EXHIBIT 10.1
PURCHASE AGREEMENT
This Purchase Agreement dated as of August 13, 1997, is made
by and between SA Telecommunications, Inc., a Delaware corporation
(the "Company") and Northstar High Total Return Fund ("Purchaser").
WHEREAS, the Company has previously issued a 10% Convertible
Debenture Due 2006 in the principal amount of $3,800,000,
convertible into Common Stock of the Company, to the Purchaser on
March 25, 1997;
WHEREAS, the Purchaser and the Company have agreed to amend
certain terms applicable to such Prior Debenture through the
attachment of an Allonge;
WHEREAS, the Company is empowered to issue additional
indebtedness for any of the objects and purposes of the Company;
WHEREAS, for its lawful corporate purposes, the Company has
duly authorized the issuance of an additional 10% Convertible
Debenture Due 2006 in the principal amount of $5,000,000,
convertible into Common Stock of the Company, to be issued under
and pursuant to the provisions of this Agreement;
WHEREAS, the Debenture is being offered and sold to the
Purchaser without being registered under the Securities Act of
1933, as amended; and
WHEREAS, upon and subject to the terms and conditions of this
Agreement, the Company has agreed to issue and sell the Debenture
to the Purchaser, and the Purchaser has agreed to purchase the
Debenture from the Company;
NOW, THEREFORE, in consideration of the premises and the
purchase of the Debenture by the Purchaser, and the agreement to
amend the Prior Debenture through the attachment of an Allonge, the
Company and the Purchaser hereby agree as follows:
1. DEFINITIONS. The terms defined in this Section 1 shall have
for all purposes of this Agreement the respective meanings
specified in this Section 1.
"Act" means the Securities Act of 1933, as amended.
"Agreement" means this Purchase Agreement as originally
executed or, if amended or supplemented as herein provided, as
so amended or supplemented.
"Allonge" means that certain allonge to the Prior Debenture in
the form of Exhibit A hereto.
"Closing" means the closing of the transactions contemplated
hereby.
"Commission" means the Securities and Exchange Commission.
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Purchase Agreement - Page 1
"Common Stock" means the common stock, $0.0001 par value, of
the Company.
"Company" means SA Telecommunications, Inc., a Delaware
corporation.
"Confidential Disclosure Statement" means the Confidential
Disclosure Statement dated August 13, 1997 attached as Exhibit
B hereto.
"Debenture" means that certain 10% convertible debenture of
the Company in the face amount of $5,000,000 in the form of
Exhibit C hereto which shall be issued by the Company to the
Purchaser at the Closing.
"Debenture Agreements" includes this Agreement, the Allonge,
the Debenture, the Registration Rights Agreement and any other
documents required by this Agreement as a condition to the
Purchaser purchasing the Debenture or executed or delivered by
the Company and/or Purchaser at the Closing.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Incorporated Documents" means the documents which at the time
are incorporated by reference in the Memorandum or any
amendment or supplement thereto.
"Indenture" means the Indenture dated as of August 12, 1996
between the Company and United States Trust Company of New
York, as Trustee, with respect to the Prior Notes.
"June 30 Financial Statements" means the Company's unaudited
substantially complete financial statements for the quarter
ended June 30, 1997 attached as Exhibit D hereto.
"Memorandum" means collectively: (i) the Prospectus, (ii) the
Confidential Disclosure Statement, (iii) the Company's Form 8-
K filings dated July 3, 1997 and July 21, 1997, (iv) the
Company's Form 10-QSB for the quarter ended March 31, 1997 (as
amended by the Form 10-QSB/A filed with the Commission on July
8, 1997), and (v) the June 30 Financial Statements. Any
reference to the Memorandum shall be deemed to include all
amendments and supplements thereto and any documents filed
under the Exchange Act and the rules and regulations of the
Commission thereunder.
"Prior Debenture" means the Company's 10% Convertible
Debenture Due 2006 issued on March 25, 1997 to the Purchaser.
"Prior Notes" means the Company's 10% Convertible Notes Due
2006 issued on August 12, 1996.
"Prospectus" means the Prospectus dated June 2, 1997 with
respect to the Prior Notes.
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"Registration Rights Agreement" means the Registration Rights
Agreement dated as of March 25, 1997 between the Company and
Purchaser, as amended by this Agreement.
"Subsidiaries" means Long Distance Network, Inc., a Texas
corporation, U.S. Communications, Inc., a Texas corporation,
AddTel Communications, Inc., a California corporation, and
North American Telecommunications Corporation, a Texas
corporation.
The terms subsequently defined in this Agreement shall have the
respective meanings assigned to them herein and shall include the
singular as well as the plural.
2. PURCHASE AND SALE OF DEBENTURE; DELIVERY AND ACCEPTANCE
OF THE ALLONGE. On the basis of the representations, warranties,
agreements and covenants herein contained and subject to the terms
and conditions set forth herein, at the Closing the Company agrees
to issue and sell to the Purchaser, and the Purchaser agrees to
purchase from the Company, the Debenture at a purchase price of
$3,500,000 to be paid by wire transfer in immediately available
funds. Additionally, at the Closing, the Company agrees to amend
certain of the terms and provisions of the Prior Debenture through
delivery to the Purchaser of the Allonge and the Purchaser agrees
to accept the Allonge as evidence of the amendments made thereto.
The Closing shall be held on August 13, 1997 at 10:00 a.m., New
York time, at the offices of Reboul, MacMurray, Xxxxxx, Xxxxxxx &
Kristol, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 or at such
other place and time as may be mutually agreed to by the Company
and the Purchaser. At the Closing, the Company will execute and
deliver this Agreement, the Debenture and the Allonge to the
Purchaser against payment of the aggregate purchase price of the
Debenture specified in SECTION 2 hereof by wire transfer of
immediately available funds, and execution by the Purchaser of this
Agreement and the Allonge. The Purchaser and its transferees of the
Prior Debenture and the Debenture will be entitled to the benefits
of the Registration Rights Agreement pursuant to which the Company
has granted, among other things, certain piggyback registration
rights with respect to certain registration statements filed by the
Company registering the shares of Common Stock issuable upon
conversion of the Prior Debenture and the Debenture under the Act.
3. EXPENSES. The Company shall pay all expenses of the
transactions contemplated by this Agreement, and shall pay or
reimburse the Purchaser for all costs and expenses incurred by the
Purchaser in connection with the preparation, execution, delivery
of this Agreement, including without limitation, the fees, expenses
and disbursements of counsel to the Purchaser, provided such fees,
expenses and disbursements do not exceed $5,000.
4. THE SECURITIES.
(a) THE DEBENTURE. The Debenture in the principal
amount of $5,000,000 shall be in the form of EXHIBIT C hereto.
The Debenture will be convertible at the holder's option into
shares of Common Stock at a conversion price of $1.50 per
share, subject to adjustment in certain circumstances.
(b) THE ALLONGE. The Allonge to the Prior Debenture
shall be in the form of EXHIBIT A hereto. The Allonge shall
(i) amend the initial conversion price applicable to the Prior
Debenture to $1.50 per share, subject to adjustment in certain
circumstances, (ii) provide
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Purchase Agreement - Page 3
for an adjustment to the then applicable conversion price
should the Company sell its shares of Common Stock or
derivative securities exchangeable, convertible or exercisable
into Common Stock to certain restricted purchasers for
aggregate consideration less than the conversion price
applicable to the Prior Debenture and (iii) provide a choice
of forum clause to the Prior Debenture selecting New York as
the venue of choice between the parties.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Purchaser that:
(a) The Memorandum does not contain any untrue statement
of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) The Incorporated Documents heretofore filed were
filed in a timely manner and, when they were filed (or, if any
amendment with respect to any such document was filed, when
such amendment was filed), conformed in all material respects
to the requirements of the Exchange Act and did not contain an
untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; and any further Incorporated Documents will, when
so filed, be filed in a timely manner and conform in all
material respects to the requirements of the Exchange Act and
will not contain an untrue statement of a material fact or
omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading.
(c) The Company has 50,000,000 shares of Common Stock
authorized, 15,668,835 of which were issued and outstanding as
of August 11, 1997; the Company has 15,000,000 shares of
Preferred Stock authorized, of which the Company has
designated 250,000 shares as Series A Cumulative Convertible
Preferred Stock ("Series A Preferred Stock"), which, as of the
date hereof, 180,000 shares are outstanding; all of the
outstanding shares of capital stock of the Company and each of
the Subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights; all of the
outstanding shares of capital stock of the Subsidiaries are
owned, directly or indirectly, by the Company, free and clear
of all liens, encumbrances and claims or restrictions on
transferability (other than those imposed by the Act and the
securities or "Blue Sky" laws of certain jurisdictions) or
voting, other than the security interests in favor of Greyrock
Business Credit. Except for the Subsidiaries (or other
subsidiaries of the Company which are not material to the
business of the Company) or as disclosed in the Memorandum,
the Company does not own, directly or indirectly, any shares
of capital stock or any other equity or long-term debt
securities or have any equity interest in any corporation,
partnership, joint venture or other entity.
(d) The shares of Common Stock issuable upon conversion
of the Debenture have been duly authorized for issuance upon
conversion of the Debenture and duly reserved for such
issuance and, when issued upon such conversion in accordance
with the terms of the
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Debenture, will have been validly issued and will be fully
paid and nonassessable, and the issuance of such shares of
Common Stock is not subject to any preemptive or similar
rights.
(e) Each of the Company and the Subsidiaries is duly
incorporated, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and has
all requisite corporate power and corporate authority to own
its properties and conduct its business as now conducted and
as described in the Memorandum; each of the Company and the
Subsidiaries is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions where
the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the
failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on the business,
financial condition, prospects as described in the Memorandum
or results of operations of the Company and the Subsidiaries,
taken as a whole (any such event, a "Material Adverse
Effect").
(f) The Company has all requisite corporate power and
corporate authority to execute, deliver and perform its
obligations under the Debenture. The Debenture has been duly
and validly authorized by the Company and, when executed by
the Company and when issued and delivered to and paid for by
the Purchaser in accordance with the terms of this Agreement,
will constitute valid and legally binding obligations of the
Company, enforceable against the Company in accordance with
its terms, except that (A) the enforcement thereof may be
subject to (i) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally,
and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
and (B) any rights to indemnity or contribution thereunder may
be limited by federal and state securities laws and public
policy considerations.
(g) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations
under the Registration Rights Agreement. The Registration
Rights Agreement has been duly and validly authorized by the
Company and, when this Agreement is executed and delivered by
the Company, will continue to constitute a valid and legally
binding agreement of the Company enforceable against the
Company in accordance with its terms, except that (A) the
enforcement thereof may be subject to (i) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought and (B) any rights to
indemnity or contribution thereunder may be limited by federal
and state securities laws and public policy considerations.
(h) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the consummation by
the Company of the transactions contemplated hereby have been
duly and validly authorized by the Company. This Agreement
has been duly executed and delivered by the Company.
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Purchase Agreement - Page 5
(i) Assuming the accuracy of the Purchaser's
representations in Section 6, no consent, approval,
authorization or order of any court or governmental agency or
body, or third party is required for the issuance and sale by
the Company of the Debenture to the Purchaser, the issuance of
shares of Common Stock upon conversion of the Debenture or the
consummation by the Company of the other transactions
contemplated hereby, except such as have been obtained and
such as may be required under state securities or "Blue Sky"
laws in connection with the purchase and resale of the
Debenture by the Purchaser. None of the Company or the
Subsidiaries is (i) in violation of its certificate of
incorporation or bylaws (or similar organizational document),
(ii) except as disclosed in the Memorandum, in breach or
violation of any statute, judgment, decree, order, rule or
regulation applicable to any of them or any of their
respective properties or assets, except for any such breach or
violation which would not, individually or in the aggregate,
have a Material Adverse Effect, or (iii) except as disclosed
in the Memorandum, in breach of or default under (nor has any
event occurred which, with notice or passage of time or both,
would constitute a default under) or in violation of any of
the terms or provisions of any indenture, mortgage, deed of
trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate, contract or other agreement or
instrument to which any of them is a party or to which any of
them or their respective properties or assets is subject
(collectively, "Contracts"), except for any such breach,
default, violation or event which would not, individually or
in the aggregate, have a Material Adverse Effect.
(j) Neither the execution, delivery or performance by
the Company of this Agreement or the Registration Rights
Agreement nor the consummation by the Company of the
transactions contemplated hereby and thereby (including,
without limitation, the issuance and sale of the Debenture to
the Purchaser and the issuance of shares of Common Stock upon
conversion of the Debenture) will conflict with or constitute
or result in a breach of or a default under (or an event which
with notice or passage of time or both would constitute a
default under) or violation of any of (i) the terms or
provisions of any Contract, except for any such conflict,
breach, violation, default or event which would not,
individually or in the aggregate, have a Material Adverse
Effect, (ii) the certificate of incorporation or bylaws (or
similar organizational document) of the Company, or (iii)
(assuming compliance with all applicable state securities or
"Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Purchaser in Section 6
hereof) any statute, judgment, decree, order, rule or
regulation applicable to the Company or any of its properties
or assets, except for any such conflict, breach or violation
which would not, individually or in the aggregate, have a
Material Adverse Effect.
(k) The audited consolidated financial statements of the
Company and the Subsidiaries included in the Prospectus and
the June 30 Financial Statements present fairly in all
material respects the financial position and results of
operations of the Company and the Subsidiaries at the dates
and for the periods to which they relate and have been
prepared in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP"), except as
otherwise stated therein and except that the June 30 Financial
Statements do not include a cash flow statement or footnote
presentations required by GAAP. Price Waterhouse LLP is an
independent public accounting firm within the meaning of the
Act and
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the rules and regulations promulgated thereunder. The
Purchaser acknowledges that the June 30 Financial Statements
may differ in certain non-material respects from the
corresponding financial statements to be included in the
Company's Form 10-QSB for the quarter ended June 30, 1997.
(l) The Allonge has been duly and validly authorized by
the Company and, when executed and delivered by the Company
and attached to the Prior Debenture, will constitute a valid
and legally binding agreement of the Company enforceable
against the Company in accordance with its terms, except that
(A) the enforcement thereof may be subject to (i) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought and (B) any rights to
indemnity or contribution thereunder may be limited by federal
or state securities laws and public policy considerations..
(m) Except as set forth in the Memorandum, there is not
pending or, to the knowledge of the Company, threatened any
action, suit, proceeding, inquiry or investigation to which
the Company or any of the Subsidiaries is a party, or to which
the property or assets of the Company or any of the
Subsidiaries are subject, before or brought by any court,
arbitrator or governmental agency or body which, if determined
adversely to the Company or any of the Subsidiaries, would,
individually or in the aggregate, have a Material Adverse
Effect or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of
the Debenture to be sold hereunder or the consummation of the
other transactions described in the Memorandum.
(n) Each of the Company and the Subsidiaries possesses
all licenses, permits, certificates, consents, orders,
approvals and other authorizations from, and has made all
declarations and filings with, all federal, state, local and
other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, presently
required or necessary to own or lease, as the case may be, and
to operate its respective properties and to carry on its
respective businesses as now conducted as set forth in the
Memorandum ("Permits"), except where the failure to obtain
such Permits would not, individually or in the aggregate, have
a Material Adverse Effect; each of the Company and the
Subsidiaries has fulfilled and performed all of its
obligations with respect to such Permits except where the
failure to perform such obligations would not, individually or
in the aggregate, have a Material Adverse Effect; no event has
occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any
other material impairment of the rights of the holder of any
such Permit except where such revocation or modification would
not, individually or in the aggregate, have a Material Adverse
Effect; and none of the Company or the Subsidiaries has
received any notice of any proceeding relating to revocation
or modification of any such Permit, except as described in the
Memorandum or except where such revocation or modification
would not, individually or in the aggregate, have a Material
Adverse Effect.
(o) Since June 30, 1997, except as described in the
Memorandum, (i) none of the Company or the Subsidiaries has
incurred any liabilities or obligations, direct or contingent,
or
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entered into or agreed to enter into any transactions or
contracts (written or oral) not in the ordinary course of
business which liabilities, obligations, transactions or
contracts would, individually or in the aggregate, be material
to the business, financial condition, prospects as described
in the Memorandum or results of operations of the Companies
and its Subsidiaries, taken as a whole, (ii) none of the
Company or the Subsidiaries has purchased any of its
outstanding capital stock, nor declared, paid or otherwise
made any dividend or distribution of any kind on its capital
stock (other than with respect to any of such Subsidiaries),
the purchase of, or dividend or distribution on, capital stock
owned by the Company and other than (a) the repurchase of
shares of Common Stock pursuant to the provisions of employee
and incentive stock option plans and the related agreements
thereunder and (b) the accrual of in-kind dividends to
holders of the Company's Series A Preferred Stock, and (iii)
there shall not have been any change in the capital stock or
long-term indebtedness of the Company or the Subsidiaries.
