle that Lynxus would enter 10 cities in 1998 and 10 cities in 1999.
According to its complaint, Lynxus in August 1997 hired Investor Media Data Distribution Inc., based in Vero Beach, Fla., and CyberNet Ventures Inc., headquartered in Denver, to raise money for Lynxus by selling partnership units in entities affiliated with Lynxus. CyberNet and Investor Media were working together while trying to find financing for Lynxus.
In return, Lynxus agreed to offer Investor Media the option to purchase 4 percent interest in Lynxus and a related company, LMG, for each Lynxus affiliate financed, the lawsuit states.
Also, Investor Media would have the right to purchase an additional 9 percent of Lynxus for providing "additional substantive services" to Lynxus, the suit reads. But Lynxus says in the lawsuit that Investor Media failed to identify or define the additional services.
On April 7, 1999, Investor Media attempted to exercise its option to purchase 49 percent of Lynxus, the complaint states.
The suit says Investor Media has no right to claim any interest in Lynxus because it failed to perform its obligations. It says CyberNet and Investor Media were "sanctioned by certain state securities commissions for their activities in marketing the partnership units in Lynxus affiliates," and were ordered to stop selling them. The suit says some investors in these partnership units have demanded that Lynxus reimburse them.
Arcuragi refused to comment. CyberNet officers did not return phone calls, and Investor Media officials could not be located.
But Lynxus attorney Robert T. Quackenboss of Hunton & Williams said Investor Media "hasn't pursued claim of ownership in Lynxus. For that reason, whether the suit will go forward has yet to be decided."
Quackenboss said he did not know which state securities commissions issued the cease-and-desist orders.
Copyright 1999 American City Business Journals Inc.
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