International Capital Holding Corp. and Subsidiaries - Page 23




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          1987, Norcom had sustained years of operating losses.  Although             
          Norcom was restored to profitability after the acquisition,                 
          Norcom’s ability to compensate Quest was limited.  At all times             
          it continued to be highly leveraged with millions of dollars of             
          debt.  The lender, Bank South, viewed Norcom as financially                 
          unstable and required Mr. Arnold to personally guarantee Norcom’s           
          loan.  Although Norcom was profitable in the years after the                
          ownership change, its financial condition was depleted in 1989 by           
          the payment of a $1.6 million dividend, which was requested by              
          Bank South.  Norcom’s poor financial condition is further                   
          evidenced by the fact it did not begin to compensate all of its             
          officers until 1991.                                                        
               The Bank South loan agreement expressly restricted the                 
          amount of compensation Norcom could pay to its officers and                 
          directors.  Moreover, both the Bank South loan and the LaSalle              
          loan limited Norcom’s ability to make payments to related                   
          parties.  As petitioners have alleged, Norcom’s financial                   
          condition and its financing arrangements severely limited its               
          ability to compensate Quest until Norcom’s financial condition              
          improved dramatically in 1995.                                              
               It is also clear that Norcom’s management team lacked high-            
          level financial planning expertise, at least after Mr. Lombardi             
          resigned in early 1992.  Instead of replacing Mr. Lombardi with             
          an officer with a finance background, Norcom looked to Quest for            






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