(p) Each of the Company and the Subsidiaries has filed
all necessary federal, state and foreign income and franchise
tax returns, except where the failure to so file such returns
would not, individually or in the aggregate, have a Material
Adverse Effect, and has paid all taxes shown as due thereon;
and other than tax deficiencies which the Company or any
Subsidiary is contesting in good faith and for which the
Company or such Subsidiary has provided adequate reserves,
there is no tax deficiency that has been asserted against the
Company or any of the Subsidiaries that would have,
individually or in the aggregate, a Material Adverse Effect.
(q) None of the Company, the Subsidiaries or any agent
acting on their behalf has taken or will take any action that
might cause this Agreement or the sale of the Debenture to
violate Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System, in each case as in effect, or as
the same may hereafter be in effect, on the Closing Date.
(r) Each of the Company and the Subsidiaries has good
and marketable title to all real property and good title to
all personal property described in the Memorandum as being
owned by it and good and marketable title to a leasehold
estate in the real and personal property described in the
Memorandum as being leased by it free and clear of all liens,
charges, encumbrances or restrictions (other than Permitted
Liens (as defined in the Debenture)), except as described in
the Memorandum or to the extent the failure to have such title
or the existence of such liens, charges, encumbrances or
restrictions would not, individually or in the aggregate, have
a Material Adverse Effect. Except as set forth in the
Memorandum, all leases, contracts and agreements to which the
Company or any of the Subsidiaries is a party or by which any
of them is bound are valid and enforceable against the Company
or such Subsidiary, and, to the knowledge of the Company, are
valid and enforceable against the other party or parties
thereto and are in full force and effect with only such
exceptions as would not, individually or in the aggregate,
have a Material Adverse Effect and except that (A) the
enforcement thereof may be subject to (i) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any
proceeding therefor may be brought and (B) any rights to
indemnity or contribution
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thereunder may be limited by federal and state securities laws
and public policy considerations. The Company and the
Subsidiaries own or possess adequate licenses or other rights
to use all patents, trademarks, service marks, trade names,
copyrights and know-how necessary to conduct the businesses
now operated by them as described in the Memorandum, and none
of the Company or the Subsidiaries has received any notice of
infringement of or conflict with (or knows of any such
infringement of or conflict with) asserted rights of others
with respect to any patents, trademarks, service marks, trade
names, copyrights or know-how which, if such assertion of
infringement or conflict were sustained, would have a Material
Adverse Effect.
(s) There are no legal or governmental proceedings
involving or affecting the Company or any Subsidiary or any of
their respective properties or assets which would be required
to be described in a prospectus pursuant to the Act that are
not described in the Memorandum, nor are there any material
contracts or other documents which would be required to be
described in a prospectus pursuant to the Act that are not
described in the Memorandum.
(t) Except as would not, individually or in the
aggregate, have a Material Adverse Effect (A) each of the
Company and the Subsidiaries is in compliance with and not
subject to liability under applicable Environmental Laws (as
defined below), (B) each of the Company and the Subsidiaries
has made all filings and provided all notices required under
any applicable Environmental Law, and has and is in compliance
with all Permits required under any applicable Environmental
Laws and each of them is in full force and effect, (C) there
is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter or request for information
pending or, to the knowledge of the Company or any of the
Subsidiaries, threatened against the Company or any of the
Subsidiaries under any Environmental Law, (D) no lien, charge,
encumbrance or restriction has been recorded under any
Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by the Company
or any of the Subsidiaries, (E) none of the Company or the
Subsidiaries has received notice that it has been identified
as a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), or any comparable state law, (F)
no property or facility of the Company or any of the
Subsidiaries is (i) listed or proposed for listing on the
National Priorities List under CERCLA or is (ii) listed in the
Comprehensive Environmental Response, Compensation and
Liability Information System List promulgated pursuant to
CERCLA, or on any comparable list maintained by any state or
local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or
regulations, codes, orders, decrees, judgments or injunctions
issued, promulgated, approved or entered thereunder, relating
to pollution or protection of public or employee health and
safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened
releases of hazardous materials into the environment
(including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation,
treatment, storage, disposal, transport or handling of
hazardous
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materials, and (iii) underground and above ground storage
tanks and related piping, and emissions, discharges, releases
or threatened releases therefrom.
(u) Other than set forth in the Memorandum, there is no
strike, labor dispute, slowdown or work stoppage with the
employees of the Company or any of the Subsidiaries which is
pending or, to the knowledge of the Company or any of the
Subsidiaries, threatened.
(v) Each of the Company and the Subsidiaries has in
effect, with financially sound and reputable insurers,
insurance with respect to its business and properties and the
business and properties of its Subsidiaries against loss or
damage of the kind customarily insured against by corporations
of established reputation engaged in the same or similar
businesses and similarly situated, of such type and in such
amounts as are customarily carried under similar circumstances
by such other corporations.
(w) None of the Company or the Subsidiaries has any
liability for any prohibited transaction or funding deficiency
or any complete or partial withdrawal liability with respect
to any pension, profit sharing or other plan which is subject
to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), to which the Company or any of the
Subsidiaries makes or ever has made a contribution and in
which any employee of the Company or of any Subsidiary is or
has ever been a participant. With respect to such plans, the
Company and each Subsidiary is in compliance in all material
respects with all applicable provisions of ERISA.
(x) The Company and the Subsidiaries, taken as a whole,
(i) makes and keeps accurate books and records and (ii)
maintains internal accounting controls which provide
reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions
are recorded as necessary to permit preparation of the
Company's financial statements and to maintain accountability
for its assets, (C) access to assets is permitted only in
accordance with management's authorization and (D) the
reported accountability for assets is compared with existing
assets at reasonable intervals.
(y) None of the Company or the Subsidiaries will be an
"investment company" or "promoter" or "principal underwriter"
for an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
(z) Immediately after the consummation of the
transactions contemplated by this Agreement and resolution of
the payment terms and/or disputed amounts satisfactory to the
Company with respect to past due invoices of WorldCom, Inc.
and NTS Communications, Inc., MCI Communications, Inc. and
other long line and local exchange carriers aggregating
approximately $5.2 million as of the date hereof, the fair
value and present fair saleable value of the assets of the
Company (on a consolidated basis) will exceed the sum of its
stated liabilities and identified contingent liabilities; the
Company (on a consolidated basis) is not, nor will the Company
(on a consolidated basis) be, after giving effect to the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, (a) left
with unreasonably small capital with which to carry on its
business as it is
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proposed to be conducted, (b) unable to pay any liability on
a claim as it becomes due or (c) otherwise insolvent. For the
purposes of this paragraph, "fair value" means the amount at
which an entity's aggregate assets would change hands between
a willing buyer and a willing seller, each having reasonable
knowledge of the relevant facts, with neither being under any
compulsion to act, with equity to both, and "present fair
saleable value" means the amount that may be realized if an
entity's aggregate assets are sold with reasonable promptness
in an arm's-length transaction under present conditions for
the sale of ongoing comparable business enterprises.
(aa) None of the Company, the Subsidiaries or any of
their respective Affiliates (as defined in Rule 501(b) of
Regulation D under the Act) has directly, or through any
agent, (i) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any "security" (as defined
in the Act) which is or could be integrated with the sale of
the Debenture in a manner that would require the registration
under the Act of the Debenture or (ii) engaged in any form of
general solicitation or general advertising (as those terms
are used in Regulation D under the Act) in connection with the
offering of the Debenture or in any manner involving a public
offering within the meaning of Section 4(2) of the Act.
(ab) [Intentionally left blank]
(ac) None of the Company or the Subsidiaries has taken,
nor will any of them take, directly or indirectly, any action
designed to, or that might reasonably be expected to, cause or
result in stabilization or manipulation of the price of the
Common Stock.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER. The Purchaser
represents and warrants that:
(a) The Purchaser represents and warrants that it is an
Accredited Investor, as such term is defined in Regulation D
promulgated under the Act. Furthermore, as a condition
precedent to the Company's obligations to consummate the
transactions contemplated hereby, the Purchaser shall execute
that representation letter attached as Exhibit E hereto. The
Purchaser agrees with the Company that (i) it has not and will
not solicit offers for, or offer or sell, the Debenture by any
form of general solicitation or general advertising (as those
terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2)
of the Act; and (ii) it has and will solicit offers for the
Debenture only from, and will offer the Debenture only (A) in
the case of offers inside the United States, to a limited
number of other institutional investors reasonably believed by
the Purchaser to be Accredited Investors that, prior to their
purchase of the Debenture, deliver to the Purchaser a letter
containing the representations and agreements substantially
similar to those contained in Exhibit E hereto, (B) in the
case of offers outside the United States, to persons other
than U.S. persons ("foreign purchasers"), which term shall
include dealers or other professional fiduciaries in the
United States acting on a discretionary basis for foreign
beneficial owners (other than an estate or trust)); provided,
however, that, in the case of this clause (B), in purchasing
such Debenture such persons are deemed to have represented and
agreed as provided under the caption "Transfer Restrictions"
contained in the Confidential Disclosure
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Purchase Agreement - Page 11
Statement or (C) in transactions otherwise exempt or excluded
from the registration provisions of the Act.
(b) The Purchaser represents and warrants that it is the
sole and exclusive owner of the Prior Debenture and, as such,
that it consents to the amendments to the Prior Debenture
contained in the Allonge.
7. CONDITIONS OF PURCHASER'S OBLIGATIONS. The Purchaser's
obligation to purchase and pay for the Debenture is subject to the
satisfaction or waiver, prior to or at the Closing, of each of the
following conditions:
(a) On the Closing Date, the Purchaser shall have
received the opinion, dated as of such Closing Date and
addressed to the Purchaser, of Xxxxx & Xxxxxx, counsel for the
Company, in form and substance reasonably satisfactory to
counsel for the Purchaser.
(b) The representations and warranties of the Company
contained in this Agreement shall be true and correct on and
as of the date hereof and on and as of the Closing Date as if
made on and as of the Closing Date; the statements of the
Company's officers made pursuant to any certificate delivered
in accordance with the provisions hereof shall be true and
correct on and as of the date made and on and as of the
Closing Date; the Company shall have performed all covenants
and agreements and satisfied all conditions on their part to
be performed or satisfied hereunder at or prior to the Closing
Date; and, except as described in the Memorandum (exclusive of
any amendment or supplement thereto after the date hereof),
subsequent to the date of the most recent financial statements
in such Memorandum, there shall have been no event or
development, and no information shall have become known, that,
individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect.
(c) The sale of the Debenture hereunder shall not be
enjoined (temporarily or permanently) on the Closing Date.
(d) Subsequent to the date of the most recent financial
statements in the Memorandum (exclusive of any amendment or
supplement thereto after the date hereof), none of the Company
or any of the Subsidiaries shall have sustained any loss or
interference with respect to its business or properties from
fire, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any strike, labor dispute,
slow down or work stoppage or from any legal or governmental
proceeding, order or decree, which loss or interference,
individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect.
(e) The Purchaser shall have received a certificate of
the Company, dated the Closing Date, signed on behalf of the
Company by its Chairman of the Board, President or any Vice
President and the Chief Financial Officer, to the effect that:
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Purchase Agreement - Page 12
(i) The representations and warranties of the
Company contained in this Agreement are true and correct
on and as of the date hereof and on and as of the Closing
Date, and the Company has performed all covenants and
agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the
Closing Date;
(ii) At the Closing Date, since the date hereof or
since the date of the most recent financial statements in
the Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), except as described in
the Memorandum no event or development has occurred, and
no information has become known, that, individually or in
the aggregate, has or would be reasonably likely to have
a Material Adverse Effect; and
(iii) The sale of the Debenture hereunder has
not been enjoined (temporarily or permanently).
(f) On the Closing Date, the Purchaser shall have
received the Debenture in the form of Exhibit C hereto and the
Allonge in the form of Exhibit A hereto, in each case,
executed by the Company and such instrument shall be in full
force and effect at all times after the Closing Date.
On or before the Closing Date, the Purchaser and counsel for
the Purchaser shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the
business, corporate, legal and financial affairs of the Company and
the Subsidiaries as they shall have heretofore reasonably requested
from the Company.
All such documents, opinions, certificates, letters, schedules
or instruments delivered pursuant to this Agreement will comply
with the provisions hereof only if they are reasonably satisfactory
in all material respects to the Purchaser and counsel for the
Purchaser. The Company shall furnish to the Purchaser such
conformed copies of such documents, opinions, certificates,
letters, schedules and instruments in such quantities as the
Purchaser shall reasonably request.
8. COVENANTS OF THE COMPANY. The Company covenants and
agrees with the Purchaser that:
(a) The Company will cooperate with the Purchaser in
attempting to arrange for the qualification of the shares of
Common Stock issuable upon conversion of the Debenture for
offering and sale under the securities or "Blue Sky" laws of
such jurisdictions as the Purchaser may designate and will
continue such qualifications in effect for as long as may be
necessary to complete the resale of the underlying shares of
Common Stock; provided, however, that in connection therewith,
the Company shall not be required to qualify as a foreign
corporation or to execute a general consent to service of
process in any jurisdiction or subject itself to taxation in
excess of a nominal dollar amount in any such jurisdiction
where it is not then so subject.
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Purchase Agreement - Page 13
(b) The Company will apply the net proceeds from the
sale of the Debenture as set forth under "Use of Proceeds" in
the Confidential Disclosure Statement comprising a part of the
Memorandum.
(c) The Company will give the Purchaser prompt written
notice of any amendment to Sections 5.01 through 5.12 of the
Indenture. The Company will agree to make a substantially
similar change in any conforming section contained in the
Debenture as a result of such amendment to the Indenture to
the extent requested by the Purchaser.
(d) None of the Company or any of its Affiliates will
sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any "security" (as defined in the Act)
which could be integrated with the sale of the Debenture in a
manner which would require the registration under the Act of
the Debenture.
(e) The Company will not, and will not permit any of the
Subsidiaries to, engage in any form of general solicitation or
general advertising (as those terms are used in Regulation D
under the Act) in connection with the offering of the
Debenture or in any manner involving a public offering within
the meaning of Section 4(2) of the Act.
(f) For so long as the Debentures remain outstanding,
the Company will make available at its expense, upon request,
to any holder of such Debentures and any prospective
purchasers thereof, the information specified in Rule
144A(d)(4) under the Act, unless the Company is then subject
to Section 13 or 15(d) of the Exchange Act.
(g) The Company will undertake whatever filings or other
steps are necessary to list the shares of Common Stock
issuable upon conversion of the Debentures on the Nasdaq
SmallCap Market, to the extent the shares of the Company's
Common Stock are then eligible for listing or quotation
thereon.
(h) As a post-closing matter only, and not as a
condition precedent or condition subsequent to the
consummation of the transactions contemplated hereby or the
performance of any party's performance hereunder, the Company
agrees that it will make application for good standing (tax-
status) certificates of the following entities in the
following jurisdictions (collectively, the "Certificates"):
Name Jurisdiction
--------------------------- ------------
SA Telecommunications, Inc. Delaware, Texas (foreign)
U.S. Communications, Inc. Texas
AddTel Communications, Inc. California
Long Distance Network, Inc. Texas
Southwest Long Distance Network, Inc. Arkansas
Uniquest Communications, Inc. Texas
The Company agrees to provide the Certificates to the
Purchaser if and when received.
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Purchase Agreement - Page 14
(i) The Company shall promptly advance the appropriate
amounts from the purchase price paid hereunder to the Trustee
under the Indenture for payment of interest on the Prior Notes
due on August 15, 1997.
9. The Company and Purchaser hereby agree that the
Registration Rights Agreement shall be automatically amended on the
Closing Date as follows:
(a) A new paragraph to the Registration Rights Agreement
shall be added as the third introductory paragraph thereof,
which such paragraph shall read, in its entirety, as follows:
This Agreement is amended as of August 13, 1997 pursuant
to the terms of that Purchase Agreement by and between
the Company and the Purchaser dated as of August 13, 1997
(the "August Purchase Agreement"), which provides for,
among other things, (1) the issuance by the Company of an
Allonge to the Debenture to, among other things, modify
the conversion price applicable to the Debenture and (2)
the sale by the Company to the Purchaser of an additional
$5,000,000 aggregate principal amount of the Company's
10% Convertible Debentures Due 2006 (the "August
Debenture.") In order to induce the Purchaser to enter
into the August Purchase Agreement, the Company has
agreed to modify the registration rights set forth in
this Agreement for the benefit of the Purchaser and its
direct and indirect transferees to cover the shares of
Common Stock acquirable upon conversion of the August
Debenture. The modification of this Agreement is a
condition to the obligation of the Purchaser to purchase
the August Debenture under the August Purchase Agreement.
(b) The definition of "Agreement" in Section 1.1 of the
Registration Rights Agreement shall be amended in its entirety
to read as follows:
"Agreement: This Agreement, as it has been amended by
the August Purchase Agreement and as it may from time to
time be amended between the Company and Purchaser in the
future."
(c) The following definitions should be added to Section
1.1 of the Registration Rights Agreement:
"August Debenture: See the third introductory paragraph
hereto.
August Purchase Agreement: See the third introductory
paragraph hereto."
(d) The definition of "Closing Date" in Section 1.1 of
the Registration Rights Agreement shall be deleted in its
entirety.
(e) The definition of "Offering Memorandum" in Section
1.1 of the Registration Rights Agreement shall be amended in
its entirety to read as follows:
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Purchase Agreement - Page 15
"Offering Memorandum: Collectively, the Disclosure
Statements dated March 25, 1997 and August 13, 1997 (and
all documents delivered to Purchaser in connection with
the transactions contemplated thereby including those
documents listed in each of the first paragraphs thereof)
pursuant to which the Debenture was offered to the
Purchaser under the Purchase Agreement and the August
Debenture was offered to the Purchaser under the August
Purchase Agreement, as the case may be."
(f) The definition of "Registrable Securities" in
Section 1.1 of the Registration Rights Agreement shall be
amended in its entirety to read as follows:
"Registrable Securities: Each share of Common Stock of
the Company issuable upon conversion of either the
Debenture or the August Debenture, until each share (i)
has been effectively registered under the Securities Act
and disposed of in accordance with the Piggyback
Registration Statement covering it or (ii) is distributed
to the public pursuant to Rule 144."
(g) The first sentence of Section 2(a) of the
Registration Rights Agreement shall be replaced, in its
entirety, with the following two sentences:
Subject to Section 2(b) below, until March 25, 2000
whenever the Company proposes to register any of its
securities other than Registrable Securities under the
Securities Act (a "Piggyback Registration"), either for
the Company's own account or for the account of any of
its security holders (other than Holders in their
capacity as Holders), the Company will give prompt
written notice to all Holders of Registrable Securities
relating to the Debenture of its intention to effect such
a registration and will include in such Piggyback
Registration all Registrable Securities of Holders of
Registrable Securities relating to the Debenture with
respect to which the Company has received written
requests for inclusion therein within 20 days after
receipt of the Company's notice. Subject to Section 2(b)
below, until August 13, 2000 whenever the Company
proposes to file a Piggyback Registration, either for the
Company's own account or for the account of any of its
security holders (other than Holders in their capacity as
Holders), the Company will give prompt written notice to
all Holders of Registrable Securities relating to the
August Debenture of its intention to effect such a
registration and will include in such Piggyback
Registration all Registrable Securities of Holders of
Registrable Securities relating to the August Debenture
with respect to which the Company has received written
requests for inclusion therein within twenty days after
receipt of the Company's notice.
(h) In each of the first and second sentences of Section
2(d) of the Registration Rights Agreement, the word
"Debenture" shall be substituted by the words "Debenture or
the August Debenture."
(i) Each of the other provisions of the Registration
Rights Agreement shall continue in full force and effect and
shall be unencumbered by the terms of this Agreement.
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Purchase Agreement - Page 16
10. Miscellaneous.
(a) SURVIVAL CLAUSE. The respective representations,
warranties, agreements, covenants, and other statements of the
Company, its officers and the Purchaser set forth in this
Agreement or made by or on behalf of them pursuant to this
Agreement shall remain in full force and effect, regardless of
(i) any investigation made by or on behalf of the Company, any
of its officers or directors, the Purchaser or any person who
controls the Company or the Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act and
(ii) delivery of and payment for the Debenture. The
respective agreements, covenants, and other statements set
forth in Sections 3, 10(d), 10(g) and 10(h) hereof shall
remain in full force and effect, regardless of any termination
or cancellation of this Agreement.
(b) NOTICES. All communications hereunder shall be in
writing and, if sent to the Purchaser, shall be mailed or
delivered to (i) Northstar High Total Return Fund, c/o
Northstar Investment Management, 0 Xxxxxxxx Xxxxx, 0xx Xxxxx,
Xxxxxxxxx, Xxxxxxxxxxx 00000; if sent to the Company, shall be
mailed or delivered to the Company at 0000 Xxxxxxxxx Xxxxxx,
00xx Xxxxx, Xxxxxxxxxx, Xxxxx 00000, Attention: Xxxx X.
Xxxxxxx, Esq., Vice President and General Counsel; with a copy
to Xxxxx & Xxxxxx, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx
00000, Attention: Xxxx X. Xxxxxxx, Esq.
All such notices and communications shall be deemed to
have been duly given: when delivered by hand, if personally
delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; and one business day after
being timely delivered to a next-day air courier.
(c) SUCCESSORS. This Agreement shall inure to the
benefit of and be binding upon the Purchaser, the Company and
their respective successors and legal representatives, and
nothing expressed or mentioned in this Agreement is intended
or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement
and all conditions and provisions hereof being intended to be
and being for the sole and exclusive benefit of such persons
and for the benefit of no other person. No purchaser of
Debenture from the Purchasers will be deemed a successor
because of such purchase.
(d) APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF
THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO
BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW. IT IS
SPECIFICALLY ACKNOWLEDGED BETWEEN THE PARTIES THAT A
SUBSTANTIAL PORTION OF THE NEGOTIATIONS RELATING TO, AND
ULTIMATELY RESULTING IN, THE DEBENTURE AGREEMENTS WERE
CONDUCTED BY THE PURCHASER THROUGH ITS COUNSEL IN THE STATE OF
NEW YORK. FURTHERMORE, THE PURCHASER REPRESENTS THAT IT HAS
PHYSICALLY EXECUTED THIS AGREEMENT IN THE STATE OF NEW YORK.
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Purchase Agreement - Page 17
(e) COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
(f) DESCRIPTIVE HEADINGS. The descriptive headings
herein have been inserted for convenience only and shall not
be deemed to limit or otherwise affect the construction of any
provisions hereof.
(g) CONFIDENTIALITY; COMPETITORS.
(i) The Purchaser acknowledges that it has
received, and may in the future receive, non-public
information regarding the Company, certain of its
subsidiaries and/or their respective businesses (the
"Confidential Information"). As such, the Purchaser
hereby agrees not to use (except for its own internal
evaluation purposes) or disclose such Confidential
Information without the prior written consent of the
Company. Confidential Information shall not include any
information which (A) has been or becomes public other
than by such Purchaser's actions or actions of such
Purchaser's directors, employees, agents or advisors in
violation of this Section, (B) becomes available to such
Purchaser on a nonconfidential basis, or (C) is known to
such Purchaser prior to being disclosed to such Purchaser
by the Company. The Purchaser hereby acknowledges that
it is aware that the United States securities laws
prohibit any person who has material non-public
information about a company from purchasing or selling
securities of such company.
(ii) The Company shall not be obligated to provide
any Confidential Information to any transferee of the
Debenture or the Prior Debenture unless and until such
transferee agrees in writing to be bound by the
provisions of this Section 10(g), which agreement shall
be a condition to any such transfer.
(iii) Notwithstanding anything to the contrary
contained in this Agreement, the Company shall not be
obligated to furnish to any Purchaser which is a
competitor or potential competitor any Confidential
Information (including any information which it would
otherwise be required to furnish to such Purchaser
pursuant to the provisions of this Agreement).
(h) The Company hereby irrevocably consents to the non-
exclusive personal jurisdiction, service of process and venue
in the federal and state courts of the State of New York for
any claim, suit or proceedings arising under this Agreement or
the documents and agreements executed in connection herewith.
[Signature Page Follows]
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Purchase Agreement - Page 18
IN WITNESS WHEREOF, the Company and the Purchaser have caused
this Agreement to be executed as of the date first above written.
SA TELECOMMUNICATIONS, INC.
By: /s/ J. XXXXX XXXXXXX
------------------------------
J. Xxxxx Xxxxxxx
Vice President - Finance and
Chief Financial Officer
NORTHSTAR HIGH TOTAL RETURN
By: /s/ XXXXXXX XXXXXXXXX
------------------------------
Xxxxxxx Xxxxxxxxx
Vice President
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Purchase Agreement - Page 19
EXHIBIT A TO PURCHASE AGREEMENT
ALLONGE TO 10% CONVERTIBLE DEBENTURE DUE 2006
This Allonge is attached to and is a part of that 10%
Convertible Debenture Due August 15, 2006 of SA TELECOMMUNICATIONS,
INC. (the "Company") in the principal amount of $3,800,000, payable
to Northstar High Total Return Fund, or registered assigns (the
"Debenture").
1. The Debenture, to which this Allonge is attached, shall
be amended as follows:
(a) The Debenture shall be amended to include a new
sentence to the end of Section 3.1, which such sentence shall
read, in its entirety, as follows:
"The Securities shall be designated Series 1997 A."
(b) The second paragraph of Section 6.1 of the Debenture
shall be amended to read, in its entirety, as follows:
"The initial conversion price is $1.50 per share, subject
to adjustment as provided in this Article 6."
(c) The Debenture is hereby amended to add new
paragraphs numbered 6.10A and 6.10B which such paragraphs
shall read, in their entirety, as set forth below:
6.10A ADJUSTMENT OF CONVERSION PRICE UPON
ISSUANCES TO RESTRICTED PURCHASERS. (a) If and whenever
after the date hereof the Company shall issue or sell, or
shall in accordance with Section 6.10B be deemed to have
issued or sold, any shares of Common Stock to (i) Jesup
& Xxxxxx Capital Markets, Inc. or any party who is an
affiliate thereof or (ii) any Person who is a beneficial
owner (as such term is used in Rule 13d-3 promulgated
under the Exchange Act) of more than five percent (5%) of
the issued and outstanding shares of Common Stock of the
Company (each, a "Restricted Purchaser") for a
consideration per share (the "Adjusted Conversion Price")
less than the then existing conversion price per share
(initially, $1.50 per share) on the date which is the
earlier of the date immediately preceding (i) the date of
such issue or sale or (ii) the date of the announcement
of such issue or sale, THEN, forthwith upon such issue or
sale, the conversion price applicable to the Debenture
shall, subject to Section 6.10B, be reduced to the
Adjusted Conversion Price.
(b) Notwithstanding the provisions of this
Section 6.10A and Section 6.10B, no adjustment of the
conversion price (other than pursuant to Section
6.10B(c)) shall be required as a result of (i) the
issuance of shares of Common Stock upon conversion of the
Debenture, (ii) the issuance of Common Stock in an
underwritten public offering, (iii) the issuance of
Common Stock or derivative securities exchangeable,
exercisable or convertible into Common Stock pursuant to
the terms of the Company's Series A Cumulative
Convertible Preferred Stock ("Series A Preferred")
(PROVIDED, HOWEVER, except as set forth in subparagraph
(iv) hereof, adjustment to the conversion price shall be
applicable for all new issuances of Series A Preferred),
(iv) the payment of payment-in-kind dividends on the
Series A
-1-
Preferred, (v) the issuance of Common Stock or
Convertible Securities (as defined in Section 6.10B(g))
to Northstar High Total Return Fund or any other fund
advised by Northstar Investment Management, or (vi) the
exercise or conversion of any derivative security
outstanding on August 13, 1997 and held by any present or
past employee, officer or director of the Company.
6.10B EFFECT OF CERTAIN EVENTS ON CONVERSION
PRICE. For purposes of determining the Adjusted
Conversion Price under Section 6.10A, the following shall
be applicable:
(a) ISSUANCE OF OPTIONS. In case at any time
the Company shall in any manner grant any Options
(including Options for Convertible Securities) to a
Restricted Purchaser, and the price per share for which
Common Stock is issuable upon the exercise of such
Options or upon conversion or exchange of such
Convertible Securities
(determined by dividing (i) the total amount, if
any, received or receivable by the Company as
consideration for the granting of such Options,
plus the minimum aggregate amount of additional
consideration payable to the Company upon the
exercise of all such Options, plus, in the case of
such Options which relate to Convertible
Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and
upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon
the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such
Options)
shall be less than the current conversion price
determined as of the earlier of the date immediately
preceding (i) the date of granting such Options or (ii)
the date of any announcement of the granting of such
Options, THEN the total maximum number of shares of
Common Stock issuable upon the exercise of such Options
or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the
exercise of such Options shall (as of the date of grant
of such Options) be deemed to be outstanding and to have
been issued for such price per share. No adjustment of
the conversion price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities
upon exercise of such Options or upon the actual issue of
such Common Stock upon conversion or exchange of such
Convertible Securities, except as otherwise provided in
Section 6.10B(c).
(b) ISSUANCE OF CONVERTIBLE SECURITIES. In
case the Company shall in any manner issue or sell any
Convertible Securities to a Restricted Purchaser, and the
price per share for which Common Stock is issuable upon
such conversion or exchange of such Convertible
Securities
(determined by dividing (i) the total amount
received or receivable by the Company as
consideration for the issue or sale of such
Convertible Securities,
-2-
plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon
the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all
such Convertible Securities)
shall be less than the current conversion price on the
date which is the earlier of the date immediately
preceding (i) the date of such issue or sale of
Convertible Securities or (ii) the date of the
announcement of such issue or sale of such Convertible
Securities, THEN the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall (as of the date of the
issue or sale of such Convertible Securities) be deemed
to be outstanding and to have been issued for such price
per share. Except as otherwise provided in Section
6.10B(c), no adjustment of the conversion price shall be
made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which
adjustments of the conversion price have been made or are
to be made pursuant to other provisions of this Section
6.10B, no further adjustment of the conversion price
shall be made by reason of such issue or sale.
(c) CHANGE IN OPTION OR CONVERSION PRICE. If
the purchase price provided for in any Option referred to
in Section 6.10B(a), the additional consideration, if
any, payable upon conversion or exchange of any
Convertible Securities referred to in Section 6.10B(a) or
6.10B(b), or the rate at which any Convertible Securities
referred to in Section 6.10B(a) or 6.10B(b) are
convertible into or exchangeable for Common Stock, shall
change at any time (other than under or by reason of
provisions designed to protect against dilution of the
type set forth in this Section 6.10B or in Sections 6.6
through 6.10A), then the conversion price in effect at
the time of such change shall forthwith be adjusted to
the conversion price which would have been in effect at
such time had such Option or Convertible Securities still
outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold.
(d) TREATMENT OF EXPIRED OPTIONS AND
UNEXERCISED CONVERTIBLE SECURITIES. Upon the expiration
of any Option or the termination of any right to convert
or exchange any Convertible Securities (without any
exercise of such Option or right to convert or exchange),
the Adjusted Conversion Price then in effect hereunder
shall forthwith be adjusted to the conversion price which
would have been in effect at the time of such expiration
or termination had such Option or Convertible Securities,
to the extent outstanding immediately prior to such
expiration or termination, never been issued, and the
Common Stock issuable thereunder shall no longer be
deemed to be outstanding. No increase in the conversion
price made pursuant to this paragraph (d) shall exceed
the amount of any decrease in the conversion price
effected pursuant to other provisions of this Section
6.10B in respect of such unexercised expired or
terminated Options or Convertible Securities, the purpose
of this Section 6.10B(d) being to reverse any adjustments
in the conversion price previously made pursuant to other
provisions of this Section 6.10B in respect of such
unexercised expired or terminated Options or Convertible
Securities.
-3-
(e) CALCULATION OF CONSIDERATION RECEIVED.
In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold or deemed
to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the aggregate
proceeds payable to the Company therefor, prior to
deduction of any expenses incurred and any underwriting
commission or concessions paid or allowed by the Company
in connection therewith. In case any shares of Common
Stock, Options or Convertible Securities shall be issued
or sold for a consideration other than cash, the amount
of consideration other than cash received by the Company
shall be deemed to be the fair value, determined in good
faith by the Board of Directors, of such consideration
except where such consideration consists of securities,
in which case the amount of the consideration received by
the Company shall be deemed to be the current market
price thereof as of the date of receipt. In case any
shares of Common Stock, Options or Convertible Securities
shall be issued in connection with any merger in which
the Company is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair
value, determined in good faith by the Board of
Directors, of such portion of the net assets and business
of the non-surviving corporation as shall be attributable
to such Common Stock, Options or Convertible Securities,
as the case may be.
(f) HOLDERS AGREEMENTS NOT TO AMEND. It is
expressly acknowledged and agreed that neither Section
6.10A nor Section 6.10B shall be deemed to amend or
adjust the conversion price if the Company shall obtain
the written consent of the Holders of at least a majority
in aggregate principal amount of the Securities prior to
the issuance of Common Stock, Options or Convertible
Securities, as the case may be.
(g) "CONVERTIBLE SECURITIES." As used herein
"Convertible Securities" shall mean any stock or other
securities convertible into or exchangeable for Common
Stock issued after the date hereof, whether or not the
right to convert or exchange the same is immediately
exercisable.
(h) "OPTIONS." As used herein, "Options"
shall mean any rights to subscribe for or to purchase, or
any warrants or options for the purchase of, Common Stock
or Convertible Securities issued after the date hereof,
whether or not such Options are immediately exercisable.
(i) "PRIOR ADJUSTMENT TO CONVERSION PRICE. No
action, issuance or other matter covered by Section 6.10A
or Section 6.10B shall be deemed to amend or adjust the
conversion price of the Debentures if or to the extent
the same action, issuance or other matter is also covered
by Section 6.6, 6.7, 6.8, 6.9 or 6.10 and such action,
issuance or other matter shall thereupon result in the
amendment or adjustment of the then current conversion
price.
(d) The Debenture is hereby amended to add a new
paragraph numbered 12.10, which such paragraph shall read, in
its entirety, as set forth below:
12.10 CHOICE OF FORUM. The Company hereby
irrevocably consents to the non-exclusive personal
jurisdiction, service of process and venue in the federal
and
-4-
state courts of the State of New York for any claim, suit
or proceedings arising under this Agreement or the
documents and agreements executed in connection herewith.
2. Except as expressly modified herein, all other terms and
conditions of the Debenture shall remain in full force and effect.
IN WITNESS WHEREOF, the Company has duly executed this Allonge
as of the 13th day of August, 1997.
SA TELECOMMUNICATIONS, INC.
By:________________________________
J. Xxxxx Xxxxxxx, Vice
President-Finance and
Chief Financial Officer
AGREED TO AND ACCEPTED
THIS 13th day of August, 1997
NORTHSTAR HIGH TOTAL RETURN FUND
By:_________________________
Xxxxxxx Xxxxxxxxx
EXHIBIT B TO PURCHASE AGREEMENT
CONFIDENTIAL DISCLOSURE STATEMENT
EXHIBIT C TO PURCHASE AGREEMENT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS.
No. 1: Series 1997 B $5,000,000
August 13, 1997
SA TELECOMMUNICATIONS, INC.
10% Convertible Debenture
Due August 15, 2006
FOR VALUE RECEIVED, SA TELECOMMUNICATIONS, INC., a Delaware
corporation (the "Company"), promises to pay to NORTHSTAR HIGH
TOTAL RETURN FUND or registered assigns (the "Holder") the
principal sum of Five Million Dollars on August 15, 2006 (the
"Maturity Date") and to pay interest on the unpaid principal amount
hereof, in such amounts, at such times and on such terms and
conditions as are specified herein.
1. INTEREST.
The Company promises to pay interest on the unpaid principal amount
of this Debenture ("the Security") at the rate of Ten Percent (10%)
per annum, payable in cash, and payable in arrears until the
principal hereof is paid in full or has been converted. The Company
will pay interest semi-annually on February 15 and August 15 each
year, commencing on August 15, 1997 to Holders of Securities at the
close of business on the relevant record dates specified below:
Interest Payment Date Corresponding Record Date
--------------------- -------------------------
February 15 February 1
August 15 August 1
Interest on the Securities, or any portion thereof, will accrue
from the most recent date to which interest has been paid or, if no
interest has been paid, from August 13, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT.
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered Holders of Securities
at the close of business on the February 1 or August 1 next
preceding the interest payment date (including Securities that are
canceled after the record date and on or before the interest
payment date). Holders must surrender Securities to the Company to
-2-
collect principal and any premium payments. The Company will pay
principal, premium, if any, and interest in money of the United
States that at the time of payment is legal tender for payment of
public and private debts. Interest and principal payments shall be
subject to withholding (if any) under applicable United States
Federal Internal Revenue Service Regulations.
3. REGISTERED DEBENTURES.
3.1 SERIES. This Security is one of a numbered series of
debentures having an aggregate principal amount of not more than
$5,000,000 which are identical except as to the principal amount
and date of issuance thereof and as to any restriction on the
transfer thereof in order to comply with the Securities Act of
1933, as amended (the "Securities Act"), and the regulations of the
SEC promulgated thereunder. The Securities shall be designated
Series 1997 B.
3.2 RECORD OWNERSHIP. The Company shall maintain a register
of the Holders of the Securities (the "Register") showing their
names and addresses and the serial numbers and principal amounts of
Securities issued to or transferred of record by them from time to
time. The Register may be maintained in electronic, magnetic or
other computerized form. The Company may treat the person named as
the Holder of this Security in the Register as the sole owner of
this Security. The Holder of this Security is the person
exclusively entitled to receive payments of interest on this
Security, receive notifications with respect to this Security,
convert it into Common Stock and otherwise exercise all of the
rights and powers as the absolute owner hereof.
3.3 REGISTRATION OF TRANSFER. Transfers of this Security may
be registered on the books of the Company maintained for such
purpose pursuant to Section 3.2 above (i.e., the Register);
provided, however, that the Company shall be under no obligation to
reflect a transfer of this Security unless such transfer is of an
amount equal to $100,000 or an integral multiple of $100,000.
Transfers shall be registered when this Security is presented to
the Company with a request to register the transfer hereof and the
Security is duly endorsed or accompanied by a written instrument of
transfer in the form attached as Exhibit A hereto, duly executed by
the Holder thereof or his attorney duly authorized in writing,
reasonable assurances are given that the endorsements are genuine
and effective, and the Company has received evidence satisfactory
to it that such transfer is rightful and in compliance with this
Security and all applicable laws, including tax laws and state and
federal securities laws. The Company may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than such taxes or charges
payable upon transfers pursuant to Section 4.6, 5.3, 6.2 and 8.4.
When this Security is presented for transfer and duly transferred
hereunder, it shall be canceled and a new Security showing the name
of the transferee as the record holder thereof shall be issued in
lieu hereof. When this Security is presented to the Company with a
reasonable request to exchange it for an equal principal amount of
Securities of other denominations, the Company shall make such
exchange and shall cancel this Security and issue in lieu thereof
Securities having a total principal amount equal to this Security
in the denominations requested by the Holder; PROVIDED HOWEVER, no
Holder shall request that the Company exchange this Security in
denominations of less than $100,000.
3.4 RESTRICTION ON TRANSFER. The Company shall not be
required: (i) to issue, register the transfer of or exchange
Securities during a period beginning at the opening of business 15
-3-
days before the day of any selection of Securities for redemption
under Section 4.2 and ending at the close of business on the day of
selection or (ii) to register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
3.5 WORN AND LOST SECURITIES. If this Security becomes worn,
defaced or mutilated but is still substantially intact and
recognizable, the Company or its agent may issue a new Security in
lieu hereof upon its surrender bearing a number not
contemporaneously outstanding. Where the Holder of this Security
claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue a new Security in place of the
original Security bearing a number not contemporaneously
outstanding if the Holder so requests by written notice to the
Company actually received by the Company before it is notified that
the Security has been acquired by a bona fide purchaser and the
Holder has delivered to the Company an indemnity bond in such
amount and issued by such surety as the Company deems satisfactory
together with an affidavit of the Holder setting forth the facts
concerning such loss, destruction or wrongful taking and such other
information in such form with such proof or verification as the
Company may request.
3.6 SPECIAL TRANSFER PROVISIONS. The Company shall only
register the transfer of any Security if the transferee (1)
executes and delivers to the Company the Assignment Form attached
hereto and (2) provides to the Company such other information,
opinions and certifications as reasonably requested by the Company
to ensure compliance with the terms of this Security and applicable
law.
4. OPTIONAL REDEMPTION.
4.1 REDEMPTION; REDEMPTION PRICE. On and after August 15,
1999, the Company may redeem all the Securities at any time or some
of them from time to time at the following redemption prices
(expressed in percentages of principal amount), plus accrued
interest to, but not including, the redemption date, if redeemed
during the 12-month period beginning August 15 of the years
indicated below:
Year Percentage
---- ----------
1999 107.0%
2000 105.6
2001 104.2
2002 102.8
2003 101.4
2004 and thereafter 100.0
No sinking fund is provided for the Securities.
4.2 SELECTION OF SECURITIES TO BE REDEEMED. If less than all
the Securities are to be redeemed, the Company may select the
Securities to be redeemed by lot or on a pro rata basis from
Securities outstanding and not previously called for redemption or
in such manner as complies with applicable legal and securities
exchange requirements, if any. Securities selected for redemption
shall be in amounts of $1,000 or integral multiples of $1,000.
-4-
4.3 NOTICE OF REDEMPTION. At least 30 days but not more than
60 days before a redemption date, the Company shall mail a notice
of redemption to each Holder whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price;
(3) the conversion price;
(4) that Securities called for redemption may be
converted at any time before the close of business on the
tenth (10th) calendar day immediately preceding the redemption
date, or if such day is not a Business Day, then the close of
business on the next succeeding day which is a Business Day;
(5) that Holders who want to convert Securities must
satisfy the requirements set forth in Article 6 of this
Security;
(6) that Securities called for redemption must be
surrendered to the Company in order to collect the redemption
price;
(7) that interest on Securities called for redemption
ceases to accrue on and after the redemption date, and the
amount of interest accrued on the Securities called for
redemption up to but not including the redemption date; and
(8) if less than all of any Security is to be redeemed,
the principal amount of such Security to be redeemed.
4.4 EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption
is mailed, Securities called for redemption, unless theretofore
converted into Common Stock pursuant to the terms of this Security,
shall become due and payable on the redemption date at the
redemption price. Upon surrender to the Company, such Securities
shall be paid at the redemption price, plus accrued interest to the
redemption date; PROVIDED, HOWEVER, that any regular semi-annual
payment of interest becoming due on the redemption date shall be
payable to the Holder of any such Security as provided herein.
4.5 EFFECT OF REDEMPTION DATE. Interest on the Securities to
be redeemed will cease to accrue on and after the applicable
redemption date, whether or not such Securities are presented for
payment. If any Security called for redemption shall not be so
paid upon surrender thereof for redemption, the principal, premium,
if any, and, to the extent lawful, accrued interest thereon shall,
until paid, bear interest from the redemption date at the rate
provided in the Securities.
-5-
4.6 Securities Redeemed in Part. Upon surrender to the
Company of a Security that is redeemed in part, the Company shall
execute for the Holder a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
5. REPURCHASE AT OPTION OF HOLDER UPON A FUNDAMENTAL CHANGE.
5.1 REPURCHASE UPON FUNDAMENTAL CHANGE. The Company covenants
and agrees that, in the event that there occurs a Fundamental
Change (as defined below), each Holder of Securities shall have the
right, at the Holder's option, to require the Company to repurchase
all of such Holder's Securities, or any portion thereof that is an
integral multiple of $1,000, on the date (the "Repurchase Date")
selected by the Company that is not less than 10 nor more than 30
days after the Final Surrender Date (as defined below), at a price
equal to the principal amount thereof, plus accrued interest to the
Repurchase Date (the "Repurchase Price").
5.2 COMPANY NOTICE. Unless the Company shall have
theretofore called for redemption all the outstanding Securities,
on or before the 30th day after the occurrence of a Fundamental
Change, the Company shall mail to all Holders of record of the
Securities (at such Holder's address appearing in the Securities
Register) a written notice (the "Company Notice") describing the
occurrence of such Fundamental Change and of the repurchase right
arising as a result thereof as well as stating the final date by
which the Securities must be surrendered for repurchase, the
conversion price then in effect, the Repurchase Date, the
repurchase price and the procedure which the Holder must follow to
elect repurchase. The Company shall deliver a copy of the Company
Notice at least once to the Dow Xxxxx News Service or similar
business service in the United States. No failure of the Company to
give the foregoing notices or defect therein shall limit any
Holder's right to exercise a repurchase right or affect the
validity of the proceedings for the repurchase of Securities.
5.3 Exercising Repurchase Right.
(a) To elect repurchase of any Securities or portion
thereof, the Holder will be required to surrender, on or
before the Final Surrender Date (as defined below), to the
Company, such Security duly endorsed or assigned to the
Company or in blank, together with written notice of the
Holder's election to have the Company repurchase all or any
$1,000 portion of such Security specified in such notice.
Election of repurchase by a Holder shall be irrevocable.
"Final Surrender Date" shall mean the date which is, subject
to any contrary requirements of applicable law, 60 days after
the date of mailing of the Company Notice. "Repurchase Date"
shall mean the date selected by the Company for the repurchase
of the Securities that is not less than 10 and not more than
30 days after the Final Surrender Date.
(b) In the event a repurchase right shall be exercised
in accordance with the terms hereof, the Company shall pay or
cause to be paid the repurchase price in cash to the Holder on
the Repurchase Date; PROVIDED, HOWEVER, that installments of
interest that mature on or prior to the Repurchase Date shall
be payable in cash to the Holders of such Securities,
registered as such at the close of business on the relevant
record date specified herein.
-6-
(c) If any Security surrendered for repurchase shall not
be so paid on the Repurchase Date, the principal amount which
is payable at maturity shall, until the repurchase price (as
calculated at the date of payment) is paid, continue to bear
interest from the Repurchase Date at the rate borne by the
Security and each such Security shall continue to remain
convertible into Common Stock until said repurchase price
shall have been paid to the Holder.
(d) Any Security which is to be repurchased only in part
shall be surrendered to the Company (with, if the Company so
requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company, duly executed by
the holder thereof or his attorney duly authorized in
writing), and the Company shall execute and deliver to the
Holder without service charge, a new Security or Securities,
of any authorized denomination as requested by such Holder in
aggregate principal amount equal to and in exchange for the
unrepurchased portion of the principal of the Security so
surrendered.
5.4 CERTAIN DEFINITIONS. For purposes of this Article:
(a) The term "Junior Capital Stock" shall mean capital
stock of the Company that does not rank prior, as to the
payment of dividends or as to the distribution of assets upon
any voluntary or involuntary liquidation, dissolution or
winding up of the Company, to shares of capital stock of any
other class of the Company;
(b) The term "Fundamental Change" shall mean any of the
following:
(i) a "Person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Exchange Act) other
than a Permitted Holder, becoming the "beneficial owner"
(as defined in Rule l3d-3 under the Exchange Act) of
Voting Shares (as defined below) of the Company entitled
to exercise more than 50% of the total voting power of
all outstanding Voting Shares of the Company (including
any Voting Shares that are not then outstanding of which
such Person or group is deemed the beneficial owner) for
purposes of Rule 13d-3; or
(ii) a change in the Board of Directors in which the
individuals who constituted the Board of Directors at the
beginning of the two-year period immediately preceding
such change (together with any other director whose
election by the Board of Directors or whose nomination
for election by the shareholders of the Company was
approved by a vote of at least a majority of the
directors then in office who either were directors at the
beginning of such period or whose election or nomination
for election was previously so approved) cease for any
reason to constitute a majority of the directors then in
office; or
(iii) any consolidation of the Company with, or
merger of the Company into, any other Person, any merger
of another Person into the Company, or any sale or
transfer of all or substantially all of the assets of the
Company to another Person in a single transaction or
series of related transactions (other than (x) a merger
which does
-7-
not result in any reclassification, conversion, exchange
or cancellation of outstanding shares of Common Stock,
(y) a merger which is effected solely to change the
jurisdiction of incorporation of the Company or (z) any
consolidation with or merger of the Company into a wholly
owned subsidiary of the Company, or any sale or transfer
by the Company of all or substantially all of its assets
to one or more of its wholly owned subsidiaries, in any
one transaction or a series of transactions, provided, in
any such case, that the resulting corporation or each
such subsidiary assumes or guarantees the Company's
obligations under the Securities); PROVIDED, HOWEVER,
that a Fundamental Change shall not occur with respect to
any such transaction if either (i) the last sale price of
the Common Stock for any five Trading Days during the ten
Trading Days immediately preceding the public
announcement by the Company of such transaction is at
least equal to 105% of the conversion price in effect on
such Trading Day, (ii) the consideration in such
transaction to the holders of Common Stock consists of
cash, securities that are, or immediately upon issuance
will be, listed on a national securities exchange or
quoted on the Nasdaq National Market, or a combination of
cash and such securities, and the aggregate fair market
value of such consideration (which, in the case of such
securities, shall be equal to the average of the last
sale prices of such securities during the ten consecutive
Trading Days commencing with the sixth Trading Day
following consummation of the transaction) is at least
105% of the conversion price in effect on the date
immediately preceding the closing date of such
transaction, or (iii) in the case of a merger or
consolidation, the stockholders of the Company
immediately prior to the date of such transaction
continue to beneficially own a majority of the Voting
Shares of the surviving entity;
(c) The term "Person" shall include any syndicate
or group which would be deemed to be a "Person" under
Section 13(d)(3) of the Exchange Act as in effect on the
date of the original execution of this Indenture;
(d) The term "Voting Shares" shall mean all
outstanding shares of any class or classes (however
designated) of Junior Capital Stock entitled to vote
generally in the election of members of the Board of
Directors; and
(e) The term "Permitted Holder" means Xxxx X. Xxxx,
Xx. or his Affiliates.
5.5 COMPLIANCE WITH SECURITIES LAWS. The Company shall comply
with the requirements of Rule 13e-4 and Rule 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with
the repurchase of Securities pursuant to this Article 5. To the
extent the provisions of any securities laws or regulations
conflict with the provisions under this Article 5, the Company
shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under this
Article 5 by virtue thereof.
-8-
6. CONVERSION.
6.1 CONVERSION PRIVILEGE. A Holder of a Security may, subject
to the terms stated herein, convert it into fully paid and non-
assessable shares of Common Stock at any time prior to the close of
Company business on August 15, 2006. If the Security is called for
redemption, the holder may convert such Security at anytime before
the close of business on the tenth (10th) calendar day immediately
preceding the redemption date, or, if such date is not a Business
Day, then the close of business on the next succeeding day which is
a Business Day. The number of shares issuable upon conversion of a
Security is determined by dividing the principal amount to be
converted by the conversion price in effect on the conversion date,
and rounding the result to the nearest 1/l00th of a share.
The initial conversion price is $1.50 per share, subject to
adjustment as provided in this Article 6.
A Holder may convert a portion of a Security if the portion is
$1,000 or a whole multiple of $1,000.
6.2 CONVERSION PROCEDURE. To convert a Security a Holder must
(1) complete and sign the conversion notice on the back of the
Security, (2) surrender the Security to the Company, (3) furnish
the endorsements and transfer documents required by the Company and
(4) pay any transfer or similar tax required. The date on which the
Holder satisfies all those requirements in respect of a Security is
the conversion date of that Security. As soon as is reasonably
practical on or after the conversion date, the Company shall
deliver a certificate for the number of full shares of Common Stock
issuable upon the conversion of that Security and a check for any
fractional share. The Person in whose name the certificate is
registered shall be treated as a shareholder of record on and after
the conversion date.
No payment will be made for accrued interest on a converted
Security (other than the payment of interest to the Holder of a
Security at the close of business on a record date pursuant to
Article 1 hereof) unless at the time of conversion such Security
has been called for redemption pursuant to Article 4 hereof, in
which case the Holder of such Security shall be entitled to
interest accrued thereon to the date of conversion. Upon
conversion, no payment or adjustment will be made for dividends or
distributions on any Common Stock issued upon conversion of any
Security.
If a Holder converts more than one Security at the same time,
the number of full shares issuable upon the conversion shall be
based on the total principal amount of the Securities converted.
Upon surrender of a Security that is converted in part, the
Company shall execute for the Holder a new Security equal in
principal amount to the unconverted portion of the Security
surrendered.
If the last day on which a Security may be converted is a
Legal Holiday in a place where the Company is located, the Security
may be surrendered to the Company on the next succeeding business
day that is not a Legal Holiday with the same force and effect as
if surrendered on such last day.
6.3 FRACTIONAL SHARES. The Company will not issue a
fractional share of Common Stock upon conversion of a Security.
Instead the Company will deliver to the converting Securityholder
its
-9-
check for the current market value of the fractional share. The
current market value of a fraction of a share is determined by
multiplying the current market price of a full share by the
fraction, and rounding the result to the nearest cent.
For purposes of this Section, the current market price of a
share of Common Stock is the Quoted Price of the Common Stock on
the last Trading Day prior to the conversion date.
6.4 TAXES ON CONVERSION. If a Holder of a Security converts
it, the Company shall pay any documentary, stamp or similar issue
or transfer tax due on the issue of shares of Common Stock upon the
conversion. However, the Holder shall pay any such tax which is
due because the shares are issued in a name other than such
Holder's.
6.5 COMPANY TO PROVIDE STOCK. The Company shall reserve at
all times and keep available, free from preemptive rights, out of
its authorized but unissued Common Stock, enough shares of Common
Stock to permit the conversion of the Securities.
All shares of Common Stock which may be issued upon conversion
of the Securities shall be fully paid and nonassessable.
The Company shall endeavor to comply with all applicable
securities laws regulating the offer and delivery of shares of
Common Stock upon conversion of Securities and shall endeavor to
list such shares on each national securities exchange on which the
Common Stock is listed, or to have such shares approved for
quotation on the Nasdaq National Market or other over-the-counter
market on which the Common Stock is traded.
6.6 ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If the Company:
(1) issues any shares of its capital stock as a dividend
(or other distribution) on its Common Stock;
(2) subdivides its outstanding shares of Common Stock
into a greater number of shares;
(3) combines its outstanding shares of Common Stock into
a smaller number of shares; or
(4) issues by reclassification of its Common Stock any
shares of its capital stock,
then the conversion privilege and the conversion price in effect
immediately prior to such action shall be adjusted so that the
Holder of a Security thereafter converted will receive the number
of shares of capital stock of the Company which would have been
received (and if there is more than one class of such capital
stock, then shares of each class in the same proportions that would
have been received) upon consummation of such action by a Holder of
the number of shares of Common Stock into which such Security might
have been converted immediately prior to such action.
-10-
The adjustment described in the preceding paragraph shall
become effective immediately after the record date in the case of
a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
If after an adjustment a Holder of a Security may receive
shares of two or more classes of capital stock of the Company upon
conversion of such Security, the Company shall determine the
allocation of the adjusted conversion price between or among those
classes of capital stock. After such allocation, the conversion
privilege and the conversion price of each class of capital stock
shall thereafter be subject to adjustment on terms comparable to
those applicable to Common Stock in this Article.
6.7 ADJUSTMENT FOR RIGHTS ISSUE. If the Company distributes
any rights or warrants to all holders of its Common Stock entitling
them to subscribe for or purchase shares of Common Stock at a price
per share less than the current market price per share (as defined
in Section 6.11) on the Rights Record Date (as defined below), the
conversion price shall be adjusted in accordance with the following
formula:
0 + (N x P)
-----------
AC = CC x M
-------------
0 + N
where:
AC = the adjusted conversion price.
CC = the current conversion price.
0 = the number of shares of Common Stock
outstanding on the Rights Record Date.
N = the number of additional shares of Common
Stock offered.
P = the offering price per share of the additional
shares.
M = the current market price per share of Common
Stock on the Rights Record Date.
The adjustment shall become effective immediately after
the record date for the determination of shareholders entitled to
receive such rights or warrants (the "Rights Record Date").
6.8 ADJUSTMENT FOR CERTAIN DISTRIBUTIONS. Subject to the last
paragraph of this Section 6.8, if the Company distributes to all
holders of its Common Stock of cash, debt securities (or other
evidences of indebtedness) or other assets (excluding dividends or
distributions for which adjustment is required to be made under
Section 6.9), the conversion price shall be reduced in accordance
with the following formula:
-11-
AC = CC x M - P
-----
M
where:
AC = the adjusted conversion price.
CC = the current conversion price.
M = the current market price per share of Common
Stock on the Relevant Record Date (as defined
below).
P = the aggregate fair market value on the
Relevant Record Date (as determined in good
faith by the Board of Directors) of the cash,
debt securities (or other evidences of
indebtedness) or other assets distributed
applicable to one share of Common Stock.
The adjustment shall become effective immediately after the
record date for the determination of shareholders entitled to
receive the distribution (the "Relevant Record Date").
No adjustment will be made with respect to this Section 6.8
if, in lieu of such adjustment, the holders of the Securities, upon
conversion, will be entitled to receive, in addition to the shares
of Common Stock into which such Securities are convertible, the
kind and amount of debt securities (or other evidences of
indebtedness) or other assets comprising the distribution that such
holders would have received had they converted their Securities
immediately prior to the Record Date.
6.9 ADJUSTMENT FOR ALL CASH DISTRIBUTION. Subject to the last
two paragraphs of this Section 6.9, if the Company shall pay or
make a dividend or other distribution consisting exclusively of
cash to all holders of its Common Stock, the conversion price shall
be reduced in accordance with the following formula:
AC = CC x M - C
-----
M
where:
AC = the adjusted conversion price.
CC = the current conversion price.
M = the current market price per share of Common
Stock on the date fixed for payment of such
distribution.
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C = the amount of cash so distributed and not
excluded (as provided below) applicable to one
share of Common Stock.
The adjustment shall become effective immediately prior to the
opening of business on the day following the date fixed for payment
of such distribution.
6.10 ADJUSTMENT FOR TENDER OR EXCHANGE OFFER. Subject to the
last paragraph of this Section 6.10, in the event that a tender or
exchange offer (other than an odd-lot offer) made by the Company or
any subsidiary of the Company for all or a portion of the Common
Stock shall expire and such tender or exchange offer (as amended
upon the expiration thereof) shall require the payment to
stockholders of consideration per share of Common Stock having a
fair market value (as determined in good faith by the Board of
Directors) that, as of the last time (the "Expiration Time")
tenders or exchanges may be made pursuant to such tender or
exchange offer, exceeds 105% of the current market price per share
of Common Stock on the trading day next succeeding the Expiration
Time, the conversion price shall be reduced in accordance with the
following formula:
AC = CC x O x M
----------
P + (T x M)
where:
AC = the adjusted conversion price.
CC = the current conversion price.
O = the number of shares of Common Stock
outstanding (including any tendered or
exchanged shares) at the Expiration Time.
P = the fair market value of the aggregate
consideration payable to shareholders of
Common Stock based on the acceptance (up to
any maximum specified in the terms of the
tender or exchange offer) of all shares of
Common Stock validly tendered or exchanged and
not withdrawn as of the Expiration Time (the
shares of Common Stock so accepted, up to any
such maximum, being referred to as the
"Purchased Shares").
T = the number of shares of Common Stock
outstanding (less any Purchased Shares) on the
Expiration Time.
M = the current market price per share of Common
Stock on the trading day next succeeding the
Expiration Time.
The adjustment shall become effective immediately prior to the
opening of business on the day following the Expiration Time.
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In the event that the Company is permanently prevented by
applicable law from effecting any such purchases or all such
purchases are rescinded, the conversion price shall again be
adjusted to be the conversion price which would then be in effect
if such tender or exchange offer had not been made.
6.10A ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCES TO
RESTRICTED PURCHASERS. (a) If and whenever after the date hereof
the Company shall issue or sell, or shall in accordance with
Section 6.10B be deemed to have issued or sold, any shares of
Common Stock to (i) Jesup & Xxxxxx Capital Markets, Inc. or any
party who is an affiliate thereof or (ii) any Person who is a
beneficial owner (as such term is used in Rule 13d-3 promulgated
under the Exchange Act) of more than five percent (5%) of the
issued and outstanding shares of Common Stock of the Company (each,
a "Restricted Purchaser") for a consideration per share (the
"Adjusted Conversion Price") less than the then existing conversion
price per share (initially, $1.50 per share) on the date which is
the earlier of the date immediately preceding (i) the date of such
issue or sale or (ii) the date of the announcement of such issue or
sale, then, forthwith upon such issue or sale, the conversion price
applicable to the Debenture shall, subject to Section 6.10B, be
reduced to the Adjusted Conversion Price.
(b) Notwithstanding the provisions of this Section 6.10A
and Section 6.10B, no adjustment of the conversion price (other
than pursuant to Section 6.10(B)(c)) shall be required as a result
of (i) the issuance of shares of Common Stock upon conversion of
the Debenture, (ii) the issuance of Common Stock in an underwritten
public offering, (iii) the issuance of Common Stock or derivative
securities exchangeable, exercisable or convertible into Common
Stock pursuant to the terms of the Company's Series A Cumulative
Convertible Preferred Stock ("Series A Preferred") (PROVIDED,
HOWEVER, except as set forth in subparagraph (iv) hereof,
adjustment to the conversion price shall be applicable for all new
issuances of Series A Preferred), (iv) the payment of payment-in-
kind dividends on the Series A Preferred, (v) the issuance of
Common Stock or Convertible Securities (as defined in Section
6.10B(g)) to Northstar High Total Return Fund or any other fund
advised by Northstar Investment Management, or (vi) the exercise or
conversion of any derivative security outstanding on August 13,
1997 and held by any present or past employee, officer or director
of the Company.
6.10B EFFECT OF CERTAIN EVENTS ON CONVERSION PRICE. For
purposes of determining the Adjusted Conversion Price under Section
6.10A, the following shall be applicable:
(a) ISSUANCE OF OPTIONS. In case at any time the
Company shall in any manner grant any Options (including Options
for Convertible Securities) to a Restricted Purchaser, and the
price per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange of such
Convertible Securities
(determined by dividing (i) the total amount, if any, received
or receivable by the Company as consideration for the granting
of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the
exercise of all such Options, plus, in the case of such
Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon
the conversion or exchange thereof, by (ii) the total
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maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of
such Options)
shall be less than the current conversion price determined as of
the earlier of the date immediately preceding (i) the date of
granting such Options or (ii) the date of any announcement of the
granting of such Options, THEN the total maximum number of shares
of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options
shall (as of the date of grant of such Options) be deemed to be
outstanding and to have been issued for such price per share. No
adjustment of the conversion price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible Securities,
except as otherwise provided in Section 6.10B(c).
(b) ISSUANCE OF CONVERTIBLE SECURITIES. In case the
Company shall in any manner issue or sell any Convertible
Securities to a Restricted Purchaser, and the price per share for
which Common Stock is issuable upon such conversion or exchange of
such Convertible Securities
(determined by dividing (i) the total amount received or
receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such
Convertible Securities)
shall be less than the current conversion price on the date which
is the earlier of the date immediately preceding (i) the date of
such issue or sale of Convertible Securities or (ii) the date of
the announcement of such issue or sale of such Convertible
Securities, THEN the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible
Securities shall (as of the date of the issue or sale of such
Convertible Securities) be deemed to be outstanding and to have
been issued for such price per share. Except as otherwise provided
in Section 6.10B(c), no adjustment of the conversion price shall be
made upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any
Options for which adjustments of the conversion price have been
made or are to be made pursuant to other provisions of this Section
6.10B, no further adjustment of the conversion price shall be made
by reason of such issue or sale.
(c) CHANGE IN OPTION OR CONVERSION PRICE. If the
purchase price provided for in any Option referred to in Section
6.10B(a), the additional consideration, if any, payable upon
conversion or exchange of any Convertible Securities referred to in
Section 6.10B(a) or 6.10B(b), or the rate at which any Convertible
Securities referred to in Section 6.10B(a) or 6.10B(b) are
convertible into or exchangeable for Common Stock, shall change at
any time (other than under or by reason of provisions designed to
protect against dilution of the type set forth in this Section
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6.10B or in Sections 6.6 through 6.10A), then the conversion price
in effect at the time of such change shall forthwith be adjusted to
the conversion price which would have been in effect at such time
had such Option or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration
or conversion rate, as the case may be, at the time initially
granted, issued or sold.
(d) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Securities (without any exercise of such Option or right to convert
or exchange), the Adjusted Conversion Price then in effect
hereunder shall forthwith be adjusted to the conversion price which
would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or
termination, never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding. No increase
in the conversion price made pursuant to this paragraph (d) shall
exceed the amount of any decrease in the conversion price effected
pursuant to other provisions of this Section 6.10B in respect of
such unexercised expired or terminated Options or Convertible
Securities, the purpose of this Section 6.10B(d) being to reverse
any adjustments in the conversion price previously made pursuant to
other provisions of this Section 6.10B in respect of such
unexercised expired or terminated Options or Convertible
Securities.
(e) CALCULATION OF CONSIDERATION RECEIVED. In case any
shares of Common Stock, Options or Convertible Securities shall be
issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor shall be deemed to be the aggregate
proceeds payable to the Company therefor, prior to deduction of any
expenses incurred and any underwriting commission or concessions
paid or allowed by the Company in connection therewith. In case any
shares of Common Stock, Options or Convertible Securities shall be
issued or sold for a consideration other than cash, the amount of
consideration other than cash received by the Company shall be
deemed to be the fair value, determined in good faith by the Board
of Directors, of such consideration except where such consideration
consists of securities, in which case the amount of the
consideration received by the Company shall be deemed to be the
current market price thereof as of the date of receipt. In case any
shares of Common Stock, Options or Convertible Securities shall be
issued in connection with any merger in which the Company is the
surviving corporation, the amount of consideration therefor shall
be deemed to be the fair value, determined in good faith by the
Board of Directors, of such portion of the net assets and business
of the non-surviving corporation as shall be attributable to such
Common Stock, Options or Convertible Securities, as the case may
be.
(f) HOLDERS AGREEMENTS NOT TO AMEND. It is expressly
acknowledged and agreed that neither Section 6.10A nor Section
6.10B shall be deemed to amend or adjust the conversion price if
the Company shall obtain the written consent of the Holders of at
least a majority in aggregate principal amount of the Securities
prior to the issuance of Common Stock, Options or Convertible
Securities, as the case may be.
(g) "CONVERTIBLE SECURITIES." As used herein
"Convertible Securities" shall mean any stock or other securities
convertible into or exchangeable for Common Stock issued after the
date hereof, whether or not the right to convert or exchange the
same is immediately exercisable.
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(h) "OPTIONS." As used herein, "Options" shall mean any
rights to subscribe for or to purchase, or any warrants or options
for the purchase of, Common Stock or Convertible Securities issued
after the date hereof, whether or not such Options are immediately
exercisable.
(i) "PRIOR ADJUSTMENT TO CONVERSION PRICE. No action,
issuance or other matter covered by Section 6.10A or Section 6.10B
shall be deemed to amend or adjust the conversion price of the
Debentures if or to the extent the same action, issuance or other
matter is also covered by Section 6.6, 6.7, 6.8, 6.9 or 6.10 and
such action, issuance or other matter shall thereupon result in the
amendment or adjustment of the then current conversion price.
6.11 CURRENT MARKET PRICE. For purposes of Sections 6.7, 6.8,
6.9 and 6.10, the current market price per share of Common Stock on
any date is the average of the Quoted Prices of the Common Stock
for five consecutive Trading Days selected by the Company
commencing not more than 20 Trading Days before, and ending not
later than, the earlier of the date in question and the Trading Day
before the "ex" date, if any, with respect to the issuance or
distribution requiring such computation. The term "'ex' date,"
when used with respect to any issuance or distribution, means the
first Trading Day on which the Common Stock trades regular way in
the market from which the Quoted Price is then to be determined
without the right to receive such issuance or distribution.
6.12 WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment in the
conversion price need be made unless the adjustment would require
an increase or decrease of at least 1% in the conversion price then
in effect. Any adjustments which are not made shall be carried
forward and taken into account in any subsequent adjustment.
All calculations under this Article shall be made to the
nearest cent or to the nearest 1/l00th of a share, as the case may
be.
6.13 STOCKHOLDER RIGHTS PLAN. In the event the Company
implements a stockholder rights plan, such rights plan shall
provide that upon conversion of the Securities, the Holders will
receive, in addition to the Common Stock issuable upon such
conversion, the rights issued under such rights plan
(notwithstanding the occurrence of an event causing such rights to
separate from the Common Stock at or prior to the time of
conversion), PROVIDED, that such Holder would not be an ineligible
Person pursuant to such plan.
6.14 WHEN NO ADJUSTMENT REQUIRED. No adjustment need be made
for (i) rights to purchase Common Stock pursuant to a Company plan
for reinvestment of dividends or interest; (ii) a change in the par
value (including a change to no par value) of the Common Stock;
(iii) the repurchase of shares of Common Stock pursuant to the
provisions of employee and incentive stock option plans; and (iv)
the payment of in-kind dividends to holders of the Company's Series
A Cumulative Convertible Preferred Stock.
To the extent the Securities become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will
not accrue on the cash.
-17-
Notwithstanding any provision to the contrary in this
Security, no adjustment shall be made in the conversion price which
would have the effect of reducing the conversion price below the
par value of the Common Stock.
6.15 NOTICE OF ADJUSTMENT. Whenever the conversion price is
adjusted, the Company shall promptly mail to Securityholders a
notice of the adjustment together with a statement of the facts
requiring the adjustment and the manner of computing it. In the
absence of manifest error, such notice shall be presumptive
evidence that the adjustment is correct.
6.16 VOLUNTARY REDUCTION. The Company from time to time may
reduce the conversion price by any amount for any period of time if
the period is at least 20 days and if the reduction is irrevocable
during the period. Notwithstanding any provision to the contrary
in this Security, the reduction of the conversion price pursuant to
this Section 6.16 shall not require the consent of any
Securityholder.
Whenever the conversion price is reduced, the Company shall
mail to Securityholders a notice of the reduction. The Company
shall mail the notice at least 15 days before the date the reduced
conversion price takes effect. The notice shall state the reduced
conversion price and the period during which it will be in effect.
A reduction of the conversion price does not change or adjust
the conversion price otherwise in effect for purposes of Sections
6.6 through 6.10.
6.17 NOTICE OF CERTAIN TRANSACTIONS. If:
(1) the Company takes any action which would require an
adjustment in the conversion price pursuant to Section 6.08
and if the Securityholders are, in lieu thereof, participants
therein;
(2) the Company takes any action of the nature specified
in Section 6.18; or
(3) there is a dissolution or liquidation of the
Company,
the Company shall mail to Securityholders a notice stating the
record date for any such distribution or the effective date of any
such subdivision, combination, reclassification, consolidation,
merger, transfer, lease, liquidation or dissolution. The Company
shall mail the notice at least 15 days before such date. Failure
to mail the notice or any defect in it shall not affect the
validity of any transaction referred to in clause (1), (2) or (3)
of this Section.
6.18 CONSOLIDATION, MERGER OF THE COMPANY OR TRANSFER OR
LEASE. If the Company is a party to a consolidation, merger or
transfer or lease of assets subject to Section 9.11 or a merger
which reclassifies or changes its outstanding Common Stock, the
Person formed by such consolidation or resulting from such merger
or which assumes or leases such assets shall assume this Security
and the obligations hereunder.
-18-
As a condition of such consolidation, merger, transfer or
lease, lawful and adequate provisions shall be made whereby each
Holder of a Security may convert the Securities into the kind and
amount of securities, cash or other assets receivable upon the
consolidation, merger, transfer or lease by a holder (other than
any party to such transaction or any of its affiliates) of the
number of shares of Common Stock into which such Security might
have been converted immediately before the effective date of such
transaction, assuming such holder of Common Stock failed to
exercise his rights of election, if any, as to the kind or amount
of securities, cash or other property receivable upon such
consolidation, merger, transfer or lease (provided that, if the
kind or amount of securities, cash or other property receivable
upon such consolidation, merger, transfer or lease is not the same
for each share of Common Stock held immediately prior to such
consolidation, merger, transfer or lease by others than the parties
to such transaction or their affiliates and in respect of which
such rights of election shall not have been exercised ("non-
electing share"), then for the purposes of this Section the kind
and amount of securities, cash and other property receivable upon
such consolidation, merger, transfer or lease by each non-electing
share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). The Company will
not effect any such consolidation, merger, transfer or lease,
unless prior to the consummation thereof the successor corporation
(if other than the Company) resulting from such consolidation or
merger or the corporation assuming or leasing such assets shall
assume, by executed written instrument, a copy of which is mailed
or delivered to each Securityholder at the last address of such
Holder appearing on the books of the Company, the obligation to
deliver to such Holder the amount of securities, cash or other
assets as, in accordance with the foregoing provisions, such Holder
would be entitled to receive upon conversion of such Holders'
Security. Such instrument shall provide for adjustments which shall
be as nearly equivalent as may be practical to the adjustments
provided for in this Article. If the issuer of securities
deliverable upon conversion of Securities is an affiliate of the
surviving, transferee or lessee corporation, that issuer shall also
execute such instrument. The successor Company shall mail to each
Securityholder a notice briefly describing the terms of such
instrument.
If this Section applies to a particular event, Section 6.6
shall not apply to such event.
6.19 COMPANY DETERMINATION FINAL. Subject to compliance with
the terms of the Securities, any determination which the Company or
its Board of Directors must make pursuant to Section 6.3, 6.6, 6.8,
6.10, 6.10A, 6.10B, 6.11 or 6.12 shall be conclusive.
7. REPURCHASE AT OPTION OF HOLDER UPON AN INCURRENCE EVENT.
7.1 REPURCHASE UPON AN INCURRENCE EVENT. The Company
covenants and agrees that, in the event that (i) the Company or any
of its Subsidiaries incurs Indebtedness (other than Additional
Permitted Indebtedness or Indebtedness under the Securities),
(ii) the Pro Forma Interest Coverage of the Company and its
Subsidiaries on a consolidated basis, would be less than 2.0:1 and
(iii) the average closing sale price of the Common Stock is less
than $2.00, adjusted for splits, combinations, reclassifications or
similar events, for the twenty Trading Days prior to the incurrence
of such Indebtedness (the occurrence of all of (i), (ii) and (iii),
an "Incurrence Event"), each Holder will have the right, at such
Holder's option, to require the Company to repurchase all, or any
portion that is an integral multiple of $1,000, of such Holder's
Securities on the Incurrence Repurchase Date (as defined
-19-
in Section 7.3 below) selected as provided below at a repurchase
price which is equal to 100% of the principal amount of such
Securities plus accrued interest to the Incurrence Repurchase Date.
The Company shall comply with the requirements of Rule 13e-4
and Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations
are applicable in connection with the repurchase of Securities
pursuant to this Article 7. To the extent the provisions of any
securities laws or regulations conflict with the provisions under
this Article 7, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have
breached its obligations under this Article 7 by virtue thereof.
7.2 NOTICES, ETC. Unless the Company shall have theretofore
called for redemption all the outstanding Securities, on or before
the 30th day after the occurrence of an Incurrence Event, the
Company shall mail to each Holder at such Holder's address
appearing in the Securities register a written notice (the "Company
Incurrence Notice") describing the occurrence of the Incurrence
Event and of the repurchase right set forth herein arising as a
result thereof, as well as stating the final date by which the
Securities must be surrendered for repurchase, the conversion price
then in effect, the Incurrence Repurchase Date, the repurchase
price and the procedure which the Holder must follow to elect
repurchase. The Company shall cause a copy of such notice of the
repurchase right to be sent at least once to the Dow Xxxxx News
Service or similar business service in the United States.
No failure of the Company to give the foregoing notices or
defect therein shall limit any Holder's right to exercise a
repurchase right or affect the validity of the proceedings for the
repurchase of Securities.
7.3 EXERCISING REPURCHASE RIGHT. (a) To elect repurchase of
any Securities or portion thereof, the Holder will be required to
surrender, on or before the Final Incurrence Surrender Date (as
defined below), to the Company, such Security duly endorsed or
assigned to the Company or in blank, together with written notice
of the Holder's election to have the Company repurchase all or any
$1,000 portion of such Security specified in such notice. Election
of repurchase by a Holder shall be irrevocable. "Final Incurrence
Surrender Date" shall mean the date which is, subject to any
contrary requirements of applicable law, 60 days after the date of
mailing of the Company Incurrence Notice. "Incurrence Repurchase
Date" shall mean the date selected by the Company for the
repurchase of the Securities that is not less than 10 and not more
than 30 days after the Final Incurrence Surrender Date.
(b) In the event a repurchase right shall be exercised
in accordance with the terms hereof, the Company shall pay or
cause to be paid the repurchase price in cash to the Holder on
the Incurrence Repurchase Date; PROVIDED, HOWEVER, that
installments of interest that mature on or prior to the
Incurrence Repurchase Date shall be payable in cash to the
Holders of such Securities, registered as such at the close of
business on the relevant record date specified in the
Securities according to the terms and provisions of Article 1.
(c) If any Security surrendered for repurchase shall not
be so paid on the Incurrence Repurchase Date, the principal
amount which is payable at maturity shall, until the
repurchase price (as calculated at the date of payment) is
paid, continue to bear interest from the Incurrence Repurchase
Date at the rate borne by the Security and each such Security
shall
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continue to remain convertible into Common Stock until said
repurchase price shall have been paid to the Holder.
(d) Any Security which is to be repurchased only in part
shall be surrendered to the Company (with, if the Company so
requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company duly executed by,
the holder thereof or his attorney duly authorized in
writing), and the Company shall execute and deliver to the
Holder without service charge, a new Security or Securities,
of any authorized denomination as requested by such Holder in
aggregate principal amount equal to and in exchange for the
unrepurchased portion of the principal of the Security so
surrendered.
8. AMENDMENT, SUPPLEMENT, WAIVER.
8.1 WITHOUT CONSENT OF HOLDERS. The Company may amend or
supplement the Securities without the consent of any
Securityholder:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the
covenants of the Company herein; or
(2) to add to the covenants of the Company for the
benefit of the Holders of the Securities or to surrender any
right or power herein conferred upon the Company; or
(3) to permit or facilitate the issuance of Securities
in uncertificated form; or
(4) to cure any ambiguity or defect in and to correct or
supplement any provision in any Security that may be
inconsistent with any other provision in the Security;
PROVIDED, HOWEVER, that any such action pursuant to this
clause (4) shall not adversely affect the interests of the
Holders of Securities in any material respect.
8.2 WITH CONSENT OF HOLDERS. The Company may amend or
supplement the Securities with the written consent of the Holders
of at least a majority in aggregate principal amount of the
Securities, and the Holders of a majority in aggregate principal
amount of the Securities may waive compliance by the Company with
any provision of the Securities. However, without the consent of
each Securityholder affected, an amendment, supplement or waiver
under this Section may not:
(1) change the stated maturity date of the principal of,
or interest on, any Security or adversely affect the right of
a Holder to convert any Security;
(2) reduce the principal amount of, or premium, if any,
or interest on, any Security;
(3) change the currency for payment of principal of, or
interest on, any Security;
(4) impair the right to institute suit for the
enforcement of any payment on or with respect to any Security;
-21-
(5) reduce the amount of Securities whose Holders must
consent to an amendment or supplement hereto or the waiver of
defaults or compliance hereunder;
(6) make any change in Sections 10.4, 10.5 or this
Section 8.2 (second sentence); or
(7) amend, modify or change in any material respect the
obligation of the Company to offer to repurchase the
Securities in the event of a Fundamental Change or an
Incurrence Event or modify any of the provisions or
definitions with respect thereto after a Fundamental Change or
an Incurrence Event, as the case may be, has occurred.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such
consent approves the substance thereof. The Company may establish
a record date for determining Securityholders of record entitled to
give any consent or waiver.
After an amendment or supplement under this Section becomes
effective, the Company shall mail to Securityholders a notice
briefly describing the amendment or supplement. Any failure of the
Company to mail each such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any amendment
or supplement.
8.3 REVOCATION AND EFFECT OF CONSENTS. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder
of a Security is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security, even
if notation of the consent is not made on any Security. An
amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Securityholder. However,
any Holder or subsequent Holder may revoke the consent as to such
Security or portion of a Security if the Company receives the
notice of revocation before the date on which it receives the
consent of the requisite principal amount of the Securities.
Notwithstanding the foregoing, if a record date has been
established for the purpose of determining Securityholders entitled
to consent, such written notice of revocation must be signed by the
Securityholder of record as of the record date or his duly
appointed proxy.
8.4 NOTATION ON OR EXCHANGE OF SECURITIES. The Company may
place an appropriate notation relating to an amendment, supplement
or waiver on any Security thereafter executed. The Company in
exchange for all Securities may issue new Securities that reflect
the amendment, supplement or waiver. Failure to make such notation
or issue such new Securities shall have no effect on such
amendment, supplement or waiver.
9. COVENANTS
9.1 PAYMENT OF SECURITIES. The Company shall pay the
principal of and premium, if any, and interest on, the Securities
on the dates and in the manner provided herein.
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The Company shall pay interest on overdue principal and
premium, if any, at 10% per annum; it shall pay interest on overdue
installments of interest at the same rate per annum to the extent
lawful.
9.2 SEC REPORTS. Notwithstanding that the Company may not be
subject to or required to remain subject to, the reporting
requirements of Section 13 or 15(d) of the Exchange Act or
otherwise report on an annual and quarterly basis on forms provided
for such annual and quarterly reporting pursuant to rules and
regulations promulgated by the Commission, the Company shall
continue to file with the Commission such annual and interim
reports (each including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's
certified independent accountants) on Forms 10-K and Q,
respectively, as the Company would be required to file were it
subject to such reporting requirements within the time periods
prescribed under such rules and regulations, and all reports that
would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports. The Company shall
not be obligated to file any such reports with the Commission if
the Commission does not permit such filings but shall remain
obligated to provide such reports to the Holders within the periods
of time referred to above. The Company shall provide to any Holder
of Securities any information reasonably requested by the Holder
concerning the Company (including financial statements) necessary
in order to permit such Holder to transfer Securities in accordance
with Rule 144A promulgated under the Securities Act. In addition,
the Company shall cause its annual reports to shareholders and any
quarterly or other financial reports furnished by it to
shareholders generally to be mailed at the expense of the Company
no later than the date such materials are mailed or made available
to the Company's shareholders, to the Holders at their addresses as
set forth in the register of Securities maintained by the
Registrar.
9.2A COMPLIANCE CERTIFICATE. The Company shall deliver to
each Holder within 120 days after the end of each fiscal year of
the Company, a brief certificate from the principal executive
officer, principal financial officer or principal accounting
officer as to his or her knowledge of the Company's compliance with
all conditions and covenants under this Security. For purposes of
this Section 9.2A, such compliance shall be determined without
regard to any period of grace or requirement of notice provided
under this Security. The first certificate pursuant to this Section
shall be for the year ending December 31, 1997.
9.3 CORPORATE EXISTENCE. Subject to Section 9.11, the Company
will do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, rights
(charter and statutory) and franchise; PROVIDED, HOWEVER, that the
Company shall not be required to preserve any such right or
franchise if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the
business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.
9.4 NOTICE OF DEFAULTS. In the event that indebtedness for
borrowed money of the Company in an amount in excess of $10,000,000
is accelerated because of the occurrence of any default under such
indebtedness, the Company will promptly give written notice to the
Holders of such failure or acceleration, as the case may be, or of
the occurrence of an event which, with the giving of notice or the
passage of time, or both, would entitle the holder or holders of
such indebtedness to declare such indebtedness due and payable
before its maturity.
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9.5 LIMITATION ON LIENS. The Company will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist
any Liens (other than Permitted Liens) of any kind against or upon
any of their respective property or assets, or any proceeds
therefrom, unless (i) in the case of Liens on property, assets or
proceeds securing Indebtedness that is expressly subordinate or
junior in right of payment to the Securities, the Securities are
secured by a Lien on such property, assets or proceeds that is
senior in priority to such Liens and (ii) in all other cases, the
Securities are equally and ratably secured.
9.6 LIMITATION ON ACQUISITIONS. The Company will not, and
will not permit any Subsidiary to, acquire (by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or any division,
operating unit, line of business or subdivision thereof (each an
"Entity"), in a single transaction or series of related
transactions (an "Acquisition"), for total consideration in excess
of $2,000,000 unless the fair market value at the time of entering
into such transaction (as evidenced by, in the case of
consideration other than cash or Common Stock of the Company ("Non-
Cash Consideration"), (i) a resolution of the Board of Directors of
the Company if the fair market value of such Non-Cash Consideration
is less than or equal to $1,000,000 or (ii) an opinion issued by a
nationally recognized investment banking firm, nationally
recognized telecommunications industry consultant or nationally
recognized independent public accounting firm if the fair market
value of such Non-Cash Consideration is greater than $1,000,000) of
the total consideration given for such Acquisition is less than
200% of the Annualized Revenues of the Entity acquired.
"Annualized Revenues" for any such Entity shall mean the product of
(i) revenues of such Entity for the most recent fiscal quarter for
which financial statements are available, calculated on a basis
consistent with such Entity's most recent audited annual statements
(except for the absence of footnotes and subject to normally
recurring year-end audit adjustments) or, if not available, actual
xxxxxxxx for such period, and (ii) four.
9.7 LIMITATIONS ON RESTRICTED PAYMENTS. The Company will not,
and will not permit any Subsidiary to, directly or indirectly, make
any Restricted Payment, unless at the time of and immediately after
giving effect to the proposed Restricted Payment (with the value of
any such Restricted Payment, if other than cash, to be determined
by the Board of Directors of the Company, whose determination shall
be conclusive and evidenced by a resolution of the Board of
Directors (including a majority of the Independent Directors),
(i) no Default or Event of Default (and no event that, after notice
or lapse of time, or both, would become an "event of default" under
the terms of any Indebtedness of the Company or its Subsidiaries)
shall have occurred and be continuing or would occur as a
consequence thereof, and (ii) the aggregate amount of all
Restricted Payments made after the Issue Date shall not exceed the
sum of (a) 50% of cumulative Consolidated Net Income of the Company
(or if cumulative Consolidated Net Income is a loss, less 100% of
such loss) from the Issue Date to the last day of the full fiscal
quarter for which financial information is available (but in no
event ending more than 135 days prior to the date of such proposed
Restricted Payment), plus (b) the aggregate amount of all net cash
proceeds received after the Issue Date by the Company from the
issuance and sale (other than to a Subsidiary) of Capital Stock
(other than Disqualified Capital Stock).
The foregoing provisions will not prohibit (a) so long as
there is no Default or Event or Default continuing, the payment of
any dividend within 60 days after the date of declaration thereof,
if at such
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declaration date such payment would have been permitted under the
terms of this Security, and such payment shall be deemed to have
been paid on such date of declaration for purposes of clause (ii)
of the preceding paragraph, (b) the payment of dividends on, or the
redemption or repurchase of, the 180,000 shares of the Company's
Series A Cumulative Convertible Preferred Stock outstanding on
December 31, 1996, and any additional shares of Series A Preferred
Stock, issued as pay-in-kind dividends thereon, (c) the repurchase
at below then current fair market value (based on the average
closing price of the Common Stock for the twenty trading days
preceding such repurchase) of employee and director options or
shares in accordance with the Company's stock option plans or
agreements related thereto, (d) pay cash in lieu of fractional
shares for stock splits, reverse stock splits and recapitalizations
and upon conversions of Capital Stock or the Securities or
(e) redeem, repurchase of otherwise prepay up to $300,000 of
subordinated Indebtedness of the Company outstanding as of the
Issue Date.
9.8 LIMITATION OF TRANSACTIONS WITH AFFILIATES. The Company
will not, and will not permit any of its Subsidiaries to, directly
or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the
sale, purchase, exchange or lease of assets, property or services)
with any Affiliate of the Company (other than the Company or a
Subsidiary of the Company) unless (i) such transaction or series of
transactions is on terms that are no less favorable to the Company
or such Subsidiary, as the case may be, than would be available in
a comparable transaction in arm's-length dealings with an unrelated
third party, and (ii) with respect to any transaction or series of
transactions involving aggregate payments in excess of $500,000,
the Company delivers to the Holders an Officers' Certificate
certifying that such transaction or series of related transactions
complies with clause (i) above and that such transaction or series
of related transactions has been approved by a majority of the
members of the Board of Directors of the Company and approved by a
majority of the Independent Directors. Notwithstanding the
foregoing, this provision will not apply to (i) employment
agreements or compensation or employee benefit arrangements with
any officer, director or employee of the Company entered into in
the ordinary course of business on customary terms (including
customary benefits thereunder), (ii) any transaction entered into
by or among the Company or one of its subsidiaries with one or more
subsidiaries of the Company, (iii) payment of reasonable and
customary fees to directors of the Company who are not employees of
the Company and the payment of reasonable and customary
compensation for director and Board of Director observer fees,
meeting expenses, insurance premiums and indemnities to the extent
permitted by law, and (iv) issuance and repurchase of stock options
(and shares of Capital Stock upon exercise thereof) pursuant to
stock options plans and agreements related thereto and loans or
advances to employees for relocation or travel expenses in the
ordinary course of business on customary terms.
9.9 CONDUCT OF BUSINESS. The Company and its Subsidiaries
will not engage in any businesses which are not the same, similar,
ancillary, complementary or related to the businesses in which the
Company and its Subsidiaries are engaged on the Issue Date.
9.10 LIMITATION ON INCURRENCE OF SUBORDINATED INDEBTEDNESS.
The Company will not issue any Indebtedness subordinate or junior
in right of payment to the Securities that matures, or requires any
mandatory payment of principal, prior to 120 days after the final
maturity of the Securities, other than any such subordinate or
junior Indebtedness which is issued by the Company as part of the
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purchase consideration paid to the seller of any stock, assets or
property to the Company or any of its Subsidiaries.
9.11 WHEN COMPANY MAY MERGE, ETC. The Company shall not
consolidate or merge with or into, or sell, lease, convey or
otherwise dispose of all or substantially all of its assets to, any
Person unless:
(1) the Company is the surviving Person or that Person
is a corporation organized under the laws of the United
States, any state thereof or the District of Columbia or a
corporation or comparable legal entity organized under the
laws of a foreign jurisdiction and whose equity securities are
listed on a national securities exchange in the United States
or authorized for quotation on the Nasdaq National Market;
(2) that Person assumes all the obligations of the
Company under the Securities, except that it need not assume
the obligations of the Company as to conversion of Securities
if pursuant to Section 6.18, the Company or another Person
agrees to deliver securities, cash or other assets upon
conversion of Securities;
(3) immediately after giving effect to such transaction,
no Default shall have occurred and be continuing; and
(4) the Company has delivered to the Holders an
Officers' Certificate stating that such consolidation, merger,
transfer or lease and such assumption comply with this Article
and that all conditions precedent herein provided for related
to such transaction have been complied with.
The surviving, transferee or lessee corporation shall be the
successor Company. Upon compliance with these provisions by a
successor or transferee corporation or entity, the Company shall
be released from its obligations under the Securities.
10. DEFAULTS AND REMEDIES.
10.1 EVENTS OF DEFAULT. An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on
any Security when the same becomes due and payable and the
Default continues uncured for a period of 30 days;
(2) the Company defaults in the payment of (A) principal
of or premium, if any, on any Security when the same becomes
due and payable, whether at maturity, upon redemption or
otherwise, or (B) the Repurchase Price in respect of any
Security when due;
(3) the Company fails to comply with any of its other
covenants or agreements set forth in this Security and the
Default continues for the period and after the notice
specified below;
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(4) the Company defaults with respect to any
indebtedness for borrowed money of the Company, which default
results in acceleration of any such indebtedness which is in
an amount of in excess of $10,000,000;
(5) the Company pursuant to or within the meaning of any
Bankruptcy Law (as defined below):
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian (as
defined below) of it or for all or substantially all of
its property, or
(D) makes a general assignment for the benefit of
its creditors; or
(6) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company in an
involuntary case,
(B) appoints a Custodian of the Company or for all
or substantially all of its property, or
(C) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for 90
consecutive days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
A Default under clause (3) above is not an Event of Default
until the Holders of at least 25% in principal amount of the
Securities notify the Company in writing of the Default and the
Company does not cure the Default within 60 days after receipt of
the notice. The notice must specify the Default, demand that it be
remedied and state that the notice is a "Notice of Default". When
a Default is cured, it ceases to exist.
10.2 ACCELERATION. If any Event of Default described in
Section 10.1(1) through (4) occurs and is continuing, the Holders
of at least 25% in aggregate principal amount of the outstanding
Securities, by written notice to the Company, may declare the
principal of and accrued interest on all Securities to be due and
payable. Upon such declaration such principal and interest shall
be due and payable immediately. If any Event of Default described
in Section 10.1(5) or 10.1(6) occurs the principal of and accrued
interest on all Securities shall automatically become due and
payable, without
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any action required of the Holders. The Holders of a majority in
principal amount of the Securities by written notice to the Company
may rescind an acceleration and its consequences if all existing
Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of the
acceleration, if the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction.
10.3 OTHER REMEDIES. A delay or omission by any Securityholder
in exercising any right or remedy accruing upon an Event of Default
shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. To the extent permitted by
law, no remedy is exclusive of any other remedy and all remedies
are cumulative.
10.4 WAIVER OF PAST DEFAULTS. Subject to Sections 8.2 and
10.5, the Holders of a majority in aggregate principal amount of
the Securities by written notice to the Company may waive an
existing Default and its consequences except a Default in the
payment of the principal of or premium, if any, or interest on any
Security as specified in clauses (1) and (2) of Section 10.1 or a
Default under Article 6. When a Default is waived, it is cured and
ceases to exist.
10.5 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provision hereof, the right of any Holder to receive
payment of the principal of and premium, if any, and interest on
this Security on or after the respective due dates expressed in
this Security, and to convert such Security in accordance with
Article 6, or to bring suit for the enforcement of any such payment
on or after such respective due dates and such right to convert, is
absolute and unconditional and shall not be impaired or affected
without the consent of the Holder.
11. DEFINITIONS.
Capitalized terms used herein and not otherwise defined shall
have the following meanings:
"1996 Indenture" means the Indenture dated as of August
12, 1996 between the Company and U.S. Trust Company of New York in
relation to the issuance of the Company's $27,200,000 aggregate
principal amount of 10% Convertible Notes due 2006.
"1996 Securities" means the securities described in and
issued, authenticated and delivered under the 1996 Indenture.
"Additional Permitted Indebtedness" means any
Indebtedness incurred by the Company or its Subsidiaries, as the
same may be amended, modified, renewed, refunded, replaced or
refinanced from time to time, where the aggregate principal amount
of borrowings available or Indebtedness outstanding thereunder does
not exceed (i) 85% of the consolidated inventory and accounts
receivable (excluding accounts receivable subject to third party
accounts receivable billing arrangements or overdue for more than
90 days) of the Company and its Subsidiaries determined on a pro
forma basis as if any acquisition or disposition of stock or assets
to be made on or about the time of any required calculation of
Additional Permitted Indebtedness had occurred plus (ii) the
product of (a) consolidated revenues of the Company and its
Subsidiaries for the most recent six-month period for which
financial
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statements are available, calculated in accordance with GAAP
(except for the absence of footnotes and subject to normally
recurring year-end audit adjustments) and determined on a pro forma
basis as if any acquisition or disposition of stock or assets had
occurred at the beginning of such six-month period and (b) 2/3.
"Affiliate" means any Person directly or indirectly
controlling or controlled by or under direct or indirect common
control with the Company. For the purposes of this definition,
"control" when used with respect to any specified Person means the
power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Board of Directors" or "Board" means the Board of
Directors of the Company or any duly authorized committee of the
Board.
"Business Day" means any day that is not a Legal Holiday.
"Capital Lease Obligations" of any Person means, at the
time any determination thereof is to be made, the amount of the
liability in respect of a capital lease for property leased by such
Person that would at such time be required to be capitalized on the
balance sheet of such Person in accordance with GAAP.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or
other equivalents of or interests in (however designated) corporate
stock or other equity participations, including partnership
interests, whether general or limited, of such Person, including
any capital stock that has preferential rights to any other capital
stock with respect to dividends or redemption or upon liquidation.
"Common Stock" means shares of the common stock, par
value $.0001, of the Company as it exists at the Issue Date or
shares of any class or classes resulting from any reclassification
or reclassifications thereof and which have no preference in
respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the Company.
"Consolidated Interest Expense" means, with respect to
any period, the sum, without duplication, of (i) the interest
expense of the Company and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP
consistently applied, including, without limitation,
(a) amortization of debt discount (other than debt discount in
relation to debentures to be redeemed from the proceeds of the
Offering), (b) the net payments, if any, under interest rate
agreements (including amortization of discounts), (c) the interest
portion of any deferred payment obligation and (d) accrued
interest, plus (ii) the interest component of all Capital Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by
the Company and its Subsidiaries during such period (other than the
interest component relating to up to $2 million of Capital Lease
Obligations of the Company and its Subsidiaries), and all
capitalized interest of the Company and its subsidiaries, in each
case as determined on a consolidated basis in accordance with GAAP
consistently applied.
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"Consolidated Net Income" means, with respect to any
period, the net income (or loss) of the Company and its
Subsidiaries, on a consolidated basis, determined in accordance
with GAAP consistently applied, minus (i) extraordinary net gains
and net gains realized on any sale or disposition of assets during
such period, minus (ii) the portion of net income (or loss) of the
Company and its subsidiaries allocable to interests in
unconsolidated Persons, except to the extent of the amount of
dividends or distributions actually paid in cash to the Company or
its subsidiaries by such Person during such period, minus (iii) the
net income of any Person combined with the Company or any of its
subsidiaries on a "pooling-of-interests" basis attributable to any
period prior to the date of combination.
"Default" means any event which is, or after notice or
passage of time would be, an Event of Default.
"Disqualified Capital Stock" means that portion of any
Capital Stock which, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or
upon the happening of any event (other than an event which would
constitute a Fundamental Change), matures (excluding any maturity
as the result of an optional redemption by the issuer thereof) or
is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of a Fundamental
Change) on or prior to the final maturity date of the Securities.
"GAAP" means, as of any date, generally accepted
accounting principles in the United States and not including any
interpretations or regulations that have been proposed but that
have not become effective.
"Holder" or "Securityholder" means the Person in whose
name a Security is registered on the Company's books.
"Indebtedness" means, with respect to any Person, without
duplication, and whether or not contingent, (i) all indebtedness of
such Person for borrowed money or which is evidenced by a note,
bond, debenture or similar instrument, (ii) all obligations of such
Person in respect of letters of credit or bankers' acceptances
issued or created for the account of such Person, (iii) all
liabilities secured by any consensual Lien (including capital
leases and Liens arising in connection with purchase money debt) on
any property owned by such Person even if such Person has not
assumed or otherwise become liable for the payment thereof to the
extent of the lesser of the amount of the debt secured thereby or
the value of the property subject to such Lien, (iv) all
Disqualified Capital Stock issued by such Person after the date
hereof (other than any Series A Cumulative Convertible Preferred
Stock of the Company issued as a pay-in-kind dividend pursuant to
the terms of the Company's Series A Cumulative Convertible
Preferred Stock outstanding on the Issue Date), and (v) to the
extent not otherwise included, any guarantee by such Person of any
other Person's indebtedness or other obligations described in
clauses (i) through (iv) above. "Indebtedness" of the Company and
its Subsidiaries shall not include trade payables (including,
without limitation, obligations under third party accounts
receivable billing agreements) incurred in the ordinary course of
business and payable in accordance with customary practices and
non-interest bearing installment obligations and accrued
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liabilities incurred in the ordinary course of business and any
current liability for federal, state, local or other taxes and
inter-company indebtedness among the Company and its Subsidiaries.
"Independent Director" means non-management directors of
any Person.
"Issue Date" means August 13, 1997, the date of original
issuance of the Securities.
"Liens" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in
the nature thereof and any agreement to give any security
interest).
"Officer" means the Chairman and Chief Executive Officer,
the President, any Vice President, the Chief Financial Officer, the
Controller or the Secretary or Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by two
Officers.
"Operating Cash Flow" means, with respect to any period,
the net income (or loss) of the Company and its Subsidiaries on a
consolidated basis, determined in accordance with GAAP consistently
applied, plus, without duplication, (i) extraordinary net losses
and net losses realized on any sale or other disposition of assets
during such period, to the extent such losses were deducted in
computing net income (or loss), plus (ii) provision for taxes based
on income or profits, to the extent such provision for taxes was
included in computing such net income (or loss), and any provision
for taxes utilized in computing the net losses under clause (i)
hereof, plus (iii) Consolidated Interest Expense of the Company and
its subsidiaries for such period, plus (iv) depreciation,
amortization and all other non-cash charges, to the extent such
depreciation, amortization and other non-cash charges were deducted
in computing such net income (or loss) (including amortization of
goodwill and other intangibles).
"Permitted Liens" means (i) Liens securing purchase money
debt; (ii) Liens arising in connection with capital leases;
(iii) Liens in favor of the Company or any Subsidiary of the
Company; (iv) Liens to secure debt of any Person which merges with
or into or consolidates with or is otherwise acquired by the
Company or any Subsidiary of the Company or debt encumbering any
asset acquired by the Company or any Subsidiary of the Company, in
either case which debt was not incurred in anticipation of, and was
outstanding prior to, such merger, consolidation or acquisition;
(v) Liens outstanding on the Issue Date; (vi) Liens in favor of the
trustee under the 1996 Indenture and any liens securing the 1996
Securities; (vii) Liens in connection with any Additional Permitted
Indebtedness, including interest rate agreements related thereto;
(viii) Liens for taxes, assessments, governmental charges or claims
which are not yet delinquent or which are being contested in good
faith by appropriate proceedings, if a reserve is maintained to the
extent required by GAAP; (ix) other Liens incidental to the conduct
of the Company's and its Subsidiaries' business or the ownership of
its property and assets not securing any debt for borrowed money,
and which do not in the aggregate materially detract from the value
of the Company's and its Subsidiaries' property or assets when
taken as a whole, or materially impair the use thereof in the
operation of its business; (x) Liens incurred or pledges and
deposits made in the ordinary course of business in connection with
workers'
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compensation, unemployment insurance and other types of statutory
obligations (including to secure government contracts); (xi) Liens
incurred or deposits made to secure the performance of tenders,
bids, leases, and other obligations of like nature (including
appeal, surety and performance bonds) incurred in the ordinary
course of business (exclusive of obligations for the payment of
borrowed money); (xii) zoning restrictions, servitudes, easements,
rights-of-way, restrictions and other similar charges or
encumbrances incurred in the ordinary course of business which, in
the aggregate, do not materially detract from the value of the
property subject thereto or interfere in any material respect with
the ordinary conduct of the business of the Company or its
Subsidiaries; (xiii) Liens arising out of judgments or awards
against the Company or any of its Subsidiaries with respect to
which the Company or such Subsidiary is prosecuting an appeal or
proceeding for review and the Company or such Subsidiary is
maintaining adequate reserves to the extent required by GAAP;
(xiv) any interest or title of a lessor in the property subject to
any lease other than a capital lease; and (xv) any statutory
warehousemen's, materialmen's, mechanic's, carrier's, supplier's,
vendor's or other similar Lien for sums not then due and payable
(or which, if due and payable, are being contested in good faith
and with respect to which adequate reserves are being maintained to
the extent required by GAAP). "Permitted Liens" shall also include
the extension, renewal, amendment, refinancing or refunding of debt
secured by any Permitted Lien set forth above, except that in the
case of the extension, renewal, amendment, refinancing or refunding
of any debt secured by a Lien under clause (iv) or (v) of this
definition, such Lien does not extend to any other property not
contemplated by the terms of such existing Lien and the principal
amount of debt so secured is not increased.
"Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or
political subdivision thereof.
"Pro Forma Interest Coverage" means, with respect to any
date of determination, the ratio of (i) Operating Cash Flow for the
most recent full fiscal quarter ending on or immediately prior to
such date, determined on a pro forma basis as if any acquisition or
disposition of stock or assets had occurred at the beginning of
such quarter, to (ii) Consolidated Interest Expense for the most
recent full fiscal quarter ending on or immediately prior to such
date, determined on a pro forma basis in the case of each of
clauses (i) and (ii) as if any obligations of the Company or its
subsidiaries incurred or repaid during such quarter had been
incurred or repaid at the beginning of such quarter, to the extent
any such obligation gives rise to Consolidated Interest Expense.
"Quoted Prices" of the Common Stock means the last sale
price regular way or, in case no such sale takes place on such day,
the average of the closing bid and asked prices regular way, in
either case on the national securities exchange on which the Common
Stock is listed or admitted to trading, or if the Common Stock is
not listed or admitted to trading on any national securities
exchange, the last sale price regular way or, in case no such sale
takes place on such day, the average of the highest reported bid
and lowest reported asked prices as furnished by the National
Association of Securities Dealers, Inc. through Nasdaq or a similar
organization if Nasdaq is no longer reporting such information, or
if on any such Trading Day the Common Stock is not quoted by any
such organization, the average of the highest reported bid and
lowest reported asked prices as available in any other over-the-
counter market, or if on such Trading Day the Common Stock is not
reported in
-32-
any such market, the fair value of a share of Common Stock on such
day, as determined in good faith by, and evidenced by a resolution
of, the Board of Directors.
"Restricted Payment" means (i) any dividend or other
distribution declared or paid on any Capital Stock of the Company
(other than dividends or distributions payable solely in Capital
Stock of the Company); (ii) any payment to purchase, redeem or
otherwise acquire or retire for value any Capital Stock of the
Company, (iii) any principal payment on, purchase, defeasance,
redemption or other prepayment of any Indebtedness of the Company
that is subordinate or junior in right of payment to the Notes,
other than any such subordinate or junior Indebtedness which is
issued by the Company as part of the purchase consideration paid to
the seller of any stock, assets or property to the Company or any
of its subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means a corporation, a majority of the
voting stock of which is owned, directly or indirectly, by the
Company or by one or more Subsidiaries, or by the Company and one
or more other Subsidiaries.
"Trading Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday other than any day on which securities are not
traded on the principal exchange or market on which the securities
in question are traded.
Other terms shall have the meanings ascribed thereto
herein.
Every effort has been made to include definitions herein for each
capitalized term used in this Security; however, to the extent any
capitalized term is not specifically defined herein, the parties
expressly intend and do hereby agree that if there is a
corresponding term contained in the 1996 Indenture, such definition
shall apply as if it were contained herein.
12. MISCELLANEOUS.
12.1 NOTICES. Any notice or communication to the Company shall
be duly given if in writing and delivered in Person or mailed by
first class mail or nationally recognized overnight courier
addressed as follows:
If to the Company: SA Telecommunications, Inc.
0000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
Attention: Vice President and
General Counsel,
with a copy to: the Chief Financial Officer
Any notice or communication to a Securityholder shall be
mailed by first-class mail to his address as shown on the register
kept by the Company. Failure to mail a notice or communication
-33-
to a Securityholder or any defect in it shall not affect its
sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner
provided above within the time prescribed, it is duly given,
whether or not the addressee receives it.
12.2 LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, Sunday
or a day on which banking institutions in Dallas, Texas are not
required to be open. If a payment date is a Legal Holiday at a
place of payment, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
12.3 GOVERNING LAW. The laws of the State of New York shall
govern the Securities without regard to principles of conflicts of
law.
12.4 NO RECOURSE AGAINST OTHERS. A director, officer, employee
or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities
or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Securityholder by accepting a
Security waives and releases all such liability.
12.5 SUCCESSORS. All agreements of the Company in the
Securities shall bind its successor.
12.6 SEVERABILITY. In case any provision in the Securities
shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby, and a Holder shall have no claim
therefor against any party hereto.
12.7 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This
Security may not be used to interpret another debenture, loan or
debt agreement of the Company or a Subsidiary. Any such debenture,
indenture, loan or debt agreement may not be used to interpret this
Security.
12.8 ABBREVIATIONS. Customary abbreviations may be used in the
name of a Securityholder or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN
(= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
12.9 RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) A term has the meaning assigned to it;
(2) An accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted
accounting principles;
(3) "Or" is not exclusive;
(4) Words in the singular include the plural, and words
in the plural include the singular; and
-34-
(5) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
(6) Provisions apply to successive events and
transactions.
12.10 CHOICE OF FORUM. The Company hereby irrevocably
consents to the non-exclusive personal jurisdiction, service of
process and venue in the federal and state courts of the State of
New York for any claim, suit or proceedings arising under this
Agreement or the documents and agreements executed in connection
herewith.
13. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement dated March 25,
1997, as amended by that Purchase Agreement dated August 13, 1997,
between the Company and Northstar High Total Return Fund, the
Company has agreed to provide the Holders of the Securities certain
limited piggy-back registration rights with respect to offers and
sales made by such Holders of the shares of Common Stock acquirable
upon conversion of the Securities.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-35-
IN WITNESS WHEREOF, the Company has duly executed this
Debenture as of the date first written above.
SA TELECOMMUNICATIONS, INC.
By:
------------------------------
Name:
------------------------------
Title:
----------------------------
Exhibit A Assignment Form
Exhibit B Conversion Notice
Exhibit C Option of Holder to Elect Purchase
Exhibit A
---------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
-----------------------------------------------------------------
-----------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _________________________________________
agent to transfer this Security on the books of the Company. The
agent may substitute another to act for him.
Date: _______________ Your Signature:_____________________
Sign exactly as your
name appears on the
other side of this
Security)
Signature Guaranteed:____________________________________________
In connection with any transfer of this Security occurring
prior to August 13, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in
connection with the transfer and that this Security is being
transferred:
(Check One)
(1) [ ] To the Company or a subsidiary thereof; or
(2) [ ] Pursuant to and in compliance with Rule 144A under
the Securities Act; or
(3) [ ] To an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act) that has furnished to the
Company a signed letter containing certain
representations and agreements (the form of which
letter can be obtained from the Company); or
(4) [ ] Outside the United States to a "Foreign Person" in
compliance with Rule 904 of Regulation S under the
Securities Act; or
(5) [ ] pursuant to the exemption from registration
provided by Rule 144 under the Securities Act; or
(6) [ ] pursuant to an effective registration statement
under the Securities Act; or
(7) [ ] pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless one of the boxes is checked, the Company will refuse to
register any of the Securities evidenced by this certificate in the
name of any Person other than the registered Holder thereof;
PROVIDED that if box (3), (4), (5) or (7) is checked, the Company
may require, prior to registering any such transfer of the
Securities, in its sole discretion, such legal opinions,
certifications (including an investment letter in the case of box
(3) or (4)) and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to
an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Registrar shall not
be obligated to register this Security in the name of any Person
other than the Holder hereof unless and until the conditions to any
such transfer of registration set forth herein have been satisfied.
Dated:_____________ Signed: _________________________________
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:_____________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Debenture for its own account or an account with respect to
which it exercises sole investment discretion and that it and any
such account is a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:_______________ ___________________________________
NOTICE: To be executed by an
executive officer
Exhibit B
CONVERSION NOTICE
The undersigned owner of this Security hereby irrevocably
exercises the option to convert this Security, or the portion
hereof (which is $1,000 or an integral multiple thereof) below
designated, into shares of Common Stock, and directs that the
shares issuable and deliverable upon conversion, together with any
check in payment for fractional shares and any Securities
representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name
has been indicated below. If shares are to be issued in the name of
a Person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto.
To convert this Security into Common Stock of the Company,
check the box:
[ ]
To convert only part of this Security, state the amount (must
be $1,000 or any whole multiple thereof):
$____________________
If you want the stock certificate made out in another Person's
name, fill in the form below:
_________________________________________________________________
_________________________________________________________________
(Insert other Person's social security or tax identification
number)
_________________________________________________________________
(Print or type other person's name, address and zip code)
Date:______________ Your signature:______________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guaranteed:____________________________________________
In connection with any transfer of the Common Stock occurring prior
to August 13, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in
connection with the transfer and that the Common Stock is being
transferred:
(Check One)
---------
(1) [ ] to the Company or a subsidiary thereof; or
(2) [ ] pursuant to and in compliance with Rule 144A under
the Securities Act; or
(3) [ ] to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act) that has furnished to the
Company a signed letter containing certain
representations and agreements (the form of which
letter can be obtained from the Company); or
(4) [ ] outside the United States to a "Foreign Person" in
compliance with Rule 904 of Regulation S under the
Securities Act; or
(5) [ ] pursuant to the exemption from registration
provided by Rule 144 under the Securities Act; or
(6) [ ] pursuant to an effective registration statement
under the Securities Act; or
(7) [ ] pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless one of the boxes is checked, the registrar for the Common
Stock will refuse to register the Common Stock in the name of any
Person other than the registered Holder thereof; PROVIDED that if
box (3), (4), (5) or (7) is checked, the Company or the Common
Stock transfer agent may require, prior to registering any such
transfer of the Common Stock, in its sole discretion, such legal
opinions, certifications (including an investment letter in the
case of box (3) or (4)) and other information as the registrar for
the Common Stock or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of
the Securities Act.
If none of the foregoing boxes is checked, the Common Stock
transfer agent shall not be obligated to register Common Stock in
the name of any Person other than the Holder hereof unless and
until the conditions to any such transfer of registration set forth
herein shall have been satisfied.
Dated:_______________ Signed:_________________________________
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:_____________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
Common Stock issuable upon conversion of this Security for its own
account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A
under the Securities Act and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as the undersigned
has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor
is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule
144A.
Dated:____________ ______________________________________
NOTICE: To be executed by an executive
officer
Exhibit C
---------
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to the provisions hereof, check the box: [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to the provisions hereof, state
the amount: $______________
Date:______________ Your signature:______________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guaranteed:____________________________________________
EXHIBIT D TO PURCHASE AGREEMENT
JUNE 30 FINANCIAL STATEMENTS
EXHIBIT E TO PURCHASE AGREEMENT
ACCREDITED INVESTOR LETTER
August 13, 1997
SA Telecommunications, Inc.
0000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxx 00000
Ladies and Gentlemen:
In connection with our proposed purchase of $5,000,000
principal amount of 10% Convertible Debenture Due 2006 (the
"Debenture") of SA Telecommunications, Inc., a Delaware corporation
(the "Company"), we confirm that:
1. We have received a copy of those documents constituting
the Offering Memorandum (the "Offering Memorandum"), dated August
13, 1997 relating to the Debenture and such other information as we
deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated in
the section entitled "Transfer Restrictions" of such Offering
Memorandum.
2. We are purchasing the Debenture for investment, without
any view to the sale or further distribution of any part thereof.
3. We recognize that the Debenture is a highly speculative
investment and that the risk of loss of all or a portion of the
investment therein is high.
4. We understand that any subsequent transfer of Debenture
or the shares of common stock, par value $.0001 per share, into
which the Debenture is convertible (the "Shares") is subject to
certain restrictions and conditions set forth in the Debenture (as
described in the Offering Memorandum) and the undersigned agrees to
be bound by, and not to resell, pledge or otherwise transfer the
Debenture or the Shares except in compliance with the Securities
Act of 1933, as amended (the "Securities Act"), and all applicable
state securities laws.
5. We understand that the offer and sale of the Debenture
has not been registered under the Securities Act or pursuant to any
state securities laws, and that the Debenture or Shares may not be
offered or sold within the United States or to, or for the account
or benefit of, U.S. persons except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, that if we should
sell any Debenture or Shares, we will do so only (i) to the Company
or any subsidiary thereof, (ii) inside the United States to an
institutional "accredited investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) of the Securities Act) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to the Company, a signed letter containing certain
representations and agreements relating to the restrictions on
transfer of the Debenture or the Shares, as the case may be (the
form of which letter can be obtained from the Company),
(iii) outside the United States in accordance with Rule 904 of
Regulation S promulgated under the Securities Act (if available),
(iv) pursuant to the exemption from registration provided by
Rule 144 promulgated under the Securities Act or (v) pursuant to an
effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing any of the
Debenture or the Shares from us a notice advising such purchaser
that any resale of the Debenture or the Shares is restricted as
stated herein.
6. We understand that, on any proposed resale of any
Debenture or the Shares, we will be required to furnish to the
Company such certification, written legal opinions and other
information as the Company may reasonably require to confirm that
the proposed sale complies with the foregoing restrictions and
applicable law. We further understand that the Debenture purchased
by us will bear a legend to the foregoing effect.
7. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated
under the Securities Act) and have such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Debenture, and we and any
accounts for which we are acting are each able to bear the economic
risks of our or their investment, as the case may be.
8. We are acquiring the Debenture purchased by us for our
account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and your counsel are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof
to any interested party in any administrative or legal proceeding
or official inquiry with respect to the matters covered hereby.
Very truly yours,
NORTHSTAR HIGH TOTAL RETURN FUND
By:_____________________________
Xxxxxxx Xxxxxxxxx
Vice President